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10 October 2006


Analysts warn of threat to Freescale's RF Business

Market research company Strategy Analytics has warned that the proposed leveraged buyout (LBO) of Freescale, by a consortium lead by The Blackstone Group, puts the future of the company’s RF products in doubt.

In its recent report “LBO Debt Load Threatens Freescale’s RF Business,” Strategy Analytics says that the LBO will force Freescale into larger debt than NXP (formerly Philips Semiconductor) or Avago Technologies (formerly part of Agilent), two other recent semiconductor LBOs. The report warns that earnings inadequate to cover interest payments could lead to the wholesale dismantling of Freescale, putting the company’s RF and wireless products at particular risk, as these products benefit from Freescale’s complete platform solutions.

“At the proposed price of $40 per share, the Freescale LBO could generate more than $11 billion in debt for the company,” said Chris Taylor, director of the RF & Wireless Component service. “Servicing this debt will prove a challenge unless the company can maintain the growth and profitability that it experienced in Q2 ’06 without letup.”

Asif Anwar, director of the GaAs and Compound Semiconductor service, added, “After this LBO, we are particularly concerned about Freescale’s ability to fund the development of new RF products, such as power amplifiers for W-CDMA handsets and platforms for UWB and ZigBee.”