It probably won't be welcomed by NXP, but NXP's owner, Kohlberg Kravis and Roberts (KKR), has said that it still has a lot to do to NXP which it regards as an 'under-performer'.
When a bunch of Wall Street finance guys say they have a lot to do to your company, you can bet your life that what they come up with it won't be very nice.
Earlier this week, KKR partner Scott Nuttall stated that KKR still has "a lot of work to do in NXP". KKR had said that one of the two 'underperformers' in its portfolio of companies was NXP.
One wonders if the NXP management can still think it was such a great idea to exchange Philips as a parent for KKR. At the time, the NXP management were saying that KKR would provide investment for NXP to grow the business, which Philips was disinclined to provide.
Philips had been in the semiconductor business for as long as the semiconductor business existed. It invested through thick and thin, and understood the business backwards.
KKR, with no history in the semiconductor business, have to look at NXP as they would look at any other kind of business and assess it purely on financial criteria.
KKR are not going to invest counter-cyclically as good semiconductor CEOs do, they're not going to invest in long-term R&D as good semiconductor CEOs do, they're not going to invest in technologically and financially risky projects as good semiconductor CEOs do.
KKR are not semiconductor guys, they're financiers, and they have to look at NXP as just another commercial company to be managed for growth and profit. And that kind of attitude, based on forecasts, budgets and costs - the inescapable clutter of financial management - kills semiconductor companies.
As the great Toshiba chip CEO, Tsuyoshi Kawanishi, pointed out, two symptoms of big company disease are: 'The company puts emphasis on forecasting' and 'The company tries to fit the business to the budget rather than to the needs of the customer'.
Blackstone at least had the sense to get a semiconductor-savvy CEO in to run Freescale when their investment went sour.
As
Kawanishi identifies another symptom of big company disease: "Authority is replaced by power."
I don't know if this has happened at NXP yet, but when you hear finance men saying they're going to tell semiconductor men how to run semiconductor companies, that's an indication that power has replaced authority.
And these finance guys haven't done much of a job lately even at running finance companies.
Handing over semiconductor companies to MBAs and accountants has not turned out to be a smart move.
TOMORROW MORNING: THE TEN MOST DISRUPTIVE TECHNOLOGIES
Subscribe to this blog's feed
Comments (5)
So David, how do you consider the role of Frans Van Houten? No chance for him to be a semiconductor-savvy CEO ?
Posted by JC Dusse | August 4, 2008 11:01 AM
Posted on August 4, 2008 11:01
Once a systems guy, always a systems guy . . .so they say
Posted by David Manners | August 4, 2008 11:03 AM
Posted on August 4, 2008 11:03
Seen from inside the company, the KKR experience
really looks like a disaster. For sure the "bottom
line" was improved. But there was no miracle with
the "top line". With emptying roadmaps and drastic
cuts in expenses (up to ridiculous situations),
how else could it be ?
My personal analyse is that the "strategy" is to
replace internal developments by Merge
& Aquisitions. Not sure this can fill the
roadmaps. Simply because interesting
technologies are not always for sale.
In concrete, if you look at the increase of debt
during the last six months, the only remaining
question is: when will the company explode into
pieces ?
Posted by Fresher | August 15, 2008 10:31 PM
Posted on August 15, 2008 22:31
That would be a sad fate for a great company which has been a top ten company or thereabouts, ever since 1975 when it bought Signetics.
The argument put out, at the time of the buy-out, by NXP management that KKR would be a better parent than Philips seemed mad to me. Philips had nurtured it through good times and bad and Philips Semiconductors was the leading contributor to European microelectronics capability for 30 years.
I just hope they find a way through this mess.
Posted by david manners | August 17, 2008 1:23 PM
Posted on August 17, 2008 13:23
It is really sad to see that financial people are breaking in pieces prestigious companies such as NXP (Philips Semiconductors) who delivered so many innovative products in the past. Concerning KKR, innovation is definitely not their cup of tea.
Posted by Anonymous | September 6, 2008 7:57 PM
Posted on September 6, 2008 19:57