Mannerisms

Fitch says that two of Freescale’s biggest markets, automotive and wireless telecoms, are going to be ‘challenged’ this year.

Freescale’s automotive business is challenged because the Big 3 US car-makers are losing market share; Freescale’s wireless telecoms business is challenged because Motorola is losing cellphone market share, and because the prospects for Wimax are not so rosy as they were.

One reason for Fitch’s gloomy view on Wimax is probably Sprint’s ambivalence about its Wimax roll-out in the US.

The biggest challenge for Beyer will, of course be the debt, estimated by Fitch to be $9.5bn at the end of last year, loaded onto it by owner Blackstone.

As a veteran Silicon Valley CEO told me last week: “Blackstone overpaid for Freescale. They had to borrow a lot. Freescale can only service the debt in a growing economy. It’s not a surprise here in the Valley.”

On the upside, Freescale has $751m in cash, and an undrawn $750m bank credit, and is likely to have $200m a year in free cash flow over ‘the next few years’, says Fitch, and is likely to get $500m cash injection, partly from the sale of equipment at Crolles, the European R&D centre from which Freescale withdrew last year, and partly in compensation from Motorola because Motorola has not been buying as much from Freescale as it contracted to do at the time of the spin-off.

So, for Beyer, the task is how to position the company to make higher margin product. It has to be said that he has a ballsy record in that respect.

At Intersil he decided to ditch the WiFi business when Intersil was the world’s No.1 WiFi chip supplier. Beyer thought the WiFi market would commoditise., and he was right. “I don’t like volume at miserable margins”, he says.

He then re-positioned Intersil as a high-performance analogue company and used the money from the sale of the WiFi business to buy Elantec, BitBlitz Communications and Xicor. He spent a lot on product development.

Transformations are very difficult things to manage well. “I’d rather start a new company than try and fix a sick one”, is an axiom of Intel founder Gordon Moore, another is: “It’s a peculiar business, the only sane strategy is to bet the company regularly.”

Sounds good, but it must be scary when you're the guy who has to both fix a sick company, and make a big bet on its future direction.

Beyer, brings two great advantages to tackling this most difficult of challenges, one is that he’s a semiconductor man through and through, taking a wide view of the industry; the other advantage is that he used to be an officer in the US Marine Corps.

If anyone can find a winning strategy he will, and if anyone can persuade the Freecalers to buy into it, he can.