Backing for Buyout Group Reportedly Withdrawn : Fujitsu Out of Picture at Fairchild

SAN FRANCISCO —  Fujitsu Ltd. has withdrawn its financial support for a management-led buyout of Fairchild Semiconductor, sources said Thursday, increasing the likelihood that Fairchild will be sold to another buyer.

Analysts said companies interested in buying all or part of Fairchild, a unit of Schlumberger Ltd., include Intergraph, a Huntsville, Ala., maker of computer workstations, and rival chip makers Motorola of Schaumberg, Ill., and Santa Clara-based National Semiconductor.

Fujitsu’s support of the management-led buyout was a fallback position after the Japanese company’s proposed purchase of an 80% stake in Fairchild, a Cupertino-based Silicon Valley pioneer, caused a political firestorm.

The earlier plan was dropped in March amid opposition from key U.S. government officials, who said they feared Japanese domination of the U.S. semiconductor industry. Many domestic semiconductor companies also opposed the deal.

A Fujitsu spokesman in Santa Clara declined to comment on reports of the firm’s withdrawal of financial backing for the management-led buyout, which first appeared in Japanese newspapers and the Wall Street Journal.

Not Commenting

But he said that Fujitsu and Fairchild are still trying to negotiate manufacturing and technology transfer agreements.

A spokeswoman for Fairchild said the management buyout proposal, along with “some number of proposals from outside parties” are currently before Schlumberger, which is a French-owned oil-drilling service concern.

Officials at Schlumberger weren’t available for comment.

Drew Peck, a New York-based semiconductor industry analyst with Donaldson, Lufkin & Jenrette, said that “with Fujitsu out of the picture, Fairchild will be an easier target for domestic suitors.”

Peck said that Motorola and National Semiconductor “have both sent out probes.” Neither was available for comment.

Although Fairchild has suffered huge losses in the past several years, the company retains a dominant position in a specialized type of chip--known as emitter-coupled logic--used in high-performance computers.

“There would be great synergies with a number of other U.S. manufacturers,” Peck said, and with the domestic industry currently on the rebound, U.S. chip makers would be better able to finance the purchase of Fairchild.

Analysts have valued Fairchild at about $200 million.