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Fairchild Shares Rise 23.6% Ahead of the Earnings Announcement

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Rumors of Fairchild acquisition

In the last part of this series, we saw that Intel’s (INTC) acquisition of Altera made Xilinx (XLNX) a potential acquisition target. Fairchild Semiconductor (FCS) is rumored to be another name on the list of consolidations happening in the semiconductor industry. According to a Bloomberg article dated October 14, 2015, Fairchild is believed to be in talks with ON Semiconductor (ONNN) and Infineon over a possible acquisition. Neither of the companies commented on the rumors.

After the news was leaked, Fairchild’s shares rose as much as 23.6% in the middle of the trading session. The news comes ahead of Fairchild’s 3Q15 earnings announcement on October 15, 2015.

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Troubles with Fairchild

Fairchild’s revenue has been falling for the past five years, except in fiscal 2014 when it witnessed modest 2% growth YoY (year-over-year).

Analysts estimate that Fairchild will report revenue of $344.6 million in fiscal 3Q15. This is lower than its fiscal 2Q15 revenue of $355.2 million. Recently, the company reduced its fiscal 3Q15 sales outlook from the previous $355–$375 million to about $340 million. However, the company retained its adjusted gross margin forecast in the range of 34%–35%.

The company is expected to undertake a cost-cutting program to reduce its operating expenses by about $30–$34 million every year.

Overview

Fairchild was founded in 1957. It manufactures semiconductors used in energy, consumer electronics, cars, and cloud computing. The company reported revenue of $1.43 billion in fiscal 2014.

You can invest in Fairchild Semiconductor through the iShares Core S&P Mid-Cap ETF (IJH). It has 0.11% exposure in the company’s stock.

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