Looking at the company's latest market performance, Freescale Semiconductor is only a few pages away from closing a dark chapter in its financial history. Struggling to free itself of large debt repayments since it was bought by private equity funds in 2006, the company has stopped a decline in product revenue and it's deleveraging effectively.

Freescale is backing up its claim with Q4 gross margins at 47.2 per cent, up 90 basis points from the previous quarter, while guiding Q1 revenue of 2015 to be $1.16 billion, above a $1.11 billion consensus, and 5.2 per cent sequential growth.

Partly, as the results of the company's earnings statement, Freescale stock price took a dramatic leap from 26.35 (previous close) to 31.16 at the close Wednesday (Jan. 28).

For the year, Freescale's net sales increased 11 per cent and product group revenue grew 16 per cent, which is "about two times the overall estimated semiconductor industry growth excluding memory and discrete," said Freescale CEO Gregg Lowe. "All five product groups' revenue grew nicely in 2014, and four of the five grew... double digits."

The standout performance in 2014 was RF chip sales, up 57 per cent over 2013. MCU sales increased 15 per cent, digital networking net sales expanded 13 per cent compared with the prior year and automotive MCUs grew 12 per cent. Analogue and sensors net sales growth was eight per cent.

Noting the company's solid upward trajectory that's driving operating efficiency across product lines, Lowe, along with CFO Dan Durn, noted that 50 per cent gross margins, a milestone according to Freescale's target operating model, are "in a very good line of sight."

The company, however, declined to comment on specifically when Freescale might reach the milestone. Lowe added that getting from the 50 per cent milestone to the long-term targets of low to mid-50s, Freescale will start seeing benefits from new products currently in the pipeline around 2017.

Lowe also talked of the deleveraging success over the past few quarters. "We have made significant progress," he said. "Since the beginning of 2014 and inclusive of the $250 million debt redemption announced earlier in January, we have reduced our debt by $1.2 billion in annual interest expense by $120 million."

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved