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Beyer: Freescale is a viable IC vendor

Posted: 25 Nov 2009 ?? ?Print Version ?Bookmark and Share

Keywords:Freescale Beyer interview? semiconductor industry? automotive?

Rich Beyer, chairman and CEO of Freescale Semiconductor Inc., walked right into what was shaping up as an inescapable trap.

During an hour long interview last week at the company's Austin, Texas, office, I asked Beyer to rate Freescale's viability on a scale of 1 to 10, with 1 being least likely and 10 being most likely.

Beyer's answer to that questiona perfect 10was hardly surprising. No head of a major semiconductor supplier, even at one struggling like Freescale to realign its operations during a difficult downturn while juggling a mountain of debts, would tell a journalist his company was most likely to collapse in the near future.

Since he was so dead sure of his company's future, I immediately challenged Beyer to "offer ten reasons why Freescale is in your opinion a viable long-term player" in the semiconductor market. "Sure," the chip industry veteran countered without skipping a beat, rattling off eleven reasons before pausing less than two minutes later to look at the notepad he had been scribbling on.

Initially alarmed about the blunt questions being fielded, the Freescale public relations executive seated with us at the oval table in Beyer's office let out a sigh of relief at his boss' untutored but still impressive response; a journalist is not supposed to admit this, but I was similarly impressed.

I am in good company. Corporate bond investors are swarming around Freescale again and bidding up its offerings in a sign many are now convinced the company's reorganization actions will eventually turn around the once-sinking ship.

About one year ago, Freescale's publicly traded bonds were trading for about 20 cents on the dollar. The company's bonds were deep in junk territory and most buyers knew they had a 20 percent chance of getting their money back.

Today, investors are feeling warm and fuzzy about Freescale. Its bonds have quadrupled in value over the last year and are beginning to trade as high as 80 cents on the dollar, signaling bondholders are more assured they would likely recover their investments in the automotive, networking and multimedia semiconductor manufacturer.

In fact, trading in Freescale bonds have become less volatile and buyers point to recent cost-cutting actions, a new management team, higher design wins and rising demand for the company's core products as positive drivers positioning it for a recovery.

The change in investor sentiment is music to the ears of Beyer who has over the last year been trying hard to allay fears about the company's long-term viability among some stakeholders, including bondholders, suppliers and OEM customers.

In the interview with EE Times, Beyer again stressed the company is experiencing significant operational improvements and scoring major design wins in key markets such as automotive, networking and multimedia that would position it for revenue growth as the semiconductor market recovery gains traction.

Freescale is not home free, though. Even Beyer agrees the company's turnaround is a work in progress. To counter his view, I will in a subsequent article to be published next week review "11 factors that could potentially derail Freescale's recovery."

While the company has addressed many of its problems, for instance, it is captive to factors beyond its controllike many high-tech product makers dealing with a sluggish global economyand could give back recent gains easily.

However, Beyer said the company is making progress over areas it can control and winning critical support from some once skeptical OEM customers who had previously expressed concerns about the company's future but are now more assured of its prospects.

In his own words, here are the 11 reasons Beyer gave for why he believes the company would recover, grow and become a viable and stronger player in the semiconductor market:

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