Broadcom to Buy NetLogic for $3.7 Billion: Memory Chip Stocks with Hedge Fund Buying

By
A A A

(Article by Becca Lipman. List compiled by Eben Esterhuizen, CFA. Institutional data sourced from Fidelity.)

Broadcom recently announced plans to purchase memory chip company NetLogic Microsystems. The move aims to expand its position in high-speed mobile networking and represents Broadcom's biggest acquisition yet - at $3.7 billion, the deal comes at a 57% premium to NetLogic's market cap on Friday's close.

The collaboration is a "synergistic move" given that both produce separate but complimentary technologies that often sell into the same companies and same equipment, according to Cody Acree, research director at financial services firm Williams Financial Group. (via The LA Times)

"Although Broadcom specializes in making parts such as switchers and controllers that regulate the flow of traffic, NetLogic makes the core processing chips that investigate and process packets of data — which ultimately play a huge hand in determining Internet speed."

Monday's opening sent NetLogic's shares up 51% while Broadcom, whose investors were uneasy with the steep premium, saw its market value drop 2.6% to $32.58 per share.

Broadcom stands by their acquisition cost, claiming the investment was solid. "I think we paid the right price," said Eric Brandt, Broadcom's chief financial officer in a conference call.

CEO Scott McGregor also defended the premium, claiming it will add value for its customers and calls the agreement to buy NetLogic a "strategic fit."

Nor does Broadcom's expansion of their micro-chip market end with NetLogic. According to Reuters, McGregor will continue to look for more acquisitions in the communications chip market.

Broadcom is clearly optimistic on the market for memory chips for mobile data services. After all, companies make acquisitions in the same way people buy stocks, in that they search for companies they believe to be undervalued in industries they expect to outperform.

Broadcom thinks there is untapped value and opportunity for growth in memory chips - their willingness to pay a significant premium demonstrates that. What do you think?

To help you find ideas on how to invest in this trend, we collected data on institutional money flows, and identified a list of 10 semiconductor / memory chip stocks that have seen significant net institutional buying during the current quarter.

Big money managers seem to think there's more upside to these stocks--do you agree?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

1. Rambus Inc. (RMBS): Engages in the creation, design, development, and licensing of patented innovations, technologies, and architectures to digital electronics products and systems. Net institutional purchases in the current quarter at 3.6M shares, which represents about 3.75% of the company's float of 96.03M shares.

2. Spansion Inc. (CODE): Engages in the design, development, manufacture, and sale of flash memory semiconductors worldwide. Net institutional purchases in the current quarter at 3.1M shares, which represents about 6.18% of the company's float of 50.14M shares.

3. Integrated Silicon Solution Inc. (ISSI): Designs and markets integrated circuits for digital consumer electronics, networking and telecommunications, mobile communications, automotive electronics, and industrial markets. Net institutional purchases in the current quarter at 1.5M shares, which represents about 5.66% of the company's float of 26.51M shares.

4. Hittite Microwave Corporation (HITT): Designs and develops integrated circuits, modules, and subsystems for technically demanding radio-frequency, microwave, and millimeter-wave applications. Net institutional purchases in the current quarter at 1.4M shares, which represents about 5.14% of the company's float of 27.24M shares.

5. Fairchild Semiconductor International Inc. (FCS): Designs, develops, manufactures, and sells power analog, power discrete, and non-power semiconductor solutions worldwide. Net institutional purchases in the current quarter at 5.1M shares, which represents about 4.02% of the company's float of 126.81M shares.

6. Semtech Corp. (SMTC): Engages in the design, development, manufacture, and marketing of analog and mixed-signal semiconductor products. Net institutional purchases in the current quarter at 2.2M shares, which represents about 3.49% of the company's float of 63.07M shares.

7. Power Integrations Inc. (POWI): Designs, develops, manufactures, and markets proprietary, high-voltage, analog, and mixed-signal integrated circuits (ICs) in the United States and internationally. Net institutional purchases in the current quarter at 1.5M shares, which represents about 5.27% of the company's float of 28.45M shares.

8. Sequans Communications S.A. Ame (SQNS): Designs, develops, and supplies 4G semiconductor solutions for wireless broadband applications. Net institutional purchases in the current quarter at 3.0M shares, which represents about 33.82% of the company's float of 8.87M shares.

9. PLX Technology Inc. (PLXT): Designs, develops, manufactures, and sells integrated circuits. Net institutional purchases in the current quarter at 2.8M shares, which represents about 10.25% of the company's float of 27.31M shares.

10. EMCORE Corporation (EMKR): Provides compound semiconductor-based products for the broadband, fiber optics, space, and solar power markets. Net institutional purchases in the current quarter at 11.9M shares, which represents about 15.04% of the company's float of 79.12M shares.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


Kapitall

Kapitall

More from Kapitall:

Related Videos

Stocks

Referenced

Most Active by Volume

113,590,482
  • $14.98 ▼ 1.77%
57,689,941
  • $94.67 ▼ 0.37%
51,501,990
  • $3.31 ▼ 2.07%
46,645,770
  • $96.13 ▲ 0.55%
42,212,567
  • $72.36 ▼ 0.40%
39,428,076
  • $25.35 ▲ 0.80%
36,799,747
    $37 unch
36,459,390
  • $44.13 ▼ 2.35%
As of 8/1/2014, 04:03 PM