Texas Instruments is hungry to grow their core business of chip manufacturing for wireless phones and electronic devices. Of course, growth takes money. To come up with the money, the company is selling their sensors and controls division to Bain Capital LLC, a private equity firm. The price tag was $3 billion.
The division manufactures controls and sensors for the automobile and aircraft industries, among other. The sales were more than $1 Billion USD last year, which was 8 percent of TI’s total. The division is profitable and stable, but the gross profit margins are lower than the semiconductor business. On top of that, the division needs an infusion of R&D cash, but TI isn’t keen to direct their resources that way. Instead, they will suffer a short term decrease in operating profits by selling the company in exchange for the cash which will allow them to grow.
The risk is that they have given up a safe and stable business for a higher risk one. Investors will support the move, though, because growth is the key. For the consumer, more money in semiconductors will mean more research and development which will ultimately means more and better toys for us.