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Microsemi Corporation, What's Up?

Summary

Research and Development costs are increasing rapidly.

Cash half of prior 2 years, large increase in debt.

Past Growth vs. Future Growth.

Buyout talk - fact or rumor?

Microsemi is a semiconductor and system solutions company based in California. Although technology stocks are projected to fall in the coming months, I believe Microsemi is a solid short to medium term buy.

Many Tech stocks, such as the Amazon-Ring, Splunk-Phantom Cyber and Salesforce-CloudCraze acquisitions have been acquired in 2018. One plausible cause for this event could be increased Research Development costs throughout the technology industry. Microsemi has seen vast increases in Research Development costs in the past years, but that could be paired with the company's massive growth trends.

Microsemi's growth is mainly caused by numerous technological advances by the company to stay ahead of competitors. Growth is projected to continue at about the same rate in future years, which shows Microsemi plans to stay up to date with their advances. I believe this drive to stay ahead of competitors is what is causing the consolidation of the technology sector. Companies, through acquisitions, can pool resources to increase the amount of money available for the rising research development costs.

In the coming days, weeks, or months, Microsemi will be sold to a buying company. There have been rumors of many offers, including the 10.15 billion offer for 67.50 a share by Microchip. As far as I've read, the acquisition by Microchip is legitimate and the offer likely will not be outbid. If Microchip can retain Microsemi’s drive to create multiple technological advances, the company seems like a solid buy for 2018.

Disclosure: I am/we are long MSCC.

Additional disclosure: I plan on making no transactions within the next week.