{"id":23984,"date":"2011-09-21T08:00:06","date_gmt":"2011-09-21T12:00:06","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/09\/21\/who%e2%80%99s-next-in-semiconductor-ma\/"},"modified":"2011-09-21T08:00:06","modified_gmt":"2011-09-21T12:00:06","slug":"whos-next-in-semiconductor-ma","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/09\/21\/whos-next-in-semiconductor-ma\/","title":{"rendered":"Who\u2019s Next in Semiconductor M&A?"},"content":{"rendered":"

Who’s Next in Semiconductor M&A?<\/a><\/p>\n

by Justin Dove<\/a>, Investment U<\/em> Research
\nTuesday, September 20, 2011<\/p>\n

If you can’t beat ‘em, just buy ‘em…<\/p>\n

Broadcom’s<\/strong> (Nasdaq: BRCM<\/a>) acquisition last week of NetLogic<\/strong> (Nasdaq: NETL<\/a>) is likely to set off a chain reaction as larger, older semiconductor companies try not to get left in the dust. Valued at 3.7 billion, it’s the largest semiconductor industry acquisition in seven years. The willingness of Broadcom to pay such a high premium represents the degree of paradigm shift in the industry.<\/p>\n

Semiconductor stocks across the board rose due to an overall market rally last week. But according to The Street, “The chip rally is notable because several stocks in the sector climbed on heavier volume – a sign that institutions are piling into the stocks.”<\/p>\n

This institutional pickup could signal anticipation of a wave of consolidation within the industry.<\/p>\n

The Nitty Gritty on the <\/strong> Semiconductor Industry <\/strong><\/p>\n

While Broadcom supplies chips that are used in many end products, such as wireless devices and iPods, NetLogic chips are key players in network processors. NetLogic’s innovation in networking processors fills a hole in Broadcom’s product line. Considering the deluge of network-connected devices entering the market, network processing will be a very important sector of the industry going forward.<\/p>\n

“Broadcom is now better positioned to meet growing customer demand for integrated, end-to-end communications and processing platforms for network infrastructure,” said Broadcom CEO Scott McGregor.<\/p>\n

In return, NetLogic shareholders stand to make a quick 57-percent gain over the stock’s previous Friday closing price if the deal holds up.<\/p>\n

However, the premium Broadcom is paying is actually just 15.5 percent greater than NetLogic stock’s 52-week high closing price of $43.28 on May 2. Broadcom’s timing represents two current opportunities for buyers in the semiconductor industry<\/a>.<\/p>\n