Barron's: Who Will Be the Next Motorola?

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THE TRADER: What Else is on Carl Icahn's Shopping List? by Kopin Tan

Summary: Activist investor Carl Icahn recently disclosed a 1.4% stake in Motorola Inc. (MOT) and set out to force the company to buy back its shares at what he sees as cheap prices. Combined with recent buyouts of Freescale Semiconductor Inc. (FSL) and Philips Electronics (PHG), astute investors are eyeing telecom and chip companies with similar cash reserves, which may soon find themselves under the radar of impatient shareholders or buyout firms. Zhiping Zhao of CreditSights: "Both events represent... pressure from shareholders for these companies to return excess cash, as well as optimize capital structure and create shareholder value." Cash represents 19.1% of semiconductor companies' market cap, vs. only 6.1% and 4.9% for consumer and industrial companies -- and chip/telecom equipment companies have little or no debt. He thinks companies like Analog Devices Inc. (ADI), Linear Technology Corp. (LLTC), Maxim Integrated Products Inc. (MXIM), Altera Corp. (ALTR) Xilinx Inc. (XLNX), and Infineon Technologies (IFX) are potential buyout targets. Companies that could face shareholder pressure to optimize balance sheets and unlock value include Ericsson (ERIC), Nokia Corp. (NOK), Sycamore Networks Inc. (SCMR) and Tellabs Inc. (TLAB).
Related Links: Five Semi Equipment Buyout Candidates • Motorola Jumps on Icahn News; Some Analysts Skeptical • Private Equity and LBOs: With Risk Comes Reward