One of the weirdest non-events of 2010 has been the 'Intel to buy Infineon wireless unit' story which has been running for about three months now across multiple media without anything actually happening.
Yesterday Bloomberg carried the story again for the nth time. As always it cites secret sources.
Why is this going on?
Usually this sort of thing happens, and it happens quite a lot at Infineon, when one segment of the company wants to go down one route, and another segment of the company wants to go down a different route.
Earlier this month, Infineon's CFO resigned over, it is believed, this very issue.
Now the leakiest part of Infineon is the Infineon supervisory board.
When the supervisory board were trying (unsuccessfully) to prosecute their former CEO Ulrich Schumacher, or trying to sack another former CEO Wolfgang Ziebart, the German newspapers were regularly awash with allegations planted by the supervisory board.
The idea seems to be that if something is trailed sufficiently often in the media as going to happen, then that will help to make it actually happen.
So it's not too difficult to figure out where all these 'Intel Buys Infineon Wireless Unit' stories are coming from.
The supervisory board has long been on the side of maximising immediate returns for shareholders irrespective of the long-term well-being of Infineon.
Clearly, selling off Infineon's wireless business, the company's fastest growing division and a distinguished engineering operation, is not in Infineon's best interest.
And clearly there are people in Infineon fighting to prevent the disposal.
Who are these brave souls trying to secure Infineon's future?
"Clearly, selling off Infineon's wireless business, the company's fastest growing division and a distinguished engineering operation, is not in Infineon's best interest."
... why do you think this?
Surely its all about the price Intel would be willing to pay? There's always a price where it makes sense.
And of course it is future performance which is important not past performance. The typical pessimists view in this regard is to question whether IFX wireless will have enough resources to develop LTE products quick enough to compete with Qualcomm & ST-Ericsson. Maybe they need Intel's vast cash resources to fund it? If they dont nail LTE, then goodbye to Apple as a customer and goodbye to a huge chunk of their revenue.
I'm disappointed that you think it's all about price, Dave. Infineon is one of Europe's finest wireless resources. To lose it to America would be bad for Europe. For Infineon's employees it would be horrible having to work for Intel. And for Infineon's future as a major semiconductor manufacturer, it would probably mean curtains. If Infineon can't find the expertise and resources within Europe to develop LTE, then its management is severely delinquent.
If your car is worth $20000 and I offer you $50000 would you say no? If Intel offered $10bn should IFX management knock it back?
Resources in this context means the ability to pay for more engineers, not the ability to find more. It means the ability to maybe reduce your earnings for a few years because you are piling in the R&D money. IFX is probably under more pressure to show short-term profitability after years of losses than what Intel is.
I dont see why it matters whether the ownership of the business is European or American, does it really matter these days with global supply chains? The engineers would still be sitting in the same offices.
Finally, I would assume IFX would not just sit around as a smaller company, rather take the money from Intel and buy a business related to their other divisions, i.e. automotive or industrial, thereby continuing as a "major semiconductor manufacturer" with about the same revenues but a better aligned business.
For $10bn, Yes Dave, Infineon would have to go for it - though Intel's shareholders wouldn't let Otellini stay in his job very long. I think it does matter that Infineon stays European. The EU has been prevailed upon these last 25 years to help European microelectronics R&D, as all major world governments do. If Infineon's wireless business became American, and with ST-Ericsson sinking like a stone, we could end up with no major commercial wireless manufacturer. Therefore no commercial place for EU R&D investment in wireless to go. So EU-backed R&D in wireless would stop, and Europe would become a no-no in wireless. There was a similar dilemma in the auto industry in the 80s. Shouild it be left to Japan and the USA? No, said European governments, we'll support it with protectionsim and resources. Now, today, Europe has the best car industry in the world. A previous generation saved the car industry for us; would you deny future generations the benefits of a wireless industry?
Dave ... I agree whole-heartedly with DM on this one. It's not all about quick financial killings - that's what's wrong with the chip industry today - but having a longer term vision to build a great company. Do that and the financial success will follow, not the other way around.
well, today the deal was announced.
Now, what is left in Infineon (Auto, cards and multimarkets) looks very very similar to what is left at NXP.... great opportunity for European consolidation and more job cuts....
Yes indeed Anonymous, to think only 4 years ago Europe had 3 semi companies in the top ten. Now there's only one and that is slipping down the league table. All three look like getting weaker still. It's a tragedy after what the Pistorio/Knorr/Schumacker/Krijsman generation of leaders achieved.