Image source: Fairchild Semiconductor.

What: Shares of Fairchild Semiconductor (NASDAQ:FCS) jumped as much as 23.6% higher in the middle of Wednesday's trading session. The maker of power management chips and other analog semiconductors is set to announce earnings on Thursday morning, but this jump wasn't based on a premature leak of strong results.

Nope. Rumor has it that the company is looking for a buyer.

So what: According to Bloomberg's anonymous sources, Fairchild has hired megabank Goldman Sachs to help it find a buyer and hammer out a profitable deal. The report names ON Semiconductor (NASDAQ:ON) and Infineon Technologies (OTC:IFNNY) as potential buyers, but also leaves the door open for other partners.

Now what: Now, even Bloomberg's sources will admit that there isn't a guaranteed exit right around the corner. You shouldn't expect a merger announcement baked into Thursday's earnings report, since talks are supposedly ongoing and far from a resolution.

The company can look back at a stellar history as a founder of Silicon Valley's semiconductor industry, but those aging laurels don't pay the bills. Fairchild's sales and cash flows have stalled in recent years, while earnings took a nosedive. That's why an exit wouldn't be terribly surprising these days.

Despite an intimate relationship with the burgeoning market for automotive computing solutions, Fairchild has failed to convert that attractive opportunity into real-world business results. In Fairchild's most recently reported quarter, revenues fell 4.4% year over year. Meanwhile, ON's sales jumped 16% higher and Infineon boosted its revenue by 43% via a strategic buyout.

So Infineon has already proven its hunger for sensible but large acquisitions, and could very well fold the much smaller Fairchild into its existing automotive and power management operations. ON has historically preferred buyouts on a much smaller scale than the $1.6 billion enterprise value Fairchild carries today, but Fairchild would be a snug fit in ON's existing power-focused operations.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

None of the companies involved in this report have commented on the rumors yet. You shouldn't expect Fairchild to bring it up in Thursday's earnings report either, except for maybe a reminder that the company doesn't comment on rumors.

But do keep an eye open for further signs of an upcoming exit strategy. Short of a wholesale reorganization, I don't see how Fairchild could extinguish these buyout rumors, especially since it's fallen more than 20% below its 52-week highs. Even large shareholders -- many of whom are major investment banks with the resources to put serious pressure on Fairchild's board of directors -- might be getting antsy regarding Fairchild's weak long-term returns.