Mannerisms

One CEO who won’t be entertaining the private equity guys is Wim Roelandts, CEO of Xilinx.

After private equity companies bought both NXP and Freescale in deals worth $11bn and $17bn respectively, it seems that the semiconductor industry has become a target of these people. But Roelandts will be strongly resisting that fate for Xilinx.

“Private equity buy-outs are a scheme for a few people to get rich quickly”, says Roelandts, “they’re not looking at the strategic direction of a company. They buy a company, leverage the hell out of it, sell bits and pieces, cut the R&D spending and go public to get their money back.”

“Whatever they say about returning value to the shareholders, what they’re really doing is putting value into their own pockets.”

“I could make Xilinx very profitable by cutting out the R&D and it would have no effect on the company for a couple of years”, said Roelandts.

Why does he think these people are targeting chip companies? “First they have a herd mentality, like VCs”, replies Roelandts, “second, a lot of people see semiconductors as a more mature industry. I think they’re wrong. I think there are still upcycles and downcycles and if you have a downcycle in the semiconductor industry, these investments are going to look very foolish.”

The private equity purchasers of NXP and Freescale are claiming that they made their acquisitions at the bottom of the cycle. Roelandts disagrees: “If anything we are probably at the top of the cycle”, he says, “people are talking about a downturn in 2007/2008.”