Active Network (The) (ACTV)
|
Based in Austin, Texas, Freescale Semiconductor (proposed FSL) is scheduling a $1.0 billion IPO with a market capitalization of $5.5 billion a price range mid-point of $23 for Thursday, May 26, 2011. |
|
SUMMARY |
|
Leveraged semiconductor buyout in 2006, still very highly leveraged |
|
For the March 2011 quarter sales increased 17% to $1.19 billion from $1.02 billion in 2010, and losses decreased to -$150,000 from -$300,000. |
|
In the March 2011 quarter FSL broke even on an operating basis. |
|
In 2010 FSL revenue was $4.46 billion and the loss was $1.1 million. |
|
INDUSTRY |
|
The seven semiconductor stocks we follow are down from their highs on average 23% in the last six months, and down 10% from their highs in the last month. |
|
So the former bull market in semiconductor stocks has turned bearish. |
|
VALUATION |
|
At the price range mid-point FSL would sell for 1.2 times sales, which seems about right because FSL lost money while six of the seven made money in the March 2011 quarter. |
|
Only FSL has a negative book value. All the other companies have a positive book value. FSL has a negative tangible book value, and only one other company also has a negative tangible book value. |
|
FSL’s gross margin of 41% is in the middle of the pack. |
|
CONCLUSION |
|
FSL can’t expect to be bailed out by a bull market in semiconductor stocks; that window seems to have closed. |
|
Even post-IPO FSL still will be highly leveraged, which will constrict growth plans when competing against competitors with stronger balance sheets. |
|
If a investor wants to participate in the semiconductor business at this time, other companies may offer more upside with less risk. |
|
6 mos |
1 mos |
|
30 day high |
6 month high |
|
|
high |
high |
May 18 |
% change |
% change |
|
|
NeoPhotonic (NPTN)* |
$20.55 |
$11.29 |
$9.06 |
-20% |
-56% |
|
|
Finisar (FNSR) |
$43.23 |
$28.48 |
$23.66 |
-17% |
-45% |
|
|
JDS Uniphase (JDSU) |
$28.16 |
$22.21 |
$20.42 |
-8% |
-27% |
|
|
NXP Semi NV (NXPI) |
$34.18 |
$34.10 |
$28.68 |
-16% |
-16% |
|
|
STMicroelect (STM) |
$13.47 |
$12.50 |
$11.58 |
-7% |
-14% |
|
|
Texas Instum (TXN) |
$36.56 |
$35.50 |
$35.17 |
-1% |
-4% |
|
|
ON Semi (ONNN) |
$11.79 |
$11.79 |
$11.64 |
-1% |
-1% |
|
|
Total: 7 semiconductor cos |
|
|
Average loss |
-10% |
-23% |
|
|
*NPTN IPO'd Feb 2, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
Gross |
|
annualizing Dec 3 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
Margin % |
|
Texas Instum (TXN) |
$41,130 |
3.0 |
15 |
3.9 |
4.4 |
54% |
|
JDS Uniphase (JDSU) |
$4,720 |
2.6 |
31 |
4.6 |
7.0 |
43% |
|
Finisar (FNSR) |
$2,120 |
2.0 |
28 |
3.3 |
3.4 |
34% |
|
NXP Semi NV (NXPI) |
$7,200 |
1.7 |
10 |
6.4 |
-2.6 |
42% |
|
ON Semi (ONNN) |
$5,180 |
1.5 |
17 |
3.5 |
5.6 |
41% |
|
Freescale Semi (FSL) |
$5,520 |
1.2 |
-9200 |
-1.3 |
-1.2 |
41% |
|
NeoPhotonic (NPTN)* |
$223 |
1.1 |
-28 |
1.1 |
1.4 |
28% |
|
STMicroelect (STM) |
$10,540 |
1.0 |
16 |
1.3 |
1.7 |
38% |
|
*NPTN IPO'd Feb 2, 2011 |
|
|
|
|
|
|
|
BUSINESS |
|
. Embedded processing semiconductors and solutions
. In 2010 derived 80% of net sales from products where FSL held the #1 or #2 market positions and had over 30% of the embedded processor market
. FSL embedded processor products include microcontrollers, single- and multi-core microprocessors, applications processors and digital signal processors |
|
LEVERAGED BUYOUT SPONSORS |
|
On December 1, 2006, Freescale Inc. was acquired by a consortium of private equity including The Blackstone Group (BX), The Carlyle Group, funds advised by Permira Advisers, LLC, TPG Capital and others, |
|
BACKLOG |
|
Backlog was $1.1 billion at April 1, 2011 and at December 31, 2010. Orders are placed by customers for delivery for up to as much as 12 months in the future, but for purposes of calculating backlog, only orders expected to be fulfilled during the next 13 weeks are reported. |
|
INTELLECTUAL PROPERTY |
|
Has a broad portfolio of approximately 6,100 patent families and numerous licenses, covering manufacturing processes, packaging technology, software systems and circuit design. A patent family includes all of the equivalent patents and patent applications that protect the same invention, covering different geographical regions. |
|
COMPETITIORS |
|
Primary competitors are other integrated device manufacturers, such as Infineon Technologies AG, Intel Corporation, Renesas Electronics Corporation, STMicroelectronics, Microchip Technology Incorporated, Atmel Corporation, Analog Devices Incorporated, Cavium Networks, Inc. and Texas Instruments Incorporated. |
|
USE OF PROCEEDS |
|
From sale of 43.5 million shares to net $944 million |
|
Repay debt |
|
Freescale Semiconductr |
FSL, C+, 6.5 |
|
|
|
|
Post IPO shares:240mm |
|
Embedded semiconductors |
|
|
|
March qtr |
March qtr |
|
|
Austin, TX, |
2008 |
2009 |
2010 |
2010 |
2011 |
IPO Mkt |
|
Revenues ($mm) |
$5,226 |
$3,508 |
$4,458 |
$1,020 |
$1,194 |
Cap (mm) |
|
Gross profit % |
40% |
27% |
38% |
36% |
41% |
$5,520 |
|
Operating income (loss) % |
-150% |
-35% |
-1% |
-6% |
0% |
@$23 |
|
Interest ($mm) |
$702 |
$556 |
$583 |
$154 |
$148 |
|
|
Interest % of revenue |
13% |
16% |
13% |
15% |
12% |
|
|
Net income (loss) |
-$8 |
$0.75 |
-$1.1 |
-$0.30 |
-$0.15 |
|
|
Net income (loss) % |
-0.15% |
0.02% |
-0.02% |
-0.03% |
-0.01% |
|
|
Adj EBITDA |
$1,391 |
$579 |
$1,147 |
|
|
|
|
Adj EBITDA % of rev |
27% |
17% |
26% |
|
|
|
|
Adj interest for IPO debt repayment including cash on hand |
|
|
|
|
|
|
$1.1 bb debt reduction. Assum 9.5% interest, saves $105mm annually |
|
|
|
|
|
or $$26mm quarterly -- reduces qtr interst to $122 from $148 |
|
|
|
|
|
FSL still shows a quarterly loss |
|
|
|
|
|
|
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
|
Annualizing March 3 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
|
Freescale Semi (FSL) |
$5,520 |
1.2 |
-9200 |
-1.3 |
-1.2 |
18% |
|
SCORECARD |
|
Mgt |
Market |
Market Do- |
Proprie- |
Total |
|
1-5, 5 is high |
|
|
Growth |
mination |
tary |
rating |
|
20 is perfect |
|
1.5 |
2 |
2 |
1 |
6.5 |
|
|
|
|
|
|
|
|
6 mos |
1 mos |
|
30 day high |
6 month high |
|
|
high |
high |
May 18 |
% change |
% change |
|
|
NeoPhotonic (NPTN)* |
$20.55 |
$11.29 |
$9.06 |
-20% |
-56% |
|
|
Finisar (FNSR) |
$43.23 |
$28.48 |
$23.66 |
-17% |
-45% |
|
|
JDS Uniphase (JDSU) |
$28.16 |
$22.21 |
$20.42 |
-8% |
-27% |
|
|
NXP Semi NV (NXPI) |
$34.18 |
$34.10 |
$28.68 |
-16% |
-16% |
|
|
STMicroelect (STM) |
$13.47 |
$12.50 |
$11.58 |
-7% |
-14% |
|
|
Texas Instum (TXN) |
$36.56 |
$35.50 |
$35.17 |
-1% |
-4% |
|
|
ON Semi (ONNN) |
$11.79 |
$11.79 |
$11.64 |
-1% |
-1% |
|
|
Total: 7 semiconductor cos |
|
|
Average loss |
-10% |
-23% |
|
|
*NPTN IPO'd Feb 2, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation Ratios |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
Gross |
|
annualizing Dec 3 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
Margin % |
|
Texas Instum (TXN) |
$41,130 |
3.0 |
15 |
3.9 |
4.4 |
54% |
|
JDS Uniphase (JDSU) |
$4,720 |
2.6 |
31 |
4.6 |
7.0 |
43% |
|
Finisar (FNSR) |
$2,120 |
2.0 |
28 |
3.3 |
3.4 |
34% |
|
NXP Semi NV (NXPI) |
$7,200 |
1.7 |
10 |
6.4 |
-2.6 |
42% |
|
ON Semi (ONNN) |
$5,180 |
1.5 |
17 |
3.5 |
5.6 |
41% |
|
Freescale Semi (FSL) |
$5,520 |
1.2 |
-9200 |
-1.3 |
-1.2 |
41% |
|
NeoPhotonic (NPTN)* |
$223 |
1.1 |
-28 |
1.1 |
1.4 |
28% |
|
STMicroelect (STM) |
$10,540 |
1.0 |
16 |
1.3 |
1.7 |
38% |
|
*NPTN IPO'd Feb 2, 2011 |
|
|
|
|
|
|
|
