Bloomberg News

Freescale Semiconductor Falls After Cutting Sales Forecast

September 26, 2011

(Updates with closing price in fifth paragraph.)

Sept. 26 (Bloomberg) -- Freescale Semiconductor Holdings, the chipmaker mostly owned by a private-equity consortium including Blackstone Group LP and TPG Capital, fell after cutting its third-quarter sales forecast.

Slowing demand in its industrial and networking businesses may push net sales for the quarter down by 6 percent to 8 percent sequentially, the Austin, Texas-based company said today in a statement. In July, Freescale estimated sales for the third quarter would be flat to down 3 percent.

Analog-chips go into everything from space hardware to household electronics, making their sales an indicator of demand across the economy. Freescale joins larger rival Texas Instruments Inc. and competitor Intersil Corp. in saying that third-quarter revenue may not meet targets.

“The whole industry is stabilizing, but hasn’t stabilized yet,” said Richard Schafer, an analyst at Oppenheimer & Co. who rates the stock ‘outperform’ with a target price of $24, in an interview today. “Freescale will have to cut its fourth quarter sales forecast as well.”

The shares dropped 12 cents, or 1 percent, to $12.12 at 4:15 p.m. on the New York Stock Exchange. The stock has fallen 34 percent since May 26, its first trading day after its initial public offering.

Gross margins will show a modest sequential improvement in the third quarter, the company said today. Analysts surveyed by Bloomberg project an average gross margin of 46.2 percent for the current quarter, up from the 42.3 percent Freescale reported for the second quarter.

Sales Decline

In July, the company reported a quarterly loss of $168 million, or 79 cents a share, compared with a $538 million loss, or $2.73 a share, a year earlier. Revenue was $1.22 billion. Analysts surveyed by Bloomberg estimate revenue of $1.19 billion for the current quarter, a 2.5 percent decline from the prior period.

Freescale sold 43.5 million shares at $18 each in its IPO in May, raising 25 percent less than it originally sought. The IPO price reflected a 50 percent discount to the average of $36 that investors paid for the company, according to a regulatory filing.

Intersil said on Sept. 12 that third quarter revenue will be $184 million to $188 million, down from an earlier projection of $205 million to $213 million, citing a weakening economy.

Texas Instruments said on Sept. 8 that third quarter sales would be $3.23 billion to $3.37 billion, down from a prior range of $3.4 billion to $3.7 billion, due to a slump in orders from customers across its product lines.

--With assistance from Xu Wang in New York. Editors: Lisa Rapaport, Niamh Ring

To contact the reporter on this story: Lisa Rapaport at lrapaport1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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