There are many tech companies with billions in cash on the balance sheet, and some are looking to acquire companies that can fuel growth. With so many companies holding huge amounts of cash on their balance sheets and interest rates still near record lows, it is likely that an acquisition spree will continue. It's also extremely cheap for companies to borrow money to fund acquisitions if needed.
With that in mind, I have researched a few names that fit the criteria discussed above, and are therefore more likely to be looked at as a buyout target. Some of these names have been considered to be buyout targets by multiple sources or analysts. These are solid companies that appear undervalued and likely to rise whether or not they are acquired. Here are some of the names worth looking at:
F5 Networks (FFIV) shares are trading at $87.04. F5 provides solutions that optimize networks. The 50-day moving average is about $78.54 and the 200-day moving average is about $101.85. These shares have traded in a 52-week range between $69.01 and $145.76. Earnings estimates for FFIV are about $3.72 per share in 2011 and $4.34 for 2012. FFIV shares have dropped sharply over the past few weeks, but appear to be quickly reasserting the upward momentum. A recent article states that International Business Machines (IBM), Cisco (CSCO), Juniper Networks (JNPR) and others could have an interest in buying this fast growing company.
Akamai Technologies, Inc. (AKAM) shares are trading at $24.43. AKAM is a leading Internet service company that helps accelerate and deliver website content. The 50-day moving average is about $21.64 and the 200-day moving average is about $33.21. Earnings estimates for AKAM are at $1.45 per share in 2011 and $1.62 for 2012. AKAM has a rapidly growing business and lots of cash on the balance sheet. That could appeal to a number of major tech stocks, some of whom have tens of billions of dollars sitting on their balance sheets. Some are speculating that Verizon (VZ) or International Business Machines (IBM) might have an interest in buying this company. But there are also rumours that Google might want to buy this company.
Novatel Wireless, Inc. (NVTL) shares are trading at $3.18. Novatel makes mobile communication products, and is based in California. The 50-day moving average is $3.32 and the 200-day moving average is $5.31. Earnings estimates for NVTL are for a loss of 90 cents per share in 2011 and a loss of 12 cents for 2012. The 52-week range is $2.81 to $11.53. This stock looks cheap in terms of book value, which is $5.03. Also, the company has about $58 million in cash on the balance sheet with no debt. That is equivalent to about $1.81 per share in cash. A major wireless company might find Novatel worthy of an acquisition.
Iridium Communications, Inc. (IRDM) shares are trading at $6.06. This company provides voice and data communications via satellite and is based in Maryland. The 50-day moving average is about $6.95 and the 200-day moving average is about $8.03. Earnings estimates are about 59 cents for 2011 and 77 cents for 2012. This gives IRDM shares a PE ratio of only about 10 times earnings. The book value is $9.27. Thanks to a market correction, Iridium is trading at a very reasonable valuation. A fund manager recently said Iridium is on his list of possible takeover targets.
Seagate Technology (STX) shares are trading at $11.71. Seagate is a leading data storage device maker. The 50-day moving average is about $11.14 and the 200-day moving average is about $14.09. Earnings estimates for STX are just over $1.57 per share in 2011 and $2.15 for 2012. STX pays a dividend of 72 cents, which yields 6.4%. Seagate looks undervalued, and has had persistent buyout interest for quite a while.
Xerox, Inc. (XRX) shares are trading at $7.54. Xerox is a leading maker of document equipment, software and related products, and is based in Connecticut. The 50-day moving average is about $7.65 and the 200-day moving average is $9.66. Earnings estimates for XRX are expected to be $1.09 for 2011 and $1.22 for 2012. The book value is $9.25 per share. XRX pays a dividend of 17 cents per share, which is equivalent to a 2.3% yield. Xerox is trading well below book value and at a very low P/E ratio. Some have speculated that Dell, Inc. (DELL), Hewlett Packard (HPQ), or International Business Machines (IBM) could have an interest in buying Xerox. Xerox owns an incredible number of very valuable patents, which could be a major incentive for a buyout.
Data is sourced from Yahoo Finance and Stockcharts.com.
Disclaimer: The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. This information is solely educational in nature and not intended to serve as the basis for any investment decision.