Khan -
(...If talents are the only thing that we are after, $400 million for 200 engineers is a hefty price. I remember that Cisco placed its office right across street from IBM to steal talents from IBM. If WRS is really superior to ISI, attracting 200 ISI engineers should be a lot easier than spending $400 million. (I know that attracting 200 ISI engineers is more easily said than done, but $2 million per embedded software engineer is over priced.) And for the $400 million we spent, there is no guarantee that the top engineers and managers at ISI will stay...)
The nominal market value of ~ $400M is not the correct metric. The real economic cost to WIND of the merger is what alternative actions are precluded because of the merger. If actual cash were spent, then the amount spent could not be used to buy something else. In this case, all that is being spent are pieces of paper that represent WIND ownership, which do not preclude further WIND actions of any sort.
In actuality, INTS is apparently being acquired in exchange for an about 50% increase in WIND shares. This would reduce a $21 WIND share market value to $14 *IF* INTS were to be valued at an absolute zero. At the other extreme, *IF* the INTS revenues were sustainable and were as valuable as WIND revenues, then the WIND share market value would be doubled from $14 to $28 as the total revenues would be about doubled. Neither extreme is reasonable in and of itself, and the expectations of future operational results will determine the market value, as always, in the long run.
Regards, Don |
