Mannerisms

People at Electronica reacted warmly to the fears about the private equity funds expressed by Xilinx CEO Wim Roelandts who dubbed them get-rich-quick schemes for a few individuals at the expense of companies’ long-term strategies.

“Wim’s saying what everyone else is thinking”, is a typical response.

The takeover of NXP and Freescale by these funds has sent ripples of fear through the industry’s customers and managers.

The fear was evident at the Electronica Forum where two CEOs who have had their companies bought by these funds, Frans van Houten of NXP and Michel Mayer of Freescale, defended the funds to a standing-room only audience.

Linear Tech’s CEO, Lothar Maier, meeting customers on the Linear stand, said that a lot of customers have been asking him about it because Linear Tech is often mentioned as a potential buy-out candidate, and its customers are worried that they won’t get the same level of support as they do now, from a company which could be run only to meet the financial targets of a small group of investors.

Managements are worried because they see their companies being destroyed by a rush for excessive short-term profitability at the expense of long-term sustainability.

Talking to executives at the companies which have been taken over suggests that they are being fed the message that it’s business as usual. No significant changes are planned.

But at one of the bought-out companies, Freescale, it appears that none of the management have been formally engaged to run the company after the buy-out which was announced two months ago.

Meanwhile Freescale’s customers are anxiously seeking reassurances about future strategy from managers which don’t know if they are part of that strategy.

There is the fear that the private equity funds will parachute in their own top managers with orders to slash R&D, burn investment plans, sell-off business units and dump long-term strategy to maximise short-term profitability.

Adding to the general misery is the secretiveness of the private equity fund which insist that they are ‘private’ and apparently regard themselves as answerable only to their investors.

And who are the investors? Rich guys who simply want to get richer.