Freescale Semiconductor Falls After Cutting Third-Quarter Sales Forecast

By Lisa Rapaport - Sep 26, 2011 9:04 PM GMT+0700

Freescale Semiconductor Holdings, the chipmaker mostly owned by a private-equity consortium including Blackstone Group LP and TPG Capital, fell after forecasting lower third-quarter sales than analysts projected.

Slowing demand in the industrial and networking business may push net sales for the quarter down by 6 percent to 8 percent sequentially, the Austin, Texas-based company said today in a statement. The average decline projected by analysts in a Bloomberg survey was 2.5 percent.

The company is the largest supplier of chips to the auto industry and also makes chips for mobile phones and portable devices such as Amazon.com Inc.’s Kindle e-reader. In July, Freescale estimated sales for the third quarter would be flat to down 3 percent.

“The whole industry is stabilizing, but hasn’t stabilized yet,” said Richard Schafer, an analyst at Oppenheimer & Co., in an interview today. “Freescale will have to cut its fourth quarter sales forecast as well.”

The shares dropped 24 cents, or 2 percent, to $12 at 10:00 a.m. on the New York Stock Exchange. The stock had dropped 32 percent this year before today.

In July, the company reported a second quarter loss of $168 million, or 79 cents a share, compared with a $538 million loss, or $2.73 a share, a year earlier. Second-quarter revenue was $1.22 billion.

Gross Margins

Gross margins will show a modest sequential improvement in the third quarter, the company said today. Freescale reported a second-quarter gross margin of 42.3 percent. Analysts surveyed by Bloomberg projected a gross margin of 46.2 percent for the current quarter.

Freescale sold 43.5 million shares at $18 each in an intital public offering in May, raising 25 percent less than it originally sought. The IPO price reflected a 50 percent discount to the average of $36 that investors paid for the company, according to a regulatory filing.

Rob Hatley, a Freescale spokesman, didn’t immediately return calls seeking comment.

To contact the reporter on this story: Lisa Rapaport at lrapaport1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net