Freescale Semiconductor was bought by a private equity group in December 2006. Quarterly results since then have been disappointing. Although recently released 2Q 2007 results are up from 1Q 2007, results are still way behind comparable quarters before the company was taken private. There are numerous reasons for the last two quarters' worth of disappointing results. The first is that there continue to be many expenses related to the company's acquisition. The company also took on a heavy debt load in its acquisition. Most importantly, the wireless market overall is in a period of contraction, so sales are in decline. This is particularly true of Freescale's largest customer, the automotive industry. Freescale CEO Michael Mayer offered no prediction as to when the wireless market might become more active.

Net sales have been essentially flat in 1Q and 2Q 2007, at $1.36 billion and $1.38 billion respectively. Each of the three operating segments within Freescale lost money in 2Q 2007 when compared to a comparable quarter in 2006. The Transportation and Standard Products segment lost $92 million from 2Q 2006, posting earnings of $159 million. The Networking and Computer Solutions segment posted earnings of $328 million, down $42 million from 2Q 2006. The biggest loser by far was the Wireless and Mobile Solutions segment, which posted earnings of $353 million, down $161 million from 2Q 2006 earnings. With results like this it is no wonder Freescale has now turned to layoffs in order to cut costs, but ended up with a $38 million charge against earnings for severance costs. Losses continue to mount. Net losses for 2Q 2007 amounted to $288 million, while operating losses amounted to $268 million. If this rate of loss continues, look for Freescale to be resold or perhaps even taken public again.

During the past week, two tech companies decided to go private: Intergraph ($1.3 billion) and Embarcadero Technologies Inc. ($234 million).

Well, these deals are small-time compared to the possible buyout of Freescale Semiconductor. This is according to a NY Times article, which pegs the valuation of the transaction at $16 billion. This would exceed the $11.3 billion deal for SunGard Data Systems.

Actually, this is not the only semiconductor company to be targeted for a buyout. In August, both KKR and Silver Lake purchased the semiconductor unit of Royal Philips Electronics for 3.4 billion euros.

Basically, it looks like the semiconductor industry is poised for strong growth. After all, with the growth in things like iPods and cell phones, there is a need for semiconductors.

As for Freescale, it had revenues of about $5.8 billion for the past year. Also, it has big-time customers like Motorola, Cisco, Ford, and General Motors.

Of course, for investors, it will be tough to make money on Freescale, as the stock price soared on the news. True, there may be outside bidders. But, for the most part, private equity firms do not like to get into a bidding frenzy – at least not so far.

Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.