The wireless business must be horrible. First, they say Freescale will flog its wireless business, then NXP flogs off its wireless business to STMicroelectronics.
OK so they’ve actually formed a joint venture for their wireless businesses, but ST owns 80 per cent of it, and has paid NXP $1.5bn so, to all intents and purposes, it’s a transfer of the control of NXP’s wireless interests to ST.
Now why would NXP want to sell off a business with excellent technology? Well it could be because it’s owned by a consortium led by Kohlberg Kravis and Roberts (KKR) which are not known for letting their investments off the hook when they fail to deliver expected improvements in revenues, profits and cash-flow.
KKR and its consortium did the usual thing in loading up NXP with debt when they bought it in late 2006, and would have been hoping to have been looking around for a profitable sale by now.
But the chip market’s not good, the credit crunch means no one has the money to buy NXP as a going concern, so ordering the sale of $1.5bn of assets may look to KKR like a good way of squeezing some return from its investment.
It makes Blackstone, which bought Freescale, look the more responsible owner because, instead of forcing sales of divisions, Blackstone appointed a new CEO last month with the brief, apparently, to manage Freescale for long-term health.
Ironically, when KKR bought NXP, the NXP management thought that KKR would be more generous in investing in the business than NXP’s former owners Philips.
After pulling out of Crolles, and now out of wireless, I bet they don’t think that now.
Knowing that KKR bought 80% of NXP mid-2006 for
3,4 billions € plus 4 billions € (debt for NXP),
do you think that the current operation is
profitable for KKR or do they sell the wireless
activity with loss ?
In terms of sales, BU M&P (mobile and personal)
represents 1/3 of the total of NXP.
2007 results show a loss of 118 M€ (IFO) for
BU M&P to be compared to an overall loss of
575M€ for NXP.
I'm afraid I don't know the profitability, or not, of NXP's wireless division.
But everyone in the wireless chip-making (as opposed to IP) business has been reporting lower profits.