SAN ANTONIO, Texas – Quick! Describe Freescale in one key word.
Put to such a test, many successful companies are pretty easy. In word association for Intel, for example, the obvious response would be “CPU;” for TI, “analog;” for Qualcomm, “cellular.” And Broadcom’s magic word? “Consumer” – at least in this reporter’s mind. Historically, Freescale’s synonym was “wireless,” because of its Motorola heritage.
In recent years, however, the non-magic word too often linked to Freescale has been “debt.” A $7.6 billion millstone hangs around the company’s neck, incurred when Freescale agreed to a $17.6 billion leveraged buyout by private equity firms in 2006. [Editor's Note: The $7.6 billion mentioned here was pre-IPO number. Currently, Freescale’s net debt level -- total debt minus cash on balance sheet -- is $5.897 billion. The company's recent actions actually reduced its debt almost by $2 billion.]
What has taken place at Freescale, especially since Rich Beyer took over its helm in 2008, was a regime of painful restructuring and cold-blooded decisions in which winners and losers were chosen within its sprawling product portfolio.
After getting the house in order and taking Freescale to an IPO last month, Beyer and his executive team now face a new challenge: creating a dynamic identity for the company, with a clarified message on who Freescale is. They’re looking for a new magic word.
The scale and breadth of demos, training and presentations Freescale brought to its Freescale Technology Forum (FTF) held here last week were precisely designed to convince its constituency – partners, customers, financial and industry analysts, media and its own employees – that Freescale has more than enough cash-generating power. “This is not your grandfather’s Freescale,” as Henri Richard, Freescale’s chief sales and marketing officer, put it.
This event might have done the trick – to an extent.
A two-hour opening keynote session featured some really high-volume audio and a dizzying onslaught of quick-cut video, prompting Joe Bryne, senior analyst at Linley Group, to remark, “It was glitzier than IDF [the Intel Developers Forum], don’t you think?”
Indeed. The event, attended by 2,000 people, made some in the audience even forget – momentarily – the long-term debt obligations faced by Freescale. The company used much of its IPO proceeds ($783 million) to pay down the arrears, but only made a dent in the balance.
Over two days here, Freescale’s executive team put on a full-court press to burnish its image, stressing the company’s accomplishments in recent quarters and its strategy to grow in the future.
CEO Rich Beyer gives his keynote at Freescale Technology Forum
CEO Beyer, in his keynote, portrayed Freescale as a company of “embedded processing.”
He is pitching an embedded processor placed in the center – surrounded by a number of sensors, RF, analog components and software that create a system.
This doesn’t make for a snappy one-word description. Nonetheless, Beyer made it clear that Freescale is zeroing in on “embedded processing,” which Freescale believes is driving the proliferation of smart devices – estimated to grow to 10 billion units in 2015.
Beyer said, “Thanks to embedded processing, we have cut the cord to a desktop. We are creating devices that are always on, always connected and always with us; and they are the devices that conform to us, not the ones we need to conform to.”
Freescale’s plan is to ride the wave of “connected intelligence.” It wants to help build infrastructure that supports the explosion of IP traffic, new devices and new applications; develop processing engines for smart mobile devices (smart phones, tablets and automotive); promote mobility and connectivity in tele-health; and create distributed intelligence in smart energy.
That vision alone, however, is hardly original. Almost every chip company – Intel and Texas Instruments included – is spouting “embedded processing” as its mantra.
Freescale still remains a company with wide-ranging products. In the fiscal year ending December 31st, 2010, each of Freescale’s three key business divisions – microcontroller solutions, networking/multimedia, RF/analog/sensors – brought in 36 percent, 28 percent and 24 percent of the company’s total revenue of $4.46 billion. Each business division is in a high-growth market. Every group increased net sales by double digits over the previous year: microcontrollers by 43 percent, networking/multimedia by 33 and RF/analog/sensors by 30 percent.
So, will this breadth eventually help Freescale stand out on the embedded processing market? What do they still lack? What could ultimately tip the scales, giving Freescale bragging rights as a leader of “embedded processing” in five years from now?
In a quest for answers, EE Times asked five questions to Freescale’s leaders during the FTF. Here are their responses.