
Chip Makers Will Merge in Deal Worth $11.8B - luu
http://www.nytimes.com/2015/03/02/business/chip-makers-will-merge-in-deal-worth-11-8-billion.html
======
krampian
>> Both companies soon began to struggle under new ownership, burdened by new
and huge debt obligations and falling demand during the financial crisis.

The debt obligations are the typical result of private equity intervention.
It's basically financial engineering which benefits mostly the private equity
people.

For a good read about conglomerates and company architecting, I would suggest
Warren Buffet's most recent shareholder letter from a few days ago, especially
the part where he discusses the skepticism that should be shown towards
bankers and financial people proposing company spinoffs to "unlock value".

~~~
shawndumas
"Investment bankers, being paid as they are for action, constantly urge
acquirers to pay 20% to 50% premiums over market price for publicly-held
businesses. The bankers tell the buyer that the premium is justified for
“control value” and for the wonderful things that are going to happen once the
acquirer’s CEO takes charge. (What acquisition-hungry manager will challenge
that assertion?)

A few years later, bankers – bearing straight faces – again appear and just as
earnestly urge spinning off the earlier acquisition in order to “unlock
shareholder value.” Spin-offs, of course, strip the owning company of its
purported “control value” without any compensating payment. The bankers
explain that the spun-off company will flourish because its management will be
more entrepreneurial, having been freed from the smothering bureaucracy of the
parent company. (So much for that talented CEO we met earlier.)

If the divesting company later wishes to reacquire the spun-off operation, it
presumably would again be urged by its bankers to pay a hefty “control”
premium for the privilege. (Mental “flexibility” of this sort by the banking
fraternity has prompted the saying that fees too often lead to transactions
rather than transactions leading to fees.)"

~~~
kchoudhu
And a counterpoint:

[http://epicureandealmaker.blogspot.com/2015/03/uncle-
warren-...](http://epicureandealmaker.blogspot.com/2015/03/uncle-warren-
explains-it-all-to-you.html)

Accept no one's argument at face value, especially when it's coming from a man
who has spent the last 50 years exploiting market inefficiencies.

~~~
ryguytilidie
"Apparently some doddering old fart in Omaha, Nebraska published a celebratory
letter yesterday."

"I tend to prefer my moral fiber to come unencumbered by six cups of refined
sugar and smug self satisfaction per serving. I know, I know: I am downright
un-American."

And finally, in the fourth paragraph, the author finally starts the story with
"Aaannnyhoo".

This guy is a pretty insufferable writer.

~~~
kchoudhu
Yup, but that doesn't change the fact that he's right though. Read through his
posts -- it is readily apparent that he knows what he is talking about.

------
mafuyu
I hope Freescale's openness with their datasheets and sample policy survive
the merger. It seems NXP is the one consuming Freescale, however.

~~~
ctz
NXP is the most paranoid and ridiculous company I've ever had the displeasure
of dealing with. Even after signing two separate NDAs with different parts of
NXP, they still wouldn't give us complete sets of datasheets for parts we were
considering. I don't know how they can sell anything at all; it's impossible
to use their parts in a design.

~~~
olalonde
Genuine question: why do they do this? Is it to protect their customers from
reverse engineers?

~~~
MichaelGG
I'd love to know, too! FBI agents were flipped for $100,000, just cause they
needed the cash. Escaped detection for decades. CIA agents were turned, too.

While I'd not be surprised to see corporate security better than the FBI's
stuff[1], I find it hard to believe you can't just get agents on the inside
for the amount of money involved. So secrecy seems so unlikely to be useful
against the companies that can really benefit from that knowledge.

It reminds me of Nikon not documenting their white balance settings in their
RAW format. Just stupidity all around.

1: A long time ago, I saw Microsoft Internal Affairs in action. They were fast
and setup a sting, complete with their own undercover agents/turned insiders,
in a matter of weeks from first tip-off. I'd imagine companies like pharma or
chips, would have even more severe response. Whereas in the FBI, one multi-
decade mole was actually caught once or twice, but talked his way out. At one
point, he even led the investigation against himself.

~~~
throwawayaway
The Police Chief didn't know he was double crossed by Internal Affairs all
along! I would fucking love to see one of those type of Dirty Harry films done
in a megacorporate setting.

Here's another, Microsoft Internal Affairs more recently in action:

[http://www.nytimes.com/2014/03/21/technology/microsofts-
soft...](http://www.nytimes.com/2014/03/21/technology/microsofts-software-
leak-case-raises-privacy-issues.html?_r=0)

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Quequau
Having worked at NXP for a short time, I agree with you but I have the
impression that most of the unwillingness to be open (with those things it
makes perfect sense to be open about) comes from laziness and fear of
unintended consequences.

The center of gravity of power is held by groups with security focuses and
they're supposed to be professional paranoids... It's just unfortunate that
the least effort, safest decision for many other folks is one which can be
seen as consistent with what those groups would have made.

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ghubbard
tldr; NXP Semiconductors is buying Freescale Semiconductor.

~~~
huxley
And for historical context, Freescale Semiconductor is the spinoff of the
original Motorola's Semiconductor Products Division, that was a transistor and
semiconductor pioneer as well as building the 680x0 and several of the PowerPC
processors for the Apple Macintosh back in the day.

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zokier
Bit sad to see another company with prestigious history to get swallowed like
this. Another similar story not too long ago was when Infineon acquired IRF
[http://www.irf.com/press-room/press-
releases/nr140820i](http://www.irf.com/press-room/press-releases/nr140820i)

Are there new players enough to fight the ever-growing conglomerates?

~~~
sitkack
Rip Burr-Brown, National Semiconductor, Zetex.

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blumkvist
Pf... that's half a whatsapp.

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ausjke
Again smaller player acquires larger ones,USA lost another used to be good
company

~~~
skrebbel
Why would Freescale become a "used to be good" company as a part of NXP? NXP
is a pretty cool company IMO. They make lots of cool tech and they got out of
the "split off from Philips and take all our debt with you" turd of a deal
_remarkably_ well.

(For the interested, NXP used to be Philips Semiconductors. Philips wanted to
cut them away because it was an unprofitable division so they sold it to some
hedge funds, _including_ a shit ton of debt. Afair, something like 20% of
their annual expenses were interest only, putting a big damper on their
freedom to innovate. So NXP in turn cut away _its_ unprofitable subdivisions,
and became or stayed remarkably competitive in the others. With an inheritance
of relatively expensive R&D (no Chinese wages) and a Philips culture (= highly
bureaucratic and hierachical), that is no small feat)

To me, an uneducated observer, the fact that NXP now feels in shape to do big
acquisitions is a pretty good signal. These guys are on the rise, and that may
not be bad for Freescale at all.

~~~
PinguTS
But I think, this was regular Hedge Fund strategy of buying companies. Take a
ton of money from the financial market. Buy off a company or subsidiary and
pay with the borrowed money. Then put all that on dept to the bought company.

That was the way it also worked when the Hedge Fonds bought it out of Philips.

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gonzo
Freeslide hits bottom, film @ 11.

