No Free Ride for Freescale Semiconductor

Motorola (MOT) stunned a jaded Wall Street earlier this year with a barnburner first quarter. But with many investors awaiting more evidence on the cell-phone giant's turnaround, the question is whether Motorola's offspring, Freescale Semiconductor, can win support as it strikes out on its own.

In a regulatory filing Monday, the Austin, Texas-based chipmaker said it will issue 121.6 million shares priced between $17.50 and $19.50; Freescale plans to list on the New York Stock Exchange under the ticker "FSL."

The underwriting syndicate will be led by Goldman Sachs, Citigroup and J.P. Morgan.

Based on current terms, the presumptive Motorola spinoff is valued at up to $2.7 billion, which would make Freescale the second-biggest IPO to hit the market this year. Last month, General Electric (GE) spun off its life insurance and mortgage unit, Genworth Financial(GNW), in a $2.8 billion offering.

Freescale has yet to make its formal pitch to investors, but some Motorola shareholders expect the offering probably will occur sometime in July.

Regardless of the timing, Freescale likely will debut to a somewhat skeptical IPO market. "For Genworth, they had to cut the price to get it done, and it opened below right off the bat," noted John Fitzgibbon, editor of the IPO news site 123jump.com. (The stock managed to close flat on its first day of trading and was up nearly 10% from its $19.50 offering price as of Monday's close.)

Another hefty tech deal this spring, the $1.8 billion IPO of China's Semiconductor Manufacturing International(SMIC) finished down 11% on its first day of trading. As of Monday's close, the stock has fallen 36.6% from its $17 debut price.

Fund manager Bernard Diggins, who owns 1.3 million shares of Motorola in the (CHCGX)Chesapeake Growth fund, said Freescale executives will need to make a case on two fronts in the road show. First, investors will want to see how the company aims to win back share in the eight-bit microprocessor market -- an area in which it has ceded its dominance to Microchip Technology(MCHP).