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Scope, Not Scale, Drives Freescale/NXP Nuptials

AUSTIN, Tex. — As NXP Semiconductors and Freescale Semiconductor officially completed a blockbuster merger Monday (Dec. 7), NXP CEO Rick Clemmer declined to answer an EE Times question about the number of layoffs likely to ensue. The CEO said he won’t yet know absolute numbers for a few months.

Both Clemmer and Jeff Palmer, vice president of Investor Relations, NXP, added that the jobs affected will be mostly in support functions, rather than engineering teams. “You don’t need two Investor Relations guys, or two sets of board of directors,” Palmer explained. Palmer also added, “R&D programs and key customer-facing programs won’t be cut.”

NXP sign unveiled on Austin campus. 
(Photo: EE Times/Junko Yoshida)

NXP sign unveiled on Austin campus.
(Photo: EE Times/Junko Yoshida)

Asked about the integration process the two companies have gone through since the deal was announced in early March, Clemmer said, “I can’t say enough about the people at Freescale and NXP” responsible for planning the marriage. “We’re hitting the ground running without any concerns now.”

The newlywed company will focus on five separate markets — security & connectivity, automotive, RF, digital networking and standard products. Among the business units, Clemmer expects the automotive group to be the largest, generating 40 percent of total revenue, although the security & connectivity unit will also approach 40 percent.

Pointing out the complementary nature of the automotive businesses Freescale and NXP owned independently, Clemmer said, “We will be able to bring unique technology solutions to customers.” They include long-range (from Freescale) and short-range radar (CMOS-based radar from NXP), V2V communication with hardware secure elements, vision capability from Freescale, and application processors from Freescale that can expand multimedia functions of NXP’s mostly tuner/DSP-based car infotainment system solutions. “We will continue to invest more in advanced driver assistance systems (ADAS),” said Clemmer.

The key to success in the newly formed “security & connectivity” business will be bringing “secure connections to the smarter world,” he added.

Kurt Sievers, executive vice president and general manager of NXP’s automotive business unit, emphasized in a separate conference call that both NXP and Freescale have very little overlap in product lines. “I see no need to lay off people” in the automotive group’s R&D and marketing teams, he noted.

Clearly, when two companies of equal size merge, the advantage is a larger scale of the business achieved by the combined entities. Asked if the deal is making NXP better but not necessarily better, Sievers disagreed. “This is not a scale deal, but a deal of scope.”

He explained, “Under a deal looking for scale, you are essentially buying revenue. You would get a larger business, but over time, you’d invest less in it eventually.”

To read the rest of this article, visit EBN sister site EE Times.

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