http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/ Our beat: The stock market. Our job: Beat it. Mon, 01 Dec 2008 23:20:21 +0000 http://wordpress.org/?v=2.2.1 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-6897 Don’t Hold Your Breath Waiting for More Semiconductor Buyouts - Stock Market Beat - Our beat is the stock market. Our job is to beat it. Thu, 30 Nov 2006 20:02:52 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-6897 [...] Ever since the Freescale buyout, firms have been coming out left and right with their lists of the next buyout candidates. Prudential is the latest to join the fray, reports Tech Trader Daily: “[S]emiconductor comapnies and their balance sheets are being managed too conservatively relative to the lower risks they now face,” he writes. “[I]f semiconductor boards don’t rationalize balance sheets to reflect their lower risk profiles, then LBO firms may step in and do it for them.”Lipacis lists five stocks with “the most opportunity for upside through more efficient use of their balance sheets: [...] […] Ever since the Freescale buyout, firms have been coming out left and right with their lists of the next buyout candidates. Prudential is the latest to join the fray, reports Tech Trader Daily: “[S]emiconductor comapnies and their balance sheets are being managed too conservatively relative to the lower risks they now face,” he writes. “[I]f semiconductor boards don’t rationalize balance sheets to reflect their lower risk profiles, then LBO firms may step in and do it for them.”Lipacis lists five stocks with “the most opportunity for upside through more efficient use of their balance sheets: […]

]]> http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-6718 Merrill Thinking What We’re Think on Semi Buyouts - Stock Market Beat - Our beat is the stock market. Our job is to beat it. Tue, 28 Nov 2006 17:20:37 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-6718 [...] Merrill Thinking What We’re Think on Semi Buyouts Back when Morgan Stanley got excited about the Freescale buyout, we threw some cold water on the idea, saying “If you figure the average buyout will be at 9x EBITDA and you expect a 25% buyout premium to make speculating worth your while, you should only buy stocks trading below 7.2x EBITDA. Even then you should only buy the ones that might make the takeout boys salivate.” It seems that line of thought is catching on. Tech Trader Daily » Buyout Of Chip Fab UMC? No Way, Says Merrill Lynch Shares of United Microelectronics (UMC), the Taiwanese contract chip maker better known as UMC, have appreciated recently on speculation that the company could be a potential buyout target. But Merrill Lynch’s Daniel Heyler this morning warns that those hopes are likely to fade - and that the stock is likely to retreat. Heyler says the company does not look very appealing as a buyout candidate, anyway. “Applying our takeover screen, UMC ranks 19 out of 27 Asian-based companies,” he says. “UMC scores low in terms of net cash to market cap and FCF (free cash flow) margin. At 7.1x EV/EBITDA, valuation is higher than all of the top-ten ranked companies.” [...] […] Merrill Thinking What We’re Think on Semi Buyouts Back when Morgan Stanley got excited about the Freescale buyout, we threw some cold water on the idea, saying “If you figure the average buyout will be at 9x EBITDA and you expect a 25% buyout premium to make speculating worth your while, you should only buy stocks trading below 7.2x EBITDA. Even then you should only buy the ones that might make the takeout boys salivate.” It seems that line of thought is catching on. Tech Trader Daily » Buyout Of Chip Fab UMC? No Way, Says Merrill Lynch Shares of United Microelectronics (UMC), the Taiwanese contract chip maker better known as UMC, have appreciated recently on speculation that the company could be a potential buyout target. But Merrill Lynch’s Daniel Heyler this morning warns that those hopes are likely to fade - and that the stock is likely to retreat. Heyler says the company does not look very appealing as a buyout candidate, anyway. “Applying our takeover screen, UMC ranks 19 out of 27 Asian-based companies,” he says. “UMC scores low in terms of net cash to market cap and FCF (free cash flow) margin. At 7.1x EV/EBITDA, valuation is higher than all of the top-ten ranked companies.” […]

]]> http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-5966 Stock Market Beat » Blog Archive » When Zell Sells, We Listen Mon, 20 Nov 2006 15:55:58 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-5966 [...] What a great reason to invest. Yet it isn’t the first questionable buyout this year, nor do we expect it will be the last. Starting with massive buyouts of highly cyclical semiconductor firms and continuing to the largest ever real estate buy when most concede the market has topped, Private Equity funds are showing that they simply have too much money to invest. We highly doubt the future returns on private equity investments will even approach the levels of past returns, as the hot money is unlikely to find sufficient real value opportunities to be put to good use. The author may hold a position in the securities discussed. The author's current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion's Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion's Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options; [...] […] What a great reason to invest. Yet it isn’t the first questionable buyout this year, nor do we expect it will be the last. Starting with massive buyouts of highly cyclical semiconductor firms and continuing to the largest ever real estate buy when most concede the market has topped, Private Equity funds are showing that they simply have too much money to invest. We highly doubt the future returns on private equity investments will even approach the levels of past returns, as the hot money is unlikely to find sufficient real value opportunities to be put to good use. The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA - Annual Report; Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion’s Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options; […]

]]> http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3633 Stock Market Beat » Blog Archive » Maxim Miss Almost Missed In Excitement Mon, 25 Sep 2006 11:25:24 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3633 [...] But aren’t valuations already down enough? Private equity firms thought Freescale was cheap, why not Maxim? Actually, we covered that argument last week. At 9.6x EV/EBITDA, Maxim is already trading at the high end of the valuation they might expect from a buyout. And that is before the EBITDA numbers get adjusted downward. If we assume a 10% hit to EBITDA and the 7.2x multiple we consider worth the speculation, well… call us when the shares are below $22. Disclosure: Author owns put options on the Semiconductor Holdrs ETF (SMH). The author may hold a position in the securities discussed. A current list of the author's holdings is available here. [...] […] But aren’t valuations already down enough? Private equity firms thought Freescale was cheap, why not Maxim? Actually, we covered that argument last week. At 9.6x EV/EBITDA, Maxim is already trading at the high end of the valuation they might expect from a buyout. And that is before the EBITDA numbers get adjusted downward. If we assume a 10% hit to EBITDA and the 7.2x multiple we consider worth the speculation, well… call us when the shares are below $22. Disclosure: Author owns put options on the Semiconductor Holdrs ETF (SMH). The author may hold a position in the securities discussed. A current list of the author’s holdings is available here. […]

]]> http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3542 Swiecki’s Blog » Blog Archive » Tech Blog Carnival Number 5! Sun, 24 Sep 2006 00:00:46 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3542 [...] Trent presents A Floor (and a Ceiling) for Semis posted at Stock Market Beat. [...] […] Trent presents A Floor (and a Ceiling) for Semis posted at Stock Market Beat. […]

]]> http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3314 Stock Market Beat » Blog Archive » Maxim Miss Almost Missed In Excitement Wed, 20 Sep 2006 13:53:18 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3314 [...] But aren’t valuations already down enough? Private equity firms thought Freescale was cheap, why not Maxim?  Actually, we covered that argument last week. At 9.6x EV/EBITDA, Maxim is already trading at the high end of the valuation they might expect from a buyout. And that is before the EBITDA numbers get adjusted downward. If we assume a 10% hit to EBITDA and the 7.2x multiple we consider worth the speculation, well… call us when the shares are below $22. Disclosure: Author owns put options on the Semiconductor Holdrs ETF (SMH). [...] […] But aren’t valuations already down enough? Private equity firms thought Freescale was cheap, why not Maxim?  Actually, we covered that argument last week. At 9.6x EV/EBITDA, Maxim is already trading at the high end of the valuation they might expect from a buyout. And that is before the EBITDA numbers get adjusted downward. If we assume a 10% hit to EBITDA and the 7.2x multiple we consider worth the speculation, well… call us when the shares are below $22. Disclosure: Author owns put options on the Semiconductor Holdrs ETF (SMH). […]

]]> http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3270 Investing World Today » investing carnival - September 19, 2006 Tue, 19 Sep 2006 22:13:50 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3270 [...] Trent presents A Floor (and a Ceiling) for Semis posted at Stock Market Beat. [...] […] Trent presents A Floor (and a Ceiling) for Semis posted at Stock Market Beat. […]

]]> http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3242 Stock Market Beat » Blog Archive » The Semiconductor Industry Needs to Go Private Tue, 19 Sep 2006 12:16:04 +0000 http://stockmarketbeat.com/blog1/2006/09/13/a-floor-and-a-ceiling-for-semis/#comment-3242 [...] With the announcement that Motorola (MOT) spinout Freescale Semiconductor (FSL) is being bought by private equity firms, the entire sector has rallied on hopes that any particular company will be the next to be taken private at a high premium. According to a recent Forbes article (that we found much more illuminating than most media stories): The unexpected reports that Freescale might be a takeout candidate certainly benefited its current investors. Shares shot up 20% to $37 to start the week and are still holding those gains. The potential that other companies might also be targeted could result in similar pops. Intersil shares are up 13% to $26.25 since the week began. Of course, we were quick to point out that those premium prices apply only when the price hasn’t already run up. By our logic, today’s Intersil buyer has already given 13% of the 20% premium to speculators. [...] […] With the announcement that Motorola (MOT - Annual Report) spinout Freescale Semiconductor (FSL) is being bought by private equity firms, the entire sector has rallied on hopes that any particular company will be the next to be taken private at a high premium. According to a recent Forbes article (that we found much more illuminating than most media stories): The unexpected reports that Freescale might be a takeout candidate certainly benefited its current investors. Shares shot up 20% to $37 to start the week and are still holding those gains. The potential that other companies might also be targeted could result in similar pops. Intersil shares are up 13% to $26.25 since the week began. Of course, we were quick to point out that those premium prices apply only when the price hasn’t already run up. By our logic, today’s Intersil buyer has already given 13% of the 20% premium to speculators. […]

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