No Free Ride for Freescale Semiconductor

Freescale embarked on a rigorous restructuring program to stem its losses, cutting its manufacturing facilities from 22 to nine and partnering with peers to reduce R&D spending. The company slashed its payroll by 35%, leaving it with a staff of 22,000 worldwide.

By 2003, Freescale had managed to narrow its loss to $366 million (on sales of $4.9 billion), and in just the past two quarters it has swung into the black.

In the first quarter of 2004, Motorola's chip division delivered net earnings of $106 million on $1.4 billion in sales.

In Monday's filing, Freescale said it anticipates net sales for the second quarter ending July 3 to range between $1.4 billion and $1.5 billion, compared with net sales of $1.1 billion for the same period a year ago.

Thomson First Call does not yet carry estimates for the company.

The latest skinny on the IPO belies earlier chatter that Motorola might pull the deal. In the wake of two profitable quarters, some thought the handset maker might decide to keep the chipmaker within the fold to boost the parent company's performance. Also, the spinoff was the brainchild of former CEO Chris Galvin, who's since been replaced by Ed Zander.

Motorola's announcement in May that it had tapped an outsider to run the division -- Michel Mayer, most recently head of IBM's (IBM) microelectronics division -- also underscored the handset maker was serious about spinning off the unit.

Expect to hear more detail when the roadshow gets under way in coming weeks. But it's clear Freescale will face a skeptical audience, with the chipmaker facing off against hardened competitors in a broader semi market still stuck in limbo.

>To order reprints of this article, click here: Reprints