mannerisms

Ruminations on the electronics industry from David Manners, Senior Components Editor on Electronics Weekly.

Fable: A Leopard Can’t Change Its Spots

There was once a semiconductor company which was bought by a private equity company.

Everyone said: ‘That’s a really bad idea – the PE company will load the company up with debt, cut back the R&D, sell off bits and pieces, lay off loads of employees and compromise long-term strategy to boost short-term profitability’.

 

‘No’, said the semiconductor company, ‘the PE people have told us they will invest in the business, and they will make funds available for strategic acquisitions to boost our presence in target markets.’

 

The PE company loaded the semiconductor company up with debt, cut back the R&D, sold off bits and pieces, laid off loads of employees and compromised long-term strategy.

 

MORAL: A Leopard Can’t Change Its Spots

Tags: bits and pieces, fable, Private equity, semiconductor company, term profitability

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2 Comments

  1. David Manners
    May 27, 2010 16:10

    As always, Dr Bob, that’s a wise view. There were many semi CEOs contacted by customers after the NXP and Freescale acquisitions in 2006 to ask if there was any chance of them being taken over by a PE company – the customers were anxious about the prospects for long-term strategy under such ownership.

  2. Dr Bob
    May 27, 2010 16:01

    As an engineer I view the long term prospects of such companies with the same jaundiced eye that the financial markets view Greece, somewhere around junk status, and bear this in mind when selecting new components for longterm usage in new designs.