Why Marvell and Sandisk are Potential Acquisition Targets

Includes: MRVL, WDC
by: Shlomi Cohen

The merger frenzy is continuing. Friday’s news that chip manufacturing giant Freescale Semiconductor Inc. (NYSE: FSL) was being taken over by private funds in a $17.6 billion cash deal, was soon followed by rumors that bar code producer Symbol Technologies, Inc. (NYSE: SBL) would be acquired by Freescale’s former parent Motorola Corp (NYSE: MOT) for $4 billion. Motorola aims, through Symbol, to enter the market for radio frequency identification ("RFID")-based bar codes, the next big thing in the consumer world.

When deals in the chip manufacturing sector reach $18 billion in cash, many big companies, which I never dreamed would be in the frame, suddenly become acquisition targets. Two such examples are SanDisk Corporation (Nasdaq: SNDK), and Marvell Technology Group (Nasdaq: MRVL), both of which currently have market caps of $12 billion, and currently focus on the hot field of chip production for consumer electronics. Marvell saw exceptionally high volumes last Friday, but I suspect that this was connected to the expiry of options.

An interesting development related to SanDisk came last Friday with the announcement by Toshiba that it had reached a compromise on a patent dispute with Lexar Media, which was recently acquired by Micron Technology (NYSE:MU). I think this will open the door to licensing and royalty agreements between SanDisk and Micron/Intel on the production of MLC-based NAND chips.

Speaking in his recent conference call, SanDisk CEO Dr. Eli Harari confirmed that the company was in talks over new licensing agreements but refused to give any names. SanDisk is also likely to sign an agreement with another chip manufacturer, Korean company Hynix Semiconductor. This deal is apparently being brokered by M-Systems Flash Disk Pioneers (Nasdaq: FLSH), which invested $100 million in Hynix under the “equipment for chips” method.

Published originally by Globes [online], Israel business news - www.globes.co.il © Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.