CurrentOfferings.com Story:

Freescale Cut Before IPO, Then Rises

Howard Wolinsky, Business Writer, Chicago Sun Times, July 17, 2004

In one of the largest initial public offerings of the year, Freescale Semiconductor, the spin-off of Motorola's computer chip unit, went public Friday after underwriters cut the opening price by about a third.

Shares of the Austin, Texas-based company, which Motorola launched back in 1953, closed at $14.02, up $1.02, or 7.9 percent, from the initial offering. During its first day, 28.7 million shares of Freescale traded hands under the symbol FSL on the New York Stock Exchange.

The IPO raised $1.7 billion, with most of the proceeds going to Motorola as a separation fee.

Goldman Sachs set the opening price at $13, far shy of the original goal of $17.50 to $19.50 per share.

Meanwhile, the Motorola ship itself didn't fare well Friday as Smith Barney and Lehman Brothers downgraded its stock, predicting that market-leading Nokia will make a comeback with more aggressive pricing of its phones. Motorola's shares closed at $15.81, down 77 cents, or 4.6 percent.

Freescale went public in an inhospitable environment for chipmakers: Intel, the giant chipmaker, warned this week that its inventory was growing and its profits were down. Merrill Lynch also downgraded the chip industry this week.

Jeffrey Hirschkorn, senior analyst with Current Offerings, had urged investors to be skeptical about the Freescale IPO. "With this deal, you're getting a company with inconsistent profitability at a time when semiconductor stocks are starting to get hammered," he said.

Analysts for years have urged Motorola to sell off its 50-year-old chip unit, which lost $4.4 billion from 2001 through 2003, though its fortunes were up earlier this year. Still, the unit had been viewed as a drain.

Motorola leaders thought Freescale had a better chance to win business from Moto competitors if it were an independent company. Freescale's customers include BMW, DaimlerChrysler, Hewlett-Packard, Apple, Qualcomm, Cisco Systems and Nokia.

A dozen local companies have filed for IPOs so far this year, more than at the peak of the Internet boom in 1999. Freescale is the third area company to go public, with the others being Standard Parking and Strategic Hotel Capital.