Top 10 Semiconductor Buyout Candidates

by: Nigam Arora

After the market closed, Texas Instruments (NYSE:TXN) announced that it will buy National Semiconductor (NSM) for $25.00.This is quite a premium for a stock that closed at $14.25 and did not perform well over the past several quarters.

Based on the information from the sources of The Arora Report, I have carefully analyzed the information for the rational leading to the acquisition.

It is all about scale.Before the acquisition, Texas Instruments has roughly 15% share of the analog market.After the acquisition the company will have about 20% share of the analog market.

Applying the same rational to uncover the future buyout candidates, here is a list of the top ten candidates.

Analog Devices (NYSE:ADI)

This company was founded by Mathew Lorber and Ray Stata in 1965.The company has 46% share of the world-wide data converter market.The company supplies to roughly 60,000 customers.

Maxim Integrated Products (NASDAQ:MXIM)

Maxim was founded by nine semiconductor professionals in 1983 with $9 million in venture capital.The company has developed over 6500 different integrated circuits and supplies to 35,000 customers.

Linear Technology (NASDAQ:LLTC)

The company was founded by Robert Dobkin and Robert Swanson in 1981.The company makes over 7,500 products and supplies to thousands of customers world-wide.

STMicroelectronics NV (NYSE:STM)

This company was formed in 1987 from the merger of the semiconductor division of France’s Thompson and Italy’s SGS Microelettonica.Now the company is headquartered in Switzerland and provides products to thousands of customers world-wide.

Fairchild Semiconductor International (NYSE:FCS)

Fairchild Semiconductor is the granddaddy of semiconductor companies.The company was started in 1957 by a group of eight engineers who left the semiconductor division of Beckman Instruments that was formed by Bill Shockley.Ironically, at one time in its existence Fairchild was owned by National Semiconductor.

Marvell Technology Group (NASDAQ:MRVL)

Marvell was founded by Sehat Sutardja, Pantas Sutardja, and Weilli Dai in 1995.The company dominates the disk drive market.


Atmel is of interest because of its 2008 acquisition of Quantum Research Group founded by Hal Philipp in 1996.Quantum focused on microcontrollers for touch sensors.Today, touch is the rage.


Altera invented the first programmable logic device in 1984.The company is now somewhat of a duopoly with Xilinx.


Xilinx was founded by Bernard Vonderschmitt and Ross Freeman in 1984.Please see my earlier article titled Is Xilinx an Intel Acquisition Target?

Lattice Semiconductor (NASDAQ:LSCC)

Lattice was founded by Ray Capace, Rhul Shud, and Norm Winningstad in 1983.The company is a distant third to Altera and Xilinx in the programmable device market.

The questions for investors are which company will be the next target and when will such an acquisition take place.The answer will depend on a number of factors.First and foremost is the amount of cost savings that an acquirer can extract out of an acquisition.In most cases, in semiconductor acquisitions as much as 70% of the SG&A expense of the target can be eliminated.The second factor will be a larger player wanting to get in the niches of these companies as part of a strategy.The third factor will be the ability to grow revenue faster as a combination firm.

As usual, some investors will get overly excited by this news and run up some semiconductor companies with no probable acquisition prospects.Such run ups will also provide a number of short term opportunities from the short side, i.e., profiting from stocks going down.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TXN, NSM, ADI, MXIM, LLTC, STM, FCS, MRVL, ATML, ALTR, XLNX, LSCC over the next 72 hours. I plan to enter positions in these stocks when all six screens of the ZYX Change Method are satisfied.