Monday, April 11, 2011

NXP Reported to be Wooing Intel to Takeover

NXP Semiconductors, a semiconductor company founded by Philips, is reportedly in takeover talks with Intel, Qualcomm and Broadcom. Unlike any other rumor in the industry, this one moved from being a gossip to news with an unidentified banker as source according to Reuters. It said a Dutch newspaper De Telegraaf broke the news Friday (April 8). 

Apparently, a private equity group with majority ownership in NXP wants to exit the business. And what better way to do that than to seek the big players of the industry for help. Intel, Broadcom and Qualcomm are all strong semiconductor companies with revenues in the billions of US dollars. 

What could be the reason?

It’s not difficult to figure out why investors would want to exit NXP. The company has been in the red since it was founded in October of 2006. Its annual income statement reveals a consistent yearly net loss which could be a real headache to investors. It lost 650 million US$ in 2007, 3.6 billion US$ in 2008, 167 million US$ in 2009 and 456 million US$ in 2010. 


As a former employee of Intel, I know it is not keen on buying companies with this kind of performance. Intel will not soon forget how it had to sell its Flash division for the same reason. A failure to be profitable plagued Flash on a yearly basis without fail. The losses were eating up on the profits being made in its microprocessor business resulting to the decision by Intel to let go of Flash. I do not believe Intel would want to be in the same position again with an unprofitable business. According to Reuters, NXP had been rumored to be in merger talks once before (in 2008) with German rival Infineon but that came to nothing.   

NXP Semiconductors is headquartered in the Netherlands employing approximately 28,000 employees working in 25 countries around the world. It has six wafer fabs and six assembly and test sites including the one in Cabuyao, Laguna in the Philippines.
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