9 Tech Stocks That Could Be the Next Takeover Targets

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Includes: ADBE, AKAM, ATVI, CRUS, DELL, INSG, IRDM, SYMC, XRX
by: Rougemont

Almost every week, most often on "Merger Monday," we learn of the latest takeover and usually see the stock price of the target company surge. There has been no shortage of these deals and with many companies holding huge amounts of cash on their balance sheets and interest rates still near record lows, it is likely that many more companies will be acquired in 2011. In particular, there are many tech companies with billions in cash on their balance sheets and they are looking to acquire companies that can fuel growth or benefit from new management, new marketing channels or the elimination of expenses. 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:

Akamai Technologies, Inc. (NASDAQ:AKAM) shares are trading at $38.09. AKAM is a leading Internet service company that helps accelerate and deliver website content. They reported earnings which disappointed the market and shares dropped from about $47 before earnings to current levels of around $38. The 50 day moving average is about $38.86 and the 200 day moving average is about $45.57. Earnings estimates for AKAM are just over $1.60 per share in 2011 and $1.83 for 2012.

Why Akamai could be an attractive target: 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 $'s sitting on their balance sheets. Some have speculated that Cisco (NASDAQ:CSCO), or Google (NASDAQ:GOOG) might have an interest in AKAM. This company has been the subject of takeover talks frequently. You can read about that here.

Novatel Wireless, Inc., (NVTL) shares are trading at $5.11. Novatel makes mobile communication products, and is based in California. The 50 day moving average is $5.79 and the 200 day moving average is $7.53. Earnings estimates for NVTL are for a loss of 37 cents per share in 2011 and a profit of 29 cents for 2012. The 52 week range is $5 to $11.53. Book value is stated at $5.82. You can see the insider buying here.

Why Novatel could be an attractive target: This stock has fallen and is significantly below the 52 week high. There has been substantial buying from multiple insiders, so they are seeing a lot of value in this company. The stock also looks cheap in terms of book value. A major wireless company might find Novatel worthy of an acquisition.

Symantec Corporation (NASDAQ:SYMC) shares are trading at $18.52. SYMC is a leading provider of security and other software solutions and is based in California. The 50 day moving average is about $18.09 and the 200 day moving average is about $16.29. Earnings estimates for SYMC are at $1.40 per share in 2011 and $1.57 for 2012. The PE ratio is about 12, which is lower than many other software companies. The book value is $5.84.

Why SYMC could be an attractive target: This company could appeal to a number of major tech companies some of which have plenty of cash sitting on their balance sheets. Intel recently agreed to buy McAfee which also provides similar software security, so there is clear interest in this sector.

Adobe Systems, Inc., (NASDAQ:ADBE) shares are trading at $34.51. Adobe is a leading provider of publishing, web design and other software solutions and is based in California. The 50 day moving average is $33.80 and the 200 day moving average is $30.47. Earnings estimates for ADBE are at $2.23 per share in 2011 and $2.54 for 2012. The PE ratio is about 14, which is below many other software companies. The book value is $10.74.

Why ADBE could be an attractive target: Adobe is trading at a very reasonable valuation and is a leader in some areas which show promise for future growth. A fund manager recently said Adobe is a possible takeover target and you can read about that here.

Iridium Communications, Inc., (NASDAQ:IRDM) shares are trading at $7.94. This company provides voice and data communications via satellite and is based in Maryland. The 50 day moving average is about $8.42 and the 200 day moving average is about $8.92. Earnings estimates are about 70 cents for 2011 and 72 cents for 2012. This gives IRDM shares a PE ratio of only about 11 times earnings.

Why IRDM could be an attractive target: The book value is $9.33 and the PE ratio is low. Iridium is trading at a very reasonable valuation and is a leader in satellite based communications. A fund manager recently said Iridium is on their list of possible takeover target and you can read about that here.

Activision Blizzard, Inc., (NASDAQ:ATVI) shares are trading at $11.23. Activision is a leading video game company and is based in California. The 50 day moving average is about $10.95 and the 200 day moving average is about $11.22. Earnings estimates for ATVI are for 72 cents per share in 2011 and 88 cents for 2012.

Why ATVI could be an attractive target: ATVI stock has a book value of $8.62 per share and the shares are trading at what might be bargain levels for the long term. ATVI could appeal to a number of major companies some of which have plenty of cash sitting on their balance sheets. ATVI also has plenty of cash which makes them easier to acquire. According to Yahoo Finance, ATVI has about $3.5 billion in cash on the balance sheet and basically no long term debt. That is equivalent to nearly $3 per share in cash. Activision has a number of highly popular video games such as "Guitar Hero" which adds additional value to this company.

Cirrus Logic, Inc., (NASDAQ:CRUS) shares are trading at $16.84. Cirrus Logic is a leading maker of specialized semiconductors and is based in Texas. The 50 day moving average is about $21.82 and the 200 day moving average is $18.01. Earnings estimates for CRUS are expected to be $1.32 for 2011 and $1.55 for 2012. The book value is $4.41 per share. A recent warning on profit margins from CRUS caused the shares to plunge. You can read about that here. Because this drop is so recent, I would wait to see if the shares decline further, and buy in stages so you can take advantage of any additional weakness.

Why CRUS could be an attractive target: Cirrus might be an interesting target for a major company, as many of them have substantial cash balances and are looking for growth. Recently, Texas Instruments (NYSE:TXN) agreed to acquire National Semiconductor (NYSE:NSM), which shows that there is buyout interest in this sector. National Semiconductor shares rose about 78% after the deal was announced. You can read more about that deal here.

Dell, Inc., (DELL) shares are trading at $14.92. Dell is a leading maker of computers and related products, and is based in Texas. The 50 day moving average is about $14.82 and the 200 day moving average is $13.71. Earnings estimates for DELL are expected to be $1.70 for 2011 and $1.76 for 2012. The book value is $4.05 per share.

Why DELL could be an attractive target: Dell might be an interesting target for a major company, as many of them have substantial cash balances and are looking for growth. Some have speculated that Cisco (CSCO) or Oracle (NYSE:ORCL) could have an interest in buying Dell in order to more fully compete with other rivals. You can read about that here. There has also been speculation that Michael Dell (founder of Dell Computer) may make a bid to takeover Dell. You can read about that here.

Xerox, Inc., (NYSE:XRX) shares are trading at $10.73. Xerox is a leading maker of document equipment, software and related products, and is based in Connecticut. The 50 day moving average is about $10.63 and the 200 day moving average is $10.46. Earnings estimates for XRX are expected to be $1.09 for 2011 and $1.26 for 2012. The book value is $8.59 per share. XRX pays a dividend of 17 cents per share which is equivalent to a 1.6% yield.

Why Xerox could be an attractive target: Xerox appears to be undervalued and might be an interesting target for a larger company. Some have speculated that Dell, Inc. (DELL), Hewlett Packard (NYSE:HPQ), or International Business Machines (NYSE:IBM) could have an interest in buying Xerox. You can read about that here.

The data is sourced from Yahoo Finance and Stockcharts.com. 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. The information contained herein is for informational purposes only.

Disclosure: I am long CSCO, HPQ.