Chip Makers Will Merge in Deal Worth $11.8B
nytimes.com
nytimes.com
The debt obligations are the typical result of private equity intervention. It's basically financial engineering which benefits mostly the private equity people.
For a good read about conglomerates and company architecting, I would suggest Warren Buffet's most recent shareholder letter from a few days ago, especially the part where he discusses the skepticism that should be shown towards bankers and financial people proposing company spinoffs to "unlock value".
A few years later, bankers – bearing straight faces – again appear and just as earnestly urge spinning off the earlier acquisition in order to “unlock shareholder value.” Spin-offs, of course, strip the owning company of its purported “control value” without any compensating payment. The bankers explain that the spun-off company will flourish because its management will be more entrepreneurial, having been freed from the smothering bureaucracy of the parent company. (So much for that talented CEO we met earlier.)
If the divesting company later wishes to reacquire the spun-off operation, it presumably would again be urged by its bankers to pay a hefty “control” premium for the privilege. (Mental “flexibility” of this sort by the banking fraternity has prompted the saying that fees too often lead to transactions rather than transactions leading to fees.)"
http://epicureandealmaker.blogspot.com/2015/03/uncle-warren-...
Accept no one's argument at face value, especially when it's coming from a man who has spent the last 50 years exploiting market inefficiencies.
"I tend to prefer my moral fiber to come unencumbered by six cups of refined sugar and smug self satisfaction per serving. I know, I know: I am downright un-American."
And finally, in the fourth paragraph, the author finally starts the story with "Aaannnyhoo".
This guy is a pretty insufferable writer.
This rebuts none of Mr. Buffet's points (not even those brought up in the parts of the letter that the author quotes), nor is it very insightful. Mr. Buffet has always ascribed to and publicly stated that he looks for deals, buying companies when they are cheap.
While I'd not be surprised to see corporate security better than the FBI's stuff[1], I find it hard to believe you can't just get agents on the inside for the amount of money involved. So secrecy seems so unlikely to be useful against the companies that can really benefit from that knowledge.
It reminds me of Nikon not documenting their white balance settings in their RAW format. Just stupidity all around.
1: A long time ago, I saw Microsoft Internal Affairs in action. They were fast and setup a sting, complete with their own undercover agents/turned insiders, in a matter of weeks from first tip-off. I'd imagine companies like pharma or chips, would have even more severe response. Whereas in the FBI, one multi-decade mole was actually caught once or twice, but talked his way out. At one point, he even led the investigation against himself.
Here's another, Microsoft Internal Affairs more recently in action:
http://www.nytimes.com/2014/03/21/technology/microsofts-soft...
While the knockoff market is very real, it always seemed far-fetched that NDAing data sheets would be that much of a protection. You would think a sophisticated shop has enough relationships to get the sheets via a close contact, friendly supplier, etc..
IMHO NXPs datasheets were usually ok (for common parts, of course)
[1]: http://uk.farnell.com/nxp/mf3mod4101da4-05-1/rfid-read-write...
Yay security by obscurity.
Which is funny because at one point I stumbled upon a web site that was selling layer-by-layer microphotographs of the chip I was using. They weren't much use to me, but for someone wanting to reverse engineer the chip I'm sure they would be a lot more useful than a complete description of the chip's external interface.
The center of gravity of power is held by groups with security focuses and they're supposed to be professional paranoids... It's just unfortunate that the least effort, safest decision for many other folks is one which can be seen as consistent with what those groups would have made.
Are there new players enough to fight the ever-growing conglomerates?
I'm not sure who're your calling a smaller player, if NXP or Freescale, but it only shows your lack of knowledge about both
(For the interested, NXP used to be Philips Semiconductors. Philips wanted to cut them away because it was an unprofitable division so they sold it to some hedge funds, including a shit ton of debt. Afair, something like 20% of their annual expenses were interest only, putting a big damper on their freedom to innovate. So NXP in turn cut away its unprofitable subdivisions, and became or stayed remarkably competitive in the others. With an inheritance of relatively expensive R&D (no Chinese wages) and a Philips culture (= highly bureaucratic and hierachical), that is no small feat)
To me, an uneducated observer, the fact that NXP now feels in shape to do big acquisitions is a pretty good signal. These guys are on the rise, and that may not be bad for Freescale at all.
That was the way it also worked when the Hedge Fonds bought it out of Philips.