Re:Qualcomm to buy NXP for $38B in largest chip deal
by candiodari on Thursday October 27, 2016 @11:54PM
(#12812923)
I do wonder what this means for the wider industry. The fact that they finally got bought means that other methods to grow revenue are failing (compared to, say, 2-3 years ago), and now directly buying revenue has become the dominant way to grow.
When reading financial textbooks they talk about how this happens in the last stages of the business cycles, because it makes sense at those points : economy steadily worsening, but only slightly (easy to mask on company results, so companies appear attractive, but management knows they will be significantly less so in a year's time or so), combined, especially today, with the massive availability of cheap credit, and the idea that "rates will be lower for longer" (history, of course, teaches us they won't).
The purpose here has to be to conquer more of the market by limiting options and moving towards more consolidation.
So NXP started its independent life deeply in the red numbers. Doesn't seem nice, does it? People were wondering whether the thing was just gonna be chopped up, sold on, and half the people fired.
Instead, however, people had to be much more scrappy than before. The new bosses weren't tech geeks but money sharks. Don't do things that don't have a clear path to profit. Don't waste time. Don't tolerate people wasting their time. Of course, this seems entirely obvious to all of HN, but anyone reading this familiar with Philips culture knows that things aren't always that way. Philips and NXP had (have) plenty of people who were rightfully referred to as furniture. They were there for decades, same desk same chair, and nobody really know what exactly they were doing. Somebody, somewhere, just kept paying the salary.
NXP's new need to get back into the black numbers was truly transformative for the company. Sure, it's still a bigcorp with all the quirks you'd expect, but they came a long way.
I'd not have predicted a Freescale-level purchase 10 years ago, and I definitely would not have predicted a $38B valuation. That's more than Philips' current market cap ($26B) and NXP was spun out because it was a loss leader that they couldn't turn around.
Well done, folks! As a fellow Eindhovener, I can't help but be a bit proud. Too bad you didn't buy Qualcomm instead but you can't have it all I guess!