mannerisms

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

Avoid These Bloody Awful People Like The Plague

If anyone was still in any doubt about the kind of people who inhabit the private equity industry, just look at the latest shenanigans from Kohlberg Kravis and Roberts (KKR).

 

KKR bought NXP in 2006, loaded it up with $6 billion of debt, initiated a period of factory closures, lay-offs, sale of the wireless and home business units and general despondency among employees.

 

Then KKR, having wreaked its havoc, announced last month it would jettison some of  its responsibility for NXP via an IPO.

 

Deutsche Bank was to be lead underwriter for the IPO and was asked by KKR to renew a $60 million loan it had made to NXP.

 

No, said Deutsche Bank. Then KKR boss Henry Kravis range Deutsche Bank and asked them, again, to renew. Again Deutsche Bank said No.

 

So KKR removed Deutsche Bank as lead underwriter.

 

Deutsche Bank’s bankers were furious, according to the New York Post, arguing that they’d have made more in fees from the underwriting than they could have lost with the loan.

 

Apparently some Deutsche Bank bankers threatened to resign and go to UBS.

 

The Post quoted a source who said:: ‘KKR did what KKR does – the guy who provides the outrageous loan gets the underwriting slot’.

 

These are the sort of people who have brought despair to NXP’s employees, dismemberment to a fine company, and have given the finger to European taxpayers who have funded much NXP R&D over the years.

 

The bankers are as bad as the private equity people – squabbling for fees as an admirable organisation like NXP is pushed into the mire.

 

The story tells us this: Have nothing to do with these bloody awful private equity people – they have nothing to offer but misery.

Tags: misery, new york post, private equity industry, taxpayers, underwriter

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42 Comments

  1. rabe
    May 07, 2010 06:33

    So, what can we say, there is an opportunity in the private ownership, and there is an opportunity in the independence from the mother company Philips. NXP just has to use it.
    NXP can become a real Semi company, rather than just a stage of an eastern block type conglomerate, where the quarz sand is coming in at one door, and the finished TV sets go out at the other door.

  2. rabe
    May 07, 2010 05:50

    @Robert:
    Regarding the creme of the mathematicians, physicists and engineers, all with a PHD – well this is absolutely no guarantee for success.
    The guys will frequently also have raised expectations, expect quick money and promotions and broad recognition after their exit from academia. So they will frequently turn an assignment into a (apparently) thesis and a promotion, rather than into business, and then quickly move on. Of course we had whole departments full of the so called “hypophysicists”, like Dr. Diode, and Dr. Neutronskyi-Starskyi, and for the process issues it was welcome. However, once this process focus was burnt in on their screen, they would see everything as a diode, which was wrong. I already mentioned the discrepancy between diodes and system business. So the experiences with them in leadership positions was rather mixed, and in every case I believe we had been better off hiring Bill Gates, without all credentials.

  3. rabe
    May 07, 2010 01:29

    A particular problem for Philips Semi was that management was continuously rotated in from the ranks of the huge mother company, and these were regularly indeed vacuum salesmen and lightbulb salesmen.
    They did not understand why the Semi products would sell in a cyclic market, their vacuum cleaners wouldn’t do this at all.
    They didn’t understand why innovation was not the same as with vacuum cleaners, where it was a new streamlined plastic casing from time to time, as if the vacuum cleaner was designed to break the sonic wall, or some added gimmicks.
    They didn’t understand that the new semiconductor products were a systems solution, not a commodity product like a lightbulb, in spite of the high volume. They consistently treated the problem as a problem of semiconductor technology. This worked well for e.g. our transistor and diode product lines, but entirely missed the point for the increasingly complex integrated systems on a chip.
    Consequently they didn’t understand that the business was to offer an inventive systems solution to an ill defined problem, and the whole thing would have to be engineering driven, in cooperation with the customer engineers. So they blamed past misses on the engineers and essentially replaced them with a formalized, proceduralized approach, to turn customer requirements into product specifications. Being paper procedures, these methods suffered from the garbage-in/ garbage-out effect like a computer program. In effect the customer got a product offer literally matching, what he had asked for literally, but it was not a solution to his problem, because his problem was ill-defined and would have required a systems investigation with brains, not an automated procedure.
    The result was that money was still made with the traditional and commodity products, where the management was appropriate, but not with the many miscarriages of the new marketing-centric and customer-centric procedural approach. The only hits at that time were engineering ideas which had been worked out “under the desk”, bypassing the procedures, financed by some reptile fund. Instead of recognizing the mismatch they proceeded now to make the procedures more and more perfect, introducing more and more control points to minimize development risk. This increased the development time more and more, such that finally completely well defined but obsolete products would result, which were not even the solution to the customers problem.

  4. rabe
    May 06, 2010 22:50

    For cross reference: The Ministry of Silly Walks
    http://www.montypython.net/scripts/silywalk.php

  5. rabe
    May 06, 2010 13:15

    Next logical moves could be sell off of the traditional product lines as sunset business.
    They claim to turn NXP into a mixed signal company, however for some time Philips Semi had the slogan pig good, human bad… digital good, analog bad, digital good, analog bad… (Animals Farm) and in this time they kicked out all analog engineers from analog Radio/TV/RF, because their knowledge was allegedly outdated. It didn’t appear to them that high speed digital anyway becomes analog.
    So before they become a mixed signal company again, they would have IMO to merge with some established mixed signal player for the systems know how and portfolio I am afraid. The factories would be ok. to make such products. But this is only my speculation.

  6. rabe
    May 06, 2010 09:45

    I have to correct myself:
    So IMO what KKR got wrong is that they kept the “nomenklatura” or “Ministry of Silly Walks” (by Monty Python) too long and let them play their game, and instead they let the engineers and scientists go.

  7. rabe
    May 06, 2010 07:16

    So IMO what KKR got wrong is that they kept the “nomenklatura” or office of funny walks too long and let them play their game, and instead they let the engineers and scientists go.

  8. rabe
    May 06, 2010 07:03

    Given the gained degrees of freedom in a private company, taking the company private was exactly the right move, was what I would have done.
    Rightsizing the company was also the right move, because after the invasion of the vacuum salesmen and the new age gurus in the 90′s, together with the machine bureaucracy they had introduced and the control and obedience cult they had developed it was literally a subsidized employment program for managers of all kind, in a rigid matrix organization. Everybody was busy to develop still more procedures and milestones to justify his own existence in this tower of babel. The bureaucracy was proliferating itself, it had taken on a life of its own, was multiplying like an animal.
    We had definitely too few engineers left over and instead a pest of talking heads and self proclaimed watchmen, much like during the construction of the Berlin Wall, where every construction worker was watched by 4 armed policemen. We already made jokes that the factory fence was there to prevent workers from escaping.
    Concluding, there are still too many talking heads left over, who cannot be used for any real engineering work. Is this a semiconductor company or a branch of public service? Maybe the office of funny walks? Right sizing is the answer for the only question they didn’t ask.
    They never questioned themselves.

  9. robert
    May 06, 2010 01:54

    Wow playing to a hard crowd!
    OK a little background:
    I mentioned Rentech because a couple of years ago there was a GIF email attachment that did the rounds.
    The title was “F**ced by the Engineers”
    The GiF was created to relation to some poor bonuses that were paid to KKR staff, it featured a banker bent over with two engineers behind him wearing identifying hats. The reason for the small bonuses was the under performance of NXP (relative to its semi peers) and the under performance of KKR relative to its banking peers (inlc. Rentech).
    I appears that you are somewhat familiar with Rentech, and the GCHQ connection (hence my NSA reference). Personally I have the deepest technical respect for one former Rentech’er, namely Nick Paterson. He got completely screwed over regarding the “split key cryptography patents” so if bogus “quant finance” restored some balance to the world,than that’s just karma.

  10. greg
    May 05, 2010 22:32

    It always gets my back up when I hear people talk about certain industries having smarts… I used to work for a counterpart to the NSA and I know they were ok, but definitely not the cream. The cream really do not institutionalize themselves. The NSA like all other government departments heavily contract out their technical requirements. If you want to find the smarts… find the contractors. I was seconded to the contractors and it was interesting the advice they gave me was to get out into private tech.. I would swallow what was to be learnt there in short order.. and they were right. Likewise with RenTech. No doubt the Math Prof was a good mathematician but he is not the cream. Maybe he was wise to get out of academia and into the finance sector… but is making money a sign of smarts? I am always flabbergasted when I hear the financial media talk about genius’s or the smartest guys in the room… its such a load of bunk. The sad part is that the smart guys are not raking in the cash for the most part. I’m sure any honest quant .. if you could find one would tell you the math is comparitively easy… and if they were really honest would also tell you its fatally floored. No serious mathemetician really believes in the accuracy of statistically based modelling like that. A finite difference formulation of crap still equals crap.. and they know it.

  11. rabe
    May 05, 2010 19:07

    I do not believe in societal justice, I am afraid. But I think it is interesting to analyze how industry got hijacked by money menshen and their vacuum salesmen types, new age coaches and McKinsey advisers for short term profit at the expense of sustainable development. This is a phenomenon larger than KKR/NXP, but I thought the Philips Semi history was exemplary.
    The societal counterpart is a cultural change, away from science and technology, towards the irrational and the soft sciences, even towards the quackery of life coaches, psychologists and new age gurus. Electro smog is emanating from the toaster, noxious chemicals are wafting through the streets from every industry, the people believe in the irrational more than in the past decades, businesses are run by fashion and vooodoo, what do we expect?
    We will be sitting there, lousing each other like apes.

  12. Robert
    May 05, 2010 13:00

    @rabe
    If you are looking for any social justice than, one of today’s most successful Finance companies is at its heart an engineering company. The bankers I meet are all green with envy over the success of this financial upstart called Renaissance Technologies.
    This company was started by a Math professor and ONLY employs Mathematicians, Physicists and Engineers, all with PHD’s. It is said that the interview is more technically difficult than a doctoral defense and that the level of scientific and mathematical rigor is unmatched outside of the NSA.
    Anyway, RenTech (as it is commonly known)is completely employee owned and makes about $2B profit per year, all from under 200 employees and about $4B capital. Needless to say they set the bar by which so called finance gurus (like KKR) are evaluated.

  13. rabe
    May 05, 2010 12:30

    In principle private investment allows optimizations which are impossible for a public company, for instance investment into new developments against the cycle, with most money spent during the down phase of the cyclic semiconductor business. This would result in optimum return over one or several periods of the periodic cyclic business. But this means also that the return will be deferred by 6-12 years and the investment will be strategic. It is to be seen how much NXP will profit from these options over a time longer than a decade.

  14. rabe
    May 05, 2010 09:40

    So as long as technology is not a recognized strategic political goal and instead regulation by environmental and labor regulations is the official direction, industries will be closed down in Europe and eventually be transferred to other countries. The voters in Europe get what they bargained for.

  15. rabe
    May 05, 2010 03:19

    So if we follow the pattern of NXP/KKR we will be making chips in the future, but it will be fish and chips.
    For some time our position in a services society as advisers and administrators and traders of the developing industrial nations and their goods will still be justified, as long as the technology transfer goes on. But soon the gradient will not be sufficient to drive the technology transfer, the engineering professions and natural sciences will have lost their splendor as driving forces of our civilization and they will be unattractive, not even promising a place in the middle class, other than as a scientific day laborer. This has already happened to some extent, look at the employment rental agencies.
    After that we will just be uneducated and backward, just a nasty wart on the butt of an Indian Elephant and a Chinese Dragon.
    And then will be the time when Plan B kicks in: We are all making chips, but it are fish and chips, do you want fries with it, want a soda with it?
    The reason will be that we have not recognized technology as a driving force of our society and a national strategic goal any more and have given it up because it promises no quick money, no day trade gains, but only these long term strategic gains which are so hard to quantify but are what made our civilization what it is today.
    We are missing out on a point which the Japanese got right, and which the Koreans got right and which the Indians and Chinese will get right. Meanwhile we are listening to the bankers, and politically to the Environmentalists who want best have the industry as a whole abandoned, but in particular electronics, chem, biochem and material sciences.
    Until in their future we are sitting and munching cereals and probably little cookies named Soylent Green, and lousing each other like apes. But almost everybody will have a degree in liberal arts, will be singing, dancing, painting and teaching.
    Remember that environmental hysteria makes it almost impossible today to run a little laboratory or even to do chemical classroom exercises with real chemicals. Even a bottle of acetone (nail polish remover) has to be locked up as dangerous chemical. So I am not surprised that all technical/chemical developments are being moved to countries without this hysteria, where the young people are still eager to become an engineer or chemist.

  16. rabe
    May 05, 2010 00:21

    It reminds of the downturn of the Romans, who were first inventors and engineers, then conquerers, then administrators and traders and then finally became pizza bakers and travel guides for their historical museum for the visitors from the new world.
    So will we be standing there baking fish and chips and making fries and guiding the visitors from East Asia through the ruins of our industrial society. Look at the former German industrial aggregate in the Rhine-Ruhr area, formerly the steel mill of continental Europe, now de-industrialized and an industrial theme park with rock concerts and cultural new age crap, all to the hearts desire of a new generation of uneducated post-industrial young people with a B.A. in fine arts and a strong luddite anti-industrial green ideology, being arts teachers and philologists and child-psychologists and the like. This is what you still can be, if you are not a marketeer or business man. Post-Industrial, this is the emphasis.

  17. rabe
    May 04, 2010 23:58

    Engineering has surely lost it’s splendor as a driving force of industry and even civilization. The whole society is on the way to developing into a services society, where people are advising, counseling, coaching, teaching, suing each other, baking fish and chips, cutting each others hair and clipping each others toe nails.
    Industry is being done elsewhere, for some time we hope to keep the management and administrative control and distribution of these exported industries in our hand.
    The leadership positions are correspondingly no engineer positions any more, but MBAs, economists, administrators, money menshen, HR psychologists, marketing and advertisement professionals.
    Only nothing is being invented or manufactured here any more. In the long run this whole pyramid of qualifications required for an industrial society, from technical and natural science over technology to the crafts is dieing away. Young people don’t want to become engineers or natural scientists any more, because these difficult to learn topics do not get rewarded in a society that is dominated by services and trade. At the same time European industries are lamenting the lack of young engineering talent in the labor market. Not a surprise, that everybody wants to become a marketeer with a BMW, a Rolex and a shitload of money in only 3 years, given the example of the marketing-heavy big business, and not a gray mouse behind some microscope, oscilloscope, work station, or with glassware full of smelly chemical substances in some stinky lab.
    Look at it, KKR makes a shitload of money, and all the engineers and scientists who got kicked out are now pulling welfare or are pushed into retirement or are driving taxi or the like.
    Who wants to be on their side and become a loser too?

  18. rabe
    May 04, 2010 23:02

    I believe above story is symptomatic for the recent development of the western industry, where in principle the long term strategic goals are being sacrificed for the short term return on investment. This will destroy the strategic position of our industry in competition with e.g. the Chinese industry, which is run on a political plan intended to promote the strategic position of the national industry at all cost and with state subsidiary.
    So they don’t care if they have to go through blood, sweat and tears for some time, if only the long term strategic position is being improved.
    The NXP/KKR story is just exemplary for this short term exploitation of the substance and strategic position for return on investment.

  19. rabe
    May 04, 2010 22:19

    In the result the introduction of the new methods – marketing and sales centric business, avoidance of development risks, new age and McKinsey babble – led to a short term tactical improvement of the return on investment. This tactical gain came at the cost of destruction of the sustainable strategic substance of the business, namely the technical inventors spirit, which after all had made the company was it was.
    Farmer John increased the efficiency of his mare to infinity temporarily, by not feeding it any more. Then it collapsed and died.

  20. David Manners
    May 04, 2010 22:10

    Crikey, rabe, it gets worse. Good stuff though, thanks.

  21. rabe
    May 04, 2010 21:26

    So this was how the slightly old-fashioned but rock solid technical Dutchmen, who were stone sober, suddenly were replaced by elasto-dynamic fashion geek vacuum sales men with a whiff of Zen and new-age cult and McKinsey and no brains.
    You can call it a development in parallel to certain fascist ideologies, where rational thinking is replaced by doctrines and ideology in an irrational fashion. Human bad, pig good, human bad, pig good… (from memory from the Animals Farm) Engineer bad, vacuum salesmen good…

  22. rabe
    May 04, 2010 20:38

    In the 90′s the Europeans were shell-shocked by the success of the Japanese consumer electronics industry. Suddenly all traditional values and the strong engineering background appeared to be worthless. Actually the engineers appeared to be the culprit of this development, because they would not understand business. In the consequence a kind of “cultural revolution” happened, suddenly the ideal was the “vacuum sales men” type, all eyes stared to the far east, how they could turn a walkman into a shitload of money, and also new “advisers”, “trainers” and “coaches” came in. The sales types took the drivers seat and they simply didn’t have the brains and solid foundation to resist the pseudo-psychological babble and marketing babble and McKinsey babble of the advisers. The engineers had turned into “unpersons” of the culture revolution. A totally irrational development took place where the sober and rational technical people suddenly got disowned by the new young “red guards” from the ranks of the sales force.
    In fact we even had a company hymn then, which ran in an endless loop on the telephone system, and it said “marketing and sales are on their way, the Philips wayhay…” and “we invented the CD-I (a total flop) and the digital cassette(also a total flop)” and the like crap.
    The unsuccess was then blamed on the engineers and a cultural revolution took place, with all things, including reeducation etc. in the hope to be successful as a knock off of the east Asian companies. Yeah, with a whiff of Zen and a workforce of blue ants…

  23. David Manners
    May 04, 2010 10:55

    What an amazing story, Rabe, to think the Dutch, of all people, could have gone in for all this pseudo-psychological rubbish. I am just amazed. But thanks for a very interesting account.

  24. rabe
    May 04, 2010 08:14

    Well, the problems started already in the 90′s, when marketing, sales and operations took the drivers seat in Philips Semi. The result was that the formerly pretty creative development activity got curtailed and got fit a straightjacket of endless procedures and milestones for the development projects, which brought true innovation, invention and personal identification with the brainchild of a new idea to a screeching halt and turned development into a bean counters and bookkeepers business, which was also totally micromanaged by strict adherence to procedures for every minor step. At the same time the CEO showed up on company print media, painted, sitting with crossed legs in front of the Himalaya, surrounded by his disciples, like a guru, and a mixture of far east mystique and copycat syndrome from some far east companies appeared to be the new ideology. This certainly reminded in an eerie fashion of some things from some central committee in some remote eastern block country. So personal identification with the company got replaced by some strange zero-defect and control and obedience ideology with a whiff of Zen. We also got classes, where we had to stare at each other without twitching the face and we had to do a lot of tests with color scales and emotional scales under the supervision or surveillance of “coaches”, who seemed to have escaped from some cult. When this new management method together with fresh management took over, they also got rid of the old farts who were bone dry experienced professional engineers and didn’t know what to say to this kind of new-age mystique. A kind of youthfulness cult developed, everybody clapping his hands at every second sentence with enthusiasm and elasto-dynamic vigor like vacuum sales men after their brain wash.
    From then on it went downhill and the whole operation turned box of frogs.

  25. Russell Dawson
    April 27, 2010 15:24

    Great article David, I clicked through from your mannerisms newsletter – very interesting for an outsider to look in and see whats been happening. Enjoy this column time and time again – cheers

  26. April 16, 2010 15:43

    Everyone involved in these and similar shenanigans on all sides of the buy/sell/invest equation had absolutely no interest whatsoever in the chip business per see, they were all simply looking to turn an ultra fast buck, and getting filthy rich personally in the process. No one comes out clean in this fiasco but I agree with David 100% on this, KKR and their ilk ARE the real villains; the employees the real losers. In truth, KKR probably lost nothing … they were playing with other people’s money, even made out handsomely on the fees they earned in the process. Time to recall those wise words of Shakespeare “neither a borrower or a lender be”. I bet even the Mafia learnt a goodly few tricks from these folks.

  27. David Manners
    April 16, 2010 11:31

    Well, Robert, if Michel Mayer told KKR they were wrong-headed to bid for NXP, then KKR were all the more delinquent in going ahead with it. In 2006 everyone I knew in the semi industry thought KKR had vastly overpaid for NXP. So why did KKR fail to understand that? KKR’s failure, a failure which caused misery to hundreds of NXP employees and their families, is one reason to stop them operating in Europe.

  28. Robert
    April 16, 2010 10:59

    David,
    when KKR bought NXP they were genuinely interested in acting as a semiconductor consolidator, they purchased SiLabs cellphone business (for no good reason) and also almost purchased Frescale.
    KKR stepped in at the last moment and bid above Blackstones $37/share for FSL, which forced Blackstone to up their takeover to $41. It is rumored that KKR did not counter Blackstones $41 bid because of highly derogatory comments made by Meyer(FSL CEO) during their initial meeting.
    Meyer was apparently very critical of KKR’s acquisition of NXP and said that he wanted nothing to do with NXP. He claimes to have passed on several previous attempts by Philips to sell the division, telling the KKR folks that he wasn’t that stupid.
    If memory serves me correctly KKR also tried to takeover most of Conexant. So they were genuine in their initial intention to act as a semi consolidator.

  29. David Manners
    April 16, 2010 10:59

    Let’s hope so, Mike, and let’s hope all Yankee debt-pedlars will be repelled by our scorn.

  30. Mike Bryant
    April 16, 2010 10:15

    from the BBC this morning
    “Liverpool FC put up for sale by American owners”
    http://news.bbc.co.uk/sport1/hi/football/teams/l/liverpool/8624597.stm
    The power of being outed on Mannerisms ! :-)
    And hopefully Hicks and Gillett will lose a fortune !!

  31. David Manners
    April 16, 2010 08:13

    That sounds right to me, Robert, but I still see KKR as the villains of the piece. According to Frans van Houten, KKR presented themselves as people wanting to invest more capital in the business, as long-term owners, as semi industry consolidators blah-di-blah-di-blah. OK, KKR’s history showed that to be unlikely, but nonetheless it gave Philips some justification for dealing with them. My hope is that the NXP story is a warning that stops Europeans dealing with KKR again, and that the EC and national governments close the tax loopholes which makes the KKR sort of operation profitable.

  32. Robert
    April 16, 2010 03:18

    I agree with Cheese, there’s no doubt that KKR are lower than pond scum, but what does that make Philips?
    I cannot believe that attractive offers were not made to have Philips re-absorb NXP, at say $3B or maybe less. Wow $4B profit for selling a pig and buying it back two years later.
    As we all know this did not happen. Philips gladly sold NXP to a asset less shell company, they cashed the check and breathed a sigh of relief. The truth is they had sold an enormous liability, so the last thing they wanted was to be further associated with NXP.
    The KKR guys clearly did not know what they were buying, but at least they were smart enough to not risk their own capital. By the time the whole venture went sideways KKR had already recouped their initial expenses and is now preparing to profit from the IPO, smart guys.
    As for the bond holders and employees, well they really got screwed.
    The sad truth is that these bond investors had absolutely no understanding of the semi industry. Fundamentally what they didn’t realize is that they had funded the takeover of a liability, and if they didn’t like what KKR was doing than they’d have to run the business themselves. This meant the bankruptcy was really not an option, so given the above, the ONLY course open was to “right size” the business, find some profitable niches and work out an exit strategy.

  33. David Manners
    April 15, 2010 21:24

    Mike, Unless you’re a banker providing loans on stupidly lax terms, or a politician giving them a tax break, or a sucker to be skinned, I don’t think PE guys buy drinks for people.

  34. Mike Bryant
    April 15, 2010 20:09

    “when you see a stupid, greedy guy bite off more than he can chew, do you expect me to feel sorry for him?”
    Only when he’s buying the drinks :-)

  35. David Manners
    April 15, 2010 15:10

    Cheese, you’re right – the crafty Dutch had been trading worldwide for many centuries before KKR set up in business. But when you see a stupid, greedy guy bite off more than he can chew, do you expect me to feel sorry for him?

  36. April 15, 2010 15:01

    David, you do come hard on KKR and some of it is understandable. But let’s try to see the picture from the other side as well.
    KKR paid a kings ransom for NXP. Yes, it wasn’t their money, but they indeed paid through their nose for a business which it’s parent company was very very eager to disown. Did we ever consider why Philips wanted to so desperately get rid of their semi business? The answer: Philips, rightly saw Semi as a company with a rich past … but a very uncertain future.
    Having done the mistake (crime!) of paying nearly 9 B Euros, KKR needs to get their money back. We can lay the blame of stupidity on KKR (or more so, their financiers), but we cannot blame them for wanting to get (some of) their money back.
    Imagine if KKR (and their financiers) would have retained the Philips Semi in the same form..or if they infact had invested in it’s growth…What chance would they have of getting any money back, ever? Given the hollow organization and portfolio of NXP, KKR would need lots of patience. Probably infinite.
    Allow me to repeat – Philips Semi had a great past, but in the last decade or so it was confronted with several problems so much so that whatever little money was made, was from classic/established businesses and not the new ones any more. The future looked even more murky. And that’s exactly why Philips exited the business. Smart guys, they made good by selling coal claiming it was a diamond.

  37. David Manners
    April 15, 2010 14:53

    Spot on Mike, the scandal of these private equity companies, to my mind, is that they produce nothing useful, but get tax-breaks to raid companies which are making something useful.

  38. Mike Bryant
    April 15, 2010 13:29

    Unfortunately we are seeing the affects of these debt driven takeovers in many other fields as well. Liverpool FC and Cadburys are two suffering in the UK but I am sure every European country has a horror story to match that of NXP. The only way for this to stop is for the EU to pass a directive that companies can only be taken over by purchase from assets, not by loading the company with debt. It needs drawing up carefully so that the rules continue to allow the model that sustains Cisco, Glaxo, Broadcom, Cadence and so on to operate by rights issue to existing shareholders, subject to a new legal cap on the size of this, say 15% to 20% of market valuation. But the nonsense of a shell company with almost no assets and no earnings buying multi billion euro companies needs to stop for good.

  39. David Manners
    April 15, 2010 10:54

    Robert, I’m down on them because they perform to a pattern: buy a company, load it up with debt, cut back on whatever they can, sell off bits and pieces, curtail the R&D and, after two or three years, sell what remains. Little regard is paid to the long-time well-being of the employees, the customers, the product-line or the company. And they have the cheek (and maybe the bribe money) to get politicians to give them tax breaks. That’s why.

  40. Robert
    April 15, 2010 03:31

    David, Why are you so down on these guys? As far as I’m concerned KKR’s present behavior is perfectly understandable, even logical given the circumstances.
    Also being a born optimist, I see this IPO as a once in a life time opportunity to sell lipstick.
    As they say every cloud has a silver lining!

  41. David Manners
    April 14, 2010 22:30

    Thanks, dbs, you’re very kind. These private equity people cause so much harm, and they argue they should get special tax treatment! It would be a joke if it wasn’t so horrible. The EC and European national governments have got to come down on them like a ton of bricks.

  42. dbs
    April 14, 2010 15:16