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Schlumberger to Put Fairchild in Joint Venture

October 24, 1986|From Reuters

NEW YORK — The Schlumberger oil services company said Thursday that it would spin off its money-losing Fairchild Semiconductor subsidiary into a new joint venture with Fujitsu of Japan.

Under the agreement, Fujitsu will take 80% of the new company, with Schlumberger retaining 20%. No cash will change hands because of the new venture, although Schlumberger said it would result in a $200-million charge against fourth-quarter earnings.

Fujitsu, a leading Japanese semiconductor and electronics firm, will make a "substantial" investment in the new venture, Schlumberger said, but neither company would supply a figure.

Among 5 Largest Chip Firms

A Fujitsu spokesman said the new company, which will retain the Fairchild name, will be one of the five biggest semiconductor manufacturers in the world.

Schlumberger, in the midst of a shake-up caused by the depression hitting the oil service industry, was considered likely to dispose of Fairchild, which has failed to make a profit since it was purchased for $425 million in 1978.

Analysts said Fairchild lost $165 million last year and was expected to post a $125-million loss this year.

"Schlumberger tried to turn the business around, but no matter how much money they poured into it and what they did to management, the downward momentum continued," Ladenburg, Thalmann & Co. analyst Elliot Levine said recently.

The new firm still faces severe problems, however, due to the slump hitting the semiconductor business. Analysts say that the industry is manufacturing microchips at only 30 to 40% of capacity.

Schlumberger, based in New York and Paris, on Thursday reported a third-quarter loss of $42 million, compared to a $208-million loss in the same period last year. It said the loss was due primarily to various losses in its oil services business, including a $24-million charge to pay for employee layoffs. Schlumberger has operations in more than 100 countries.

The number of oil rigs world wide has fallen sharply due to the 50% fall in oil prices. In the United States, the number of rigs has fallen to around 800 from 4,500 at the peak of activity in 1981.

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