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# RFMD, TQNT EPS Basic Calcs

|Includes:

My rough EPS math for the merger of equals between (RFMD) and (TQNT) goes like this:

Inputs:

--Target is \$150M cost savings over 2 years (so call it) \$75M/year.

--RFMD's 2014ish expected earnings were \$158M (uses \$0.59 estimate from Yahoo! with minor adjustment to \$0.56 to line up with Dec fiscal year end).

--RFMD's shares outstanding are about 283M. Converted at 1/1 yields same 283M shares of new company.

--TQNT's 2014 expected earnings were \$74M (uses \$0.45 estimate from Yahoo).

--TQNT's shares outstanding are about 164M. Converted at 1.675/1 yields 275M shares of new company.

--Total earnings of new company projected at \$307M (\$158M RFMD + \$74M TQNT + \$75M cost savings).

--Total shares estimated at 558M.

--So EPS of new company (realizing it will not officially combine until end of year) is about \$.055/share for 2014.

For RFMD that is almost exactly equal to what was already expected. RFMD shareholders from the \$75M cost savings but lose from the dilutive addition of a lower-earning TQNT business. For TQNT shareholders benefit (EPS-wise) from the \$75M cost savings and also combing with a more profitable company.

When I net out the math, I think the key takeaways are:

1) If realized the \$75M/year cost savings is significant. It is a 31% adder to the 2 companies earnings separate and added together.

2) From a short-term, pure math standpoint focused on EPS, I am not sure that RFMD shareholders gained much.

3) I think the 2 keys to driving value in this deal are first realizing the sizable cost savings projected and second finding/realizing revenue-increasing synergies (sales/cross-selling, product development, etc.) that improve the revenue/margin story significantly.

Someone please check my math and holler if I missed something. :-)

Disclosure: I am long RFMD.