Amazing to think that NXP, the former Philips Semiconductors, is now out of the wireless business. Who would have thought it could ever happen?
Scott McGregor, now CEO of Broadcom, told me when he was CEO of Philips Semiconductors, that the Philips Nexperia wireless chip platform was in one in every ten phones made on the planet.
That can't have been more than five years ago. And now, with yesterday's announcement of the ST-NXP Wireless merger with Ericsson Mobility Systems, NXP is going to be completely out of wireless chips.
One has to say that if Royal Philips, the former parent of Philips Semiconductors, still owned the company, it would never have happened.
But now it's owned by a bunch of private equity companies led by Kohlberg Kravis and Roberts (KKR), it seems the lure of around $1.875 billion in cash has proved too much for the money guys.
Mind you, they said at the time the first $1.5 billion was promised to NXP for selling 80 per cent of its wireless activities to the ST-NXP Wireless joint venture, that the $1.5 billion would all go to the operating divisions of NXP.
I wonder, now, if it will.
Seen from the inside of NXP, we have less
doubt:
a recent cash issue was solved by subscribing
a rather important short term depth.
You can consider that for a start a quarter of
the cash coming from ST will be used to refund
this burden. And this is rather optimistic: in
six month, NXP has consumed $830 million of net
cash as mentioned here:
http://www.reuters.com/article/rbssConsumerGoodsAndRetailNews/idUSN2359755720080723
Yet we do not exclude opportunistic aquisitions
as for SiliconLabs and GloNav, which are part
of the package that was sold to ST.
Seen from the outside, NXP's strategy looks chaotic. NXP buys these companies to boost its wireless capability, then sells them off within a few months to ST and gets out of wireless.
No normal semiconductor management would behave like thins - it must be the Wall Street-ers behind NXP who are responsible for this erratic strategy.
Thanks for the Reuters reference.
Having now read the Reuters story you mentioned, I see what you mean about NXP's need for cash. To use up $830m in the first half of the year looks awful.
I remember the NXP management saying, at the time of the buy-out, that KKR would be good owners because they'd put in lots of money for investment and acquisitions.
What do NXP management think now?
And what do KKR think of their investment?
I expect you are right - the cash from ST - however much it's now going to be - will have to go to NXP just to keep them going at this rate of cash-burn.
Let's bet.
Which of the remaining NXP business will be the next one to be sold?
1) Multimarket semiconductors,
2) Automotive,
3) Identification,
4) Home electronics.
My bet is on automotive because it's the easiest to sell. Either Infineon or ST would take it.
But what a sad end for Philips Semiconductors, a great company brought down to the level of being broken up by a bunch of Wall Street money men.
Indeed this is a sad ending for the company
itself.
I was very proud to be part of Philips
semi-conductors, even if some re-organisation
was certainly necessary (uneffective matrix
organisation where responsability was never
clear and ratio cost/benefit of corporate
activities). This is not the case for NXP.
The funny aspect is that management is still
wondering why internal motivation surveys
show such bad results.
I am now waiting for one thing: be part of a BU
which will be sold to - preferably - another
european company. Because I feel there is no
other alternative. I am very happy for those
who are now part of ST wireless. Because there
is an industrial project behind. And because
major share-holders of ST are french and
italian governments. Which implies some kind
of stability and a less short-term oriented
mindset.
I entirely sympathise. Your situation reminds me of the Plessey people I knew when GEC and Siemens were buying it. The Plessey engineers all hoped that their bit of the company would go to Siemens rather than to GEC, because Siemens was a great engineering company and GEC was seen as a low-paid, risk-averse, finance-driven killer of motivation.
So I very much sympathise, and wish you luck in your hopes of getting transferred to another European company.