Freescale: A Good Execution Story
Darspal S Mann
Darspal S Mann
Freescale Semiconductor: Boosting With Tailwind Opportunities
Mar. 25, 2015, 12:03 PM
- Chip stocks are particularly hard-hit (SOXX -3.6%) on a rough day for tech. The Nasdaq is down 1.3%, and the S&P 0.7%. Going into today, good earnings reports and ongoing M&A activity had led the Philadelphia Semi Index to rise 10% from its Jan. 30 close; the index remains up nearly 2x from its fall 2012 lows.
- AMD (AMD -7.2%) is a major decliner following a UBS downgrade. AMD rival/GPU giant Nvidia (NVDA -5.2%) and memory giant Micron (MU -3.7%) are also selling off, as are merger partners NXP (NXPI -3.8%) and Freescale (FSL -3.4%), RF chipmakers Avago (AVGO -5.2%), Skyworks (SWKS -5.3%), and Qorvo (QRVO -7.1%), LED/RF chipmaker Cree (CREE -4.1%), and high-flying video processor developer Ambarella (AMBA -4.3%).
- Other decliners include telecom chipmakers/ARM server CPU vendors Cavium (CAVM -4.8%) and AppliedMicro (AMCC -4.4%), microcontroller vendors Atmel (ATML -3.5%), Cypress (CY -5.5%), and STMicroelectronics (STM -3.5%), voice processor developer Audience (ADNC -3.7%), analog/mixed-signal chipmakers Linear (LLTC -3.7%), Maxim (MXIM -3%), and Intersil (ISIL -3.5%), FPGA maker Lattice (LSCC -3.9%), and mixed-signal/wireless charging IC developer IDT (IDTI -5.4%).
- Chip equipment, IP, and foundry providers are also underperforming. Big decliners include ARM (ARMH -4.4%), KLA-Tencor (KLAC -4.2%), Lam Research (LRCX -5.4%), ASML (ASML -4.1%), TowerJazz (TSEM -4.3%), Mattson (MTSN -4.5%), Ultratech (UTEK -4.7%), and Tessera (TSRA -6.1%). ASML has been downgraded to Hold by Banco Santander.
- TSMC (TSM -4.6%) is among the decliners in spite of a Digitimes report stating the foundry giant's sales are expected to rise 0%-5% Q/Q in Q2 - consensus is for a 2% drop - with strong Apple A8 CPU orders offsetting soft Qualcomm Snapdragon 810 orders.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Mar. 13, 2015, 10:22 AM
- Declaring NXP's (NASDAQ:NXPI) $16.7B cash/stock merger with Freescale (NYSE:FSL) will create "a powerhouse in the semiconductor industry," Needham's Rajvindra Gill has launched coverage on NXP with a Strong Buy rating and $140 target.
- Gill notes NXP/Freescale will be the world's biggest automotive chip and microcontroller supplier (as previously noted by the companies), with respective shares of 13% and 15%. He adds the post-merger company will be a top player in the growing mobile payments and IoT chip markets.
- NXP/Freescale are expected to see 2016 EPS of $7.44, and 2017 EPS of $9.00. $2.3B/year in free cash flow is considered possible.
- Also: BofA/Merrill's Vivek Arya is out with a bullish note: He thinks 2018 EPS of $8.40 is possible, with 10%-47% upside via cost synergies, lower interest expenses (as Freescale's high-interest debt gets refinanced), lower taxes, and potential buybacks as the company deleverages.
- Arya observes Chinese regulatory approval remains a hurdle, and that NXP/Freescale's combined 90%+ base station power amplifier share is a concern, but also notes NXP plans to divest its base station amplifier ops, and has plenty of Chinese experience (previous).
- Both NXP and Freescale have surged to new highs.
Mar. 4, 2015, 4:17 PM
- Avago (NASDAQ:AVGO) held "advanced talks" to buy microcontroller/network processor/base station amplifier maker Freescale (NYSE:FSL) before the chipmaker agreed to a $16.7B deal with NXP (NASDAQ:NXPI), Reuters reports.
- Avago reportedly got cold feet after Freescale's shares surged on an NY Post M&A report last month. However, sources state the company is "still looking for an acquisition that could be transformative."
- Over the last 15 months, Avago has struck a $6.6B deal to buy LSI (it later sold parts of LSI to Seagate and Intel), a $309M deal to buy PLX Technology, and (most recently) a $609M deal to buy Emulex, expanding into a number of enterprise hardware markets along the way.
- $31B worth of chip industry M&A deals took place last year, as chipmakers large and small try to reap cost and product synergies by merging with peers.
- Avago rose 0.9% today to $129.40, leaving it close to Monday's all-time high of $130.87.
Mar. 2, 2015, 2:52 PM
- Freescale (NYSE:FSL), fresh off announcing a deal to merge with NXP, has unveiled the S32V, an automotive SoC/vision processor said to provide "the requisite reliability, safety and security measures to automate and co-pilot a self-aware car."
- The S32V contains a bevy of high-reliability features, as well as private CogniVue's image-processing tech and support for radar, LIDAR, ultrasonic info, and other data streams. It becomes available in July.
- Mobileye (NYSE:MBLY), whose driver-assistance systems rely on the company's proprietary EyeQ SoC, has sold off in response. Wells Fargo is defending the company, arguing competing in the driver-assistance tech market is easier said than done.
- Shares have added to the losses seen after a Q4 beat and solid Q1/2015 guidance were provided last week, and are less than $2.50 above a post-IPO low of $31.11.
Mar. 2, 2015, 9:15 AM
Mar. 1, 2015, 9:56 PM
- Shortly after Reuters reported a deal was close, NXP (NASDAQ:NXPI) has announced it's buying Freescale (NYSE:FSL) for $6.25/share in cash and 0.35 NXP shares for each Freescale share owned.
- Based on NXP's Friday's close, the deal has a value of $36.14/share, nearly even with Freescale's Friday close. It has an equity value of $11.8B, and an enterprise value of $16.7B after factoring Freescale's net debt.
- Freescale shareholders will own 32% of the post-merger company. NXP will pay for the deal with $1B in cash on hand, $1B in new debt, and 115M shares. It's expected to close in 2H15.
- The companies predict $200M/year in cost savings in the first year after closing, and $500M/year eventually. They assert the post-merger company will be "the market leader in automotive semiconductor solutions and the market leader in general-purpose microcontroller (MCU) products." NXP promises the acquisition will be accretive to both EPS and free cash flow.
Mar. 1, 2015, 7:45 PM
- NXP (NASDAQ:NXPI) is close to buying fellow microcontroller vendor Freescale (NYSE:FSL) for a slight premium to Freescale's current ($11.1B) market cap, two sources tell Reuters. The deal would be the biggest in the chip industry's 18-month-long consolidation wave, creating a company with a ~$32B valuation (~$40B after debt) and expected 2015 sales of $12.2B.
- Two weeks ago, Freescale's shares jumper on reports it's exploring a sale; they've more than doubled from their October lows. In addition to making NXP a top player in the fragmented microcontroller market, acquiring Freescale would give NXP sizable network processor, analog/sensor IC, and RF power amplifier businesses.
- Freescale's network processor and amplifier ops have strong 4G base station exposure, while its microcontroller business depends heavily on auto and industrial sales. The company has relatively little consumer hardware exposure.
- Freescale currently trades for 17x 2015E EPS, and is expected by the Street to post 5% 2015 revenue growth. NXP trades for 15x 2015E EPS, and is expected to post 11% revenue growth. If recent deals are any sign, the companies will argue a merger can deliver major cost synergies.
- Update: NXP and Freescale have officially announced the deal.
Feb. 17, 2015, 11:40 AM
- With shares having more than doubled from their October lows, RBC has downgraded Freescale (FSL -2%) to Sector Perform, while keeping its $33 target intact.
- The network processor/microcontroller maker is still up 6% from where it traded before reports emerged on Thursday night stating the company is exploring a sale, as the chip industry's consolidation wave continues at a frenetic pace.
Feb. 13, 2015, 9:15 AM| Feb. 13, 2015, 9:15 AM | 3 Comments
Feb. 13, 2015, 3:28 AM
- Freescale Semiconductor (NYSE:FSL) has hired investment bankers to explore a possible sale, the NY Post reported, citing a source close to the situation.
- The company went public in 2011 after being taken private in 2006 for $17.6B.
- Freescale's shares have soared over 75% in the last three months, with much of the rise coming after its strong Q4 results.
Jan. 28, 2015, 12:44 PM
Jan. 28, 2015, 9:14 AM
Jan. 27, 2015, 5:35 PM
Jan. 27, 2015, 5:20 PM
- In addition to beating Q4 EPS estimates (while posting in-line revenue), Freescale (NYSE:FSL) is guiding for Q1 revenue of $1.135B-$1.185B, above a $1.11B consensus.
- Driving the EPS beat: Q4 gross margin was 47.2%, up 90 bps Q/Q and 330 bps Y/Y, and soundly beating guidance for a 75-100 bps Q/Q drop. GM is expected to be roughly flat Q/Q in Q1.
- RF chip sales (lifted by Chinese 4G base station demand) were a standout in Q4, rising 71% to $164M. Microcontroller sales +5% Y/Y to $232M. Digital networking -11% to $217M (carrier and industrial weakness). Automotive MCUs +1% to $271M. Analog/sensors +2% to $193M.
- Operating expenses rose 4% to $327M. $74M was spent on capex in Q4, and $249M over the whole of 2014.
- Shares have risen to $29.50 AH, making new 52-week highs along the way.
- Q4 results, PR
Jan. 27, 2015, 4:07 PM
- Freescale Semiconductor (NYSE:FSL): Q4 EPS of $0.42 beats by $0.09.
- Revenue of $1.1B (+1.9% Y/Y) in-line.
Jan. 26, 2015, 5:35 PM
Freescale Semiconductor Ltd offers embedded processors such as microcontrollers and digital networking processors.
Industry: Semiconductor - Broad Line
Country: United States
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