Symbol List Views
FlashQuotes InfoQuotes
Stock Details
Summary Quote Real-Time Quote After Hours Quote Pre-market Quote Historical Quote Option Chain
Basic Chart Interactive Chart
Company Headlines Press Releases Market Stream
Analyst Research Guru Analysis Stock Report Competitors Stock Consultant Stock Comparison
Call Transcripts Annual Report Income Statement Revenue/EPS SEC Filings Short Interest Dividend History
Ownership Summary Institutional Holdings Insiders
(SEC Form 4)
 Save Stocks

Freescale Semiconductor (FSL)
Q3 2006 Earnings Call
October 19, 2006 5:00 pm ET


Mitch Haws, Vice President, Investor Relations
Michel Mayer, Chief Executive Officer
Alan Campbell, Chief Financial Officer


James Faucette – Pacific Crest Securities
Glen Yeung, Citigroup
Ron Lee, UBS
Jake Kaminny(?) - Morgan Stanley
Mickey(?) Lee - Goldman Sachs



Good afternoon and welcome to the Freescale Semiconductor Q3 2006 financial results conference call. Operator instructions. I would now like to turn the conference over to Mr. Mitch Haws, Vice President, Investor Relations. Sir, you may begin when ready.

Mitch Haws, Vice President, Investor Relations

Thank you and welcome everyone to our Q3 2006 conference call. With me today as usual are Michel Mayer, our CEO, and Alan Campbell, our Chief Financial Officer. The earnings release and financial statements discussed today are available at the investor relations section of our website at This call is also being webcast live at our site. We will today make certain forward-looking statements. These forward-looking statements, including statements about the proposed merger, and statements about our expected financial performance for Q4 2006. These statements are based upon our current expectations and assumptions, and we cannot assure you that these expectations will be correct due to inherent risks and uncertainties. Our actual results could differ materially from these statements.

Please review our filings with the SEC for a more detailed discussion of the factors that could cause such results to differ, as well as other factors that could affect our future results. With that, I will turn the call over to Michel Mayer.

Michel Mayer, Chief Executive Officer

Thanks, Mitch. Good afternoon, welcome to this earnings call. Joining me as always is Alan Campbell, our CFO. I am going to give you an overview of the quarter and then I will turn the call over to Alan to cover the financials. Before I review the quarter, as you are I’m sure most likely aware, we announced on September 15 that the company signed a definitive agreement with a consortium of private equity funds led by the Blackstone Group to be acquired in a merger transaction for a price of $40 per share in cash. The Board of Directors of Freescale has unanimously approved the merger agreement and resolved to recommend that Freescale stockholders adopt the agreement. A special meeting of stockholders to approve the merger has been scheduled for November 13, 2006. Stockholders of record on October 18 2006 are entitled to vote at the special meeting. We filed this morning with the SEC the definitive proxy statement in which further information concerning this merger is contained.

As I’m sure you understand, the purpose of this call is to discuss our Q3 results and so we do not plan – and I mean it, we do not plan – to comment any further on the transaction during today’s call. We will not take any questions related to the transaction.

Moving on to the results in the quarter, sales for the quarter grew 12% over last year to $1.62 billion. Excluding divested businesses, Apple and so on, sales really grew 17% YoverY. All three segments contributed to the growth. We increased our gross margin to 46.1% for this quarter including our options expense. The revenue growth, gross margin improvement and continued operating expense controls drove an operating margin of 16.4%. I think those results again, as we’ve underscored every quarter, show the value of our diversified revenue model.

Let me now discuss our three major businesses, starting with TSPG transportation and standard products. The Q3 revenue was $682 million and operating margin was 21%, which is nine points ahead of last year. Automotive revenues were impacted in Q3 by a steeper than expected decline in North American vehicle production. US automotive revenue sales during the quarter were frankly lower as we exited than when we entered the quarter. North American big three production was down 13% YoverY and down 23% sequentially.

Despite this weakness, we were still able to grow our automotive business versus last year. This was driven by more than 50% growth in Japan and more than 20% growth in Asia. This highlights the progress on one of our key growth initiatives, broadening the base of our automotive business is important as market share shifts continue to occur among the other makers around the world. We also continue to see very strong growth in analog and sensors, primarily driven by demand for advanced safety systems.

You will recall that earlier this year we announced a joint design program with ST Microelectronics, centered around the power architecture for automotive. Since the announcement, we’ve had staff join design facilities, we have already designed a new generation micro controller core, we have defined product roadmaps and we have aligned poster technologies. The joint design centers that we have opened, we anticipate to reach a headcount of 120 engineers by the end of this year. As we move from design to production, customers will benefit from the dual source availability of our jointly designed automotive MPUs.

In consumer and industrial, we continue to make good progress in strengthening our presence in distribution. TSPG’s distribution revenue in Q3 was nearly 30% above last year. Our 32-bit ColdFire product contributed significantly to the growth in consumer and industrial, demonstrating over 25% growth both sequentially and year over year. We are seeing increased penetration in a number of applications such as industrial controls and networking applications. At the Freescale Technology Forum, we continued to build momentum for our controller continuum roadmap with the launch of our ColdFire V1 core. This will provide the engine for the industry’s first 32-bit devices that are comfortable with 8-bit micro controllers. At the lower end of the continuum, we introduced a new 8-bit micro controller, that combines an analog to digital converter with five volt operation, but reduces board space, system costs and power consumption for a variety of consumer markets.

Read the rest of this transcript for free on