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M&A: Next-in-line analogue targets

Posted: 10 May 2011     Print Version  Bookmark and Share

Keywords:acquisitions  mergers  analogue market  stocks  analogue vendors 

Speculation is rife about the next big acquisition in the analogue space following Texas Instruments Inc.'s move to buy National Semiconductor Corp. for Rs.29,680.37 crore ($6.5 billion) with some analysts predicting a wave of analogue acquisitions while others are forecasting a slowdown in mergers and acquisitions (M&A).

Because of the high premium that TI is paying for National, the stock prices for many companies have soared, thereby creating a seller's market in the M&A world. The TI-National deal ''hurt the M&A industry,'' said Steve Sanghi, president and CEO of Microchip Technology Inc., in an interview at the Embedded Systems Conference (ESC). Following that blockbuster, several chip makers saw their stocks jump by up to ''35 per cent to 40 per cent without even getting an offer.''

If or when the market comes back to earth, the analogue world is ripe for acquisition. ''There is an increased interest in M&A,'' said Steve Ohr, an analogue semiconductor analyst at Gartner, in an interview at ESC.

The mega-mergers could be an exception to the rule. The sweet spot for acquisitions is for mid-sized companies in the $100 million to $200 million [~Rs.450 crore—Rs.900 crore] range, Ohr said.

Ohr did not identify the potential takeover targets, but here are some possibilities:

Advanced Analogic Technologies Inc. – Analogue vendor continues to spill red ink.

The company recently said revenue for the first quarter of 2011 was Rs.93.61 crore ($20.5 million), compared to net revenue of Rs.100 crore ($21.9 million) for the first quarter of 2010, and Rs.109.59 crore ($24 million) for the fourth quarter of 2010. Net loss for the first quarter of 2011 was Rs.35.16 crore ($7.7 million), or Rs.8.22 ($0.18) per diluted share, including non-recurring charges for patent litigation and severance-related expenses. This compares to a GAAP net loss of Rs.19.18 crore ($4.2 million), or Rs.4.57 ($0.10) per diluted share, for the first quarter of 2010 and a GAAP net loss of Rs.15.07 crore ($3.3 million), or Rs.3.65 ($0.08) per diluted share, for the fourth quarter of 2010.

Intersil Corp. – Too big to swallow?

Net revenues for the first quarter were Rs.908.22 crore ($198.9 million), a 5 per cent increase from Rs.864.84 crore ($189.4 million) in the first quarter of 2010, and a 3 per cent increase from Rs.885.84 crore ($194 million) in the fourth quarter of 2010. Net income for the first quarter of 2011 decreased to Rs.64.38 crore ($14.1 million), or Rs.5.02 ($0.11) per diluted share, compared with net income of Rs.126.48 crore ($27.7 million), or Rs.10.05 ($0.22) per diluted share, in the same quarter last year, and net income of Rs.119.18 crore ($26.1 million), or Rs.9.59 ($0.21) per diluted share, in the fourth quarter of 2010.

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