Freescale shares retreat after downbeat guidance
Chipmaker projections shy of analysts’ mark as NXP merger advances.
After surging Thursday, shares of Austin-based Freescale Semiconductor Ltd. retreated Friday as investors weighed the chipmaker’s fourth-quarter prospects.
Freescale reported third-quarter net income Thursday of $80 million, or 25 cents per share. Adjusted net income — factoring in costs related to mergers and acquisitions and pretax expenses — was 54 cents per share, the company said.
That topped Wall Street expectations, as the average estimate of six analysts surveyed by Zacks Investment Research was for adjusted earnings of 49 cents per share.
The chipmaker posted revenue of $1.12 billion in the period. Four analysts surveyed by Zacks had expected $1.14 billion.
Freescale’s revenue guidance for the fourth quarter, however, disappointed analysts.
The company projected a range of $950 million to $1 billion. That was below the consensus analysts expectation of $1.12 billion.
Freescale President and CEO Gregg Lowe said company executives think the fourth quarter “will pose challenges as market conditions have continued to weaken.”
“Our results will be impacted in the quarter by normal seasonal declines in our automotive-related businesses, continued weakness in wireless infrastructure and enterprise spending, which will
negatively impact our RF and Digital Networking businesses, and weak end-demand in industrial, which will lead to lower Microcontroller revenues. Looking past the near-term demand softness, we are encouraged by the growth prospects in our core markets and the significant value creation inherent in the combination with NXP Semiconductors,” Lowe said in a written statement.
Freescale shares had jumped in after-hours trading Thursday, reaching $40.53 per share. They dropped Friday, closing down 88 cents, or 2.1 percent, at $39.71.
Freescale executives said the company’s $11.8 billion sale to Dutch chipmaker NXP Semiconductors remains on track and is expected to close in November.
In March, NXP Semiconductors announced it planned to acquire Freescale. That sent ripples through the semiconductor industry, especially in Austin, where Freescale employs about 5,000 people.
Shareholders for both companies voted in July to approve the deal.
Freescale provides computer chips to facilitate embedded processing in a wide array of products, from traditional computing platforms to home appliances and automobiles.
NXP’s security chips are used in security cards, government passports and building ID tags.
The deal values the combined company at more than $40 billion and would make the business an industry leader within the automobile and industrial semiconductor markets.
Company officials and analysts have said that the deal would combine mostly separate and complementary strengths for the companies, positioning the new NXP as a market leader in electronics for Internet-connected smart devices, including everything from tablets to wearable devices and automobiles.