Analog Devices Inc.
) recently announced that it has entered a definitive agreement to
Hittite Microwave Corporation
) for $2.0 billion or $78 per share in cash. The transaction,
subject to regulatory approvals and customary closing conditions,
is expected to be closed by the end of third-quarter 2014.
Massachusetts-based Hittite manufactures integrated circuits,
modules and subsystems for radio frequency microwave and millimeter
wave applications. The company's chips are used in cellular,
optical and satellite communications, medical imaging and defense
electronics. The company reported total revenue of $7.5 million in
the first quarter, soaring 188% year over year.
Analog Devices makes signal-processing microchips that are used
in several consumer products, such as automobiles, personal
computers, cellphones and tablets. Hittite's chips, on the other
hand, process very high frequency analog signals used in military
and satellite communications systems. Therefore, the acquisition
complements Analog Devices' commitment to offer high frequency
chips and other signal processors.
Hittite's offerings will strengthen Analog Devices' presence in
the industrial and communications end markets. The strategic move
aims to expand the company's existing product line-up to be used in
satellite gear, military radar and cars, which require very high
radio frequency (RF) chips and signal processors.
For the past few decades, Analog Devices has been developing
innovative products for the consumer, communications, automotive
and industrial segments. The combined company would boast a wider
selection of high-power, high-frequency chips by leveraging
Hittite's leading position in RF, microwave, and millimeter wave
technology. Additionally, the strategic deal is expected to boost
Analog Devices' profitability.
Reportedly, this deal happens to be the largest deal for Analog
this year. Following the announcement of the deal, Analog shares
jumped 4.97% to close at $55.31. The acquisition is expected to
augment revenues, produce cost synergies, complement the company's
product portfolio and generate economies of scale.
Analog Devices reaffirmed its third-quarter 2014 guidance of
1-5% sequential revenues increase and pro-forma earnings in the
60-64 cents range. The Zacks Consensus Estimate for third-quarter
earnings is pegged at 62 cents.
In the last reported quarter, earnings of 59 cents surpassed the
Zacks Consensus Estimate by 3 cents. The increase was driven by
strong revenue growth coupled with better gross margins and solid
Currently, Analog Devices has a Zacks Rank # 3 (Hold). Other
stocks that look attractive are
Montage Technology Group Ltd
) sporting a Zacks Rank # 1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
ANALOG DEVICES (ADI): Free Stock Analysis
HITTITE MICROWV (HITT): Free Stock Analysis
MONTAGE TECH GP (MONT): Free Stock Analysis
MAXLINEAR INC-A (MXL): Free Stock Analysis
To read this article on Zacks.com click here.