Mannerisms

Since Freescale was bought late last year by a private equity consortium led by Blackstone, there have been murmurings that all is not well in the good ship Freescale as budgets were slashed.

Then, it is alleged, the private equity owners cashed out all the stock options, removing any long-term lock on employees. These cashed-out stock options are said to be payable in the first week of March.

Some Freescale-ers are said to be waiting for the moment they can get their money and run. The next couple of weeks will decide.

After March, it is said, the Freescale management will be on a performance bonus scheme rather than a stock option scheme.

There were always misgivings in the semiconductor industry about the Freescale buy-out which valued the company at $17.6bn, 40 per cent more than the value placed on NXP which is the same size as Freescale in terms of revenues.

Then the private equity owners loaded up Freescale with $9.5bn worth of debt. Before the takeover Freescale had $1bn of free cash flow annually.

It doesn't take a genius to work out that, after servicing the debt, there's not going to be a whole lot left for capex and R&D.

Freescale customers were extremely concerned that the financial constraints would affect the service they were used to from Freescale.

"Freescale was not a suitable target for a private equity buy-out. We had done all the work on cost-cutting and stream-lining to prepare the company for the IPO. Then it was bought for more than market price" says a former Freescale-er, "typically semiconductor companies run without debt. Loading it up with that much debt is going to make it very difficult."