Analysts asked question about DN in the earnings conference calls. Employees asked many questions about DN in the internal business review. Does anyone know about something going on? Last quarter CEO said about we will see how much we will continue to invest in DN. Tareq then said in his conference that DN is thrown under the bus. Now RC said DN technologies are still looking for various homes in other business units. Does this mean DN is going to be disbanded?
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"So, I think if you look at the DN, DN is we have seeing a pretty significant shift especially in the network processing areas. A lot of those customers have moved their fundamental processing capability internally."
RC's statement above is bizarre. If he really believes that he has much bigger problems than DN. He has a fundamental strategy problem in both Auto and Micro as if the are bringing in network processing then they are also bringing in all processing, since the former is a lot harder to arrive at. RC's dislike of DN is bizarre, in hindsight I think he will regret what he did to that Freescale division. It had the ability to game change the industry but he wasn't patient enough to wait for it. He should sell of RF though as it doesn't fit in the company and is really just like standard products. Old technology at its core waiting around for 5G that may be years away.
RC has said in earnings calls that 10% was his goal for all segments not just Auto. The fact it came in at 7% for such a large division with also large expenditures was not a good result when you have the rest of the semi industry snapping at your heels. He will need to do something to fix that because if it were to drop further real questions are going to be asked.
Complementary to @2zil comments: lower than expected is a relative score because N did not give forward guidance due to the pending acquisition. Of course market expectations could be taken as reference. Another outcome from the call is that N admits they don't have the cutting edge tech Q has. So in many areas N cannot compete with them. Automotive is a sector you don't need the cutting edge tech but a safety tech. Of course BoM is important. RC didn't give any hint how to optimize business. Funny stuff is no investor asked the situation about 500M$ "synergies" announced during xFSL merger. Not to forget that N perf is impacted by Q's acquisition for 21 months (7 quarters). This is a huge time window to miss many customers with new design wins - It will take some effort that N repairs itself
Looking at the automotive discussion in earnings call, several analysts point out lower then expected numbers in revenue and margins and higher opex overall. RC being a numbers guy, will do what he does best, that is improve business there with the least costly options. So it's unlikely that a huge chunk of DN be re-fitted into auto - if a few existing products work out well enough to get higher processing capability, then that's all that may survive. No 5G of course as he mentioned. The wifi tech move to Micro depends on how fast they need the connectivity solutions - micro had cut back on their own efforts hoping to get Q's solutions, so if micro can wait to give a chance for DNs wifi to mature then it may survive, but they could also go with just partnering with Q on this since its a proven solution. All this can be gleaned from the earnings call, if you can read between the lines.
As an answer to an investors question. RC mentioned that they will improve in the next 2-3 years apex first when it will be time for opex. E.g. they can shut down some sites. Afterwards chop off.
Don't forget this is subject to market dynamics. They can do this anytime!
RC said this:
"So, I think if you look at the DN, DN is we have seeing a pretty significant shift especially in the network processing areas. A lot of those customers have moved their fundamental processing capability internally. We still are driving multi-core ARM solutions with some limited portion of the portfolio for those customers, but it’s not in the broad base that it was five or six years ago. So that’s one of the reasons that we’re spending quite a bit of time looking at our network processing area in DN. And frankly looking at the capability, we are seeing some significant opportunities in automotive for basically taking a network architecture and applying that to the car and some of the technology we have there are really positions to this well to be able to provide a leadership technology in providing that communications hub if you will in the car which is a real opportunity to use our fundamental technology. On 5G per se on the DN, I don’t think that it’s really going to be a significant factor in driving huge growth parts, but we will be a participant. We do have technology that allows us some software upgrades in the network processor that really opens the market opportunities for us but we have to prove the size of those and what is significant – and how significant that will be in our growth in that specific area before."
DN may be broken into pieces and merged into MCU and Auto and there are many chances of a forthcoming layoff.. you never know with RC at helm and Q deal falling-off..