A passel of professional investors are salivating after Freescale Semiconductor, with figures of $16 billion or more being thrown around. The news came out just weeks after Royal Philips Electronics agreed to sell 80% of its semiconductor division to a consortium of private equity firms for $4.35 billion, plus $5 billion in debt.
As Dr. Evil in the Austin Powers movies might put it: “One billion dollars – times 16.”
Now, back up a minute, there. Billions of real dollars are being offered for semiconductor companies? Chip makers that operate in a boom-or-bust industry that often goes from the Garden of Eden to Death Valley in a matter of weeks? Well, yes. Semiconductors are sexy again, at least to big-time investors.
How did this happen, especially when Intel, the capo di tutti capi of chip firms, is getting rid of thousands of employees, including managers? The answer may be in your own hand, especially if you’re clutching a cell phone, an iPod, or the remote control for your ginormous flat-screen TV at the moment. Consumer electronics are driving a worldwide chip business that hit a record $227.5 billion in 2005, topping the prior record of $213 billion set in 2004. The Semiconductor Industry Association forecasts growth of 10% for this year, to a new record of nearly $250 billion.
The private equity investing business is subsequently throwing bigger and bigger sums of money out there for chip makers: $2.66 billion for Avago Technologies, $3 billion for Sensata Technologies, $9 billion-plus (including $5 billion in debt) for Philips Semiconductors (which is changing its name to the puzzling NXP), and you-tell-me for Freescale Semi when that shooting match is over. Break out the champagne! Happy days are here again! We’re going to party like it’s…what? Texas Instruments forecasts that Q3 sales and earnings are going to be a little lower than expected?
Oh. Never mind.
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