Building the Base The first big change is the management team, starting with Mayer, who arrived a year ago from IBM's semiconductor group. Although a number of long-time Motorola executives remain, Mayer has slashed the number of vice presidents while filling key roles with outsiders. More important, Mayer is rebuilding the technology-driven culture to put more emphasis on meeting customer needs. Freescale has three main businesses. The company's automotive business lacks glamour but is a cash cow, producing half of the company's revenue and profits. Freescale manufactures a variety of microcontrollers and sensors that are used by most of the major automobile makers in the world. Once a vehicle goes into production, it typically continues for several years, locking in revenue and profits for Freescale. The company is also a major player in the communications market with its popular PowerQuicc processor. Freescale recently announced a new version of the product that replaces the familiar but aging CPM with a new data-plane engine. This Quicc Engine delivers roughly three times more performance and will scale to even greater levels in the future. With this stroke, the company hopes to revitalize interest in its PowerQuicc line. Mayer also reiterated that Freescale remains committed to PowerPC, but we expect the company to scale back its next-generation e700 CPU to better address the needs of the embedded market instead of the Mac. Freescale's wireless business is the only one of its three major segments that continues to lose money. The company designed its wireless processors for Motorola's cell phones but now seeks to broaden its customer base by selling to other handset makers. Freescale has gained a few new customers so far, but Motorola will continue to dominate its wireless revenue for years to come. Plan for Growth Now that Mayer has the three main businesses back on track, he is turning his attention to opportunities for growth. His target is the consumer market. In his keynote, Mayer pointed out that 2004 was the first year in which consumers purchased more semiconductors (in various electronic devices) than businesses did. But other than cell phones, Freescale gets little revenue from consumer devices. All three of the company's business units have some consumer design wins. The transportation group sells some of its microcontrollers and DSPs into low-cost audio players. The wireless group sells some of its low-power ARM processors into portable video units. The communications group sells PowerQuicc into home networking. With different groups promoting different processor architectures, Freescale has no coherent strategy for the consumer. Although it has excellent processors, Freescale lacks key technologies that are required in the consumer market. DSL is the most popular method of connecting to the Internet, and 802.11 is the most popular home networking protocol, yet Freescale offers neither technology. The company took a step in the right direction by acquiring UWB technology from XtremeSpectrum, becoming the first company to market a UWB chip set. Unfortunately, Freescale is on the wrong side of a standards battle that could nullify its early advantage. Freescale's processors have been popular in many emerging applications because they provide an easy way to develop new functions. But for a consumer device to achieve the lowest cost, it needs a single chip that integrates all the important functions. Without home-networking technology, Freescale cannot build single-chip products for the digital home. To become competitive in the consumer market,
Freescale must acquire new technologies and
develop more
integrated processors.
As Motorola,
the company was never willing to make the investment
and take the risk required to leap into the
consumer market.
If Freescale
makes
this leap, it would prove that it truly is
a new company.
|
