[Q&A]
OK, to get the ball rolling, I offer this stab at the four questions.
WHAT SHOULD AMTX BID FOR?
I want a solid premium over the current price level (or rather the price after the GTE, HKT, and SIE contracts are announced) and the prospect of solid share price growth of the buyer's stock. The buyer should be either a small company with a small enough market cap that the ADSL growth potential AMTX brings can really move the stock and itself might be a takeover candidate, or a big company that can really take it to the next level globally and is a stock I wouldn't mind being stuck with. Since I'm long AMTX, I'm looking forward to cashing out at the capital gains tax rate of 20%. Since I loaded up at $8-12 earlier this year, some of my shares have a ways to go, so I want the acquirer, if it's a giant, to be one I feel comfortable holding for a year.
I agree that anything less than $65-70 dollars/share would be a bummer. That said, when was the last time you saw a company get acquired for four times its current share price?
This difficulty at arriving at a price suggests that selling might be a bad thing. More on this later.
IS A BUY-OUT/MERGER GOOD FOR THEM?
If it's good for AMTX shareholders, yes.
WHO CAN BE THEIR BIDDER?
Telecom: LU, NT, SIE, ALA, ERICY, Fujitsu
LU - Late to enter ADSL market, already investing in VDSL. Worldwide marketing clout and best-of-class products hard to beat. Good R&D fit between Bell Labs and AMTX. LU likes patents. In one move would become the major player in the market. GREAT FIT.
NT - Already placed bet by taking equity stake in NetSpeed. WSTL followers say NT is their buddy. UNLIKELY.
SIE - Sure seems to love AMTX technology. Wants to build their own DMT chips next year. Already has a signed contract in place to resell AMTX hardware, and is following CopperGold and C6x closely. A SOLID POSSIBILITY.
ALA - Decided early on to dominate the DMT ADSL market but doesn't have the technology to make good. starting to lose early momentum. Might see acquiring AMTX as best way to get back on track. Also has foundering chip program. POSSIBLE.
ERICY - Seemingly happy to wait for CopperGold. VERY UNLIKELY.
Fujitsu - Pushing hard into ADSL and VDSL through strategic alliances with Orckit and ADI/Aware. If they were shopping I think ORCTF would be what they buy. UNLIKELY
Networking: CSCO, COMS, ASND, others
CSCO - Working their way up the xDSL ladder with handful of acquisitions over the last 12 months. Has option to use ALA ADSL chipsets, which may suck. AMTX has the goods, fills the gap, and is just down the street. SOLID POSSIBILITY.
COMS - Doing their own ADSL solution, adapting AWRE's DMT to run on the TXN C6x. Could decide it's expedient to buy AMTX, get their R&D, improve time-to-market, and so on. May do it to pre-empt CSCO or ASND. REMOTE POSSIBILITY.
ASND - Might do it just to counter COMS. Still wrestling with assimilating Cascade. Currently committed to ADI/AWRE but have not made product plans public. Not telco focused. UNLIKELY.
others - Don't have the size or telco focus to warrant buying AMTX. VERY UNLIKELY.
Chip makers: MOT, TXN, NEC, others
MOT - I expect them to create a product line around CopperGold ("CopperSurfr", anyone?), and buying AMTX could be expedient. Might also want to preempt AMTX work on the TXN C6x chip. Estranged from AMTX management? SOMEWHAT POSSIBLE.
TXN - Wants to see C6x succeed and says ADSL will be a driver. Would they go into direct competition with their largest customer, USRX? I don't think so. UNLIKELY.
NEC - AMTX's VDSL chip partner and an ADSL integration partner. Is that enough reason for them to buy AMTX? UNLIKELY.
others - No synergy if AMTX isn't using their chips. NO.
Other xDSL companies: WSTL, PAIR, ADTN
WSTL - Realizing they're vulnerable because they don't own ADSL I.P. Could provide cash and telco relationships, and DLC contracts, to complement AMTX's technology. The combined company would likely win the GTE and BC contracts. POSSIBLE.
PAIR - Needs a viable ADSL product line to complement its HDSL offerings. POSSIBLE.
ADTN - Ditto, but I don't follow this company.
WHAT'S BEST FOR SHAREHOLDERS?
The company should sell if (1) the price (including prospect of buyer's share appreciation) is too good to refuse, (2) it's another small cap company and the synergies are too great to ignore, and/or (3) AMTX believes they can't go it alone and are sinking, in which case they should get the best deal they can. Believing that (3) is not the case, they should set the bar very high for (1) and (2). I think that bar will be too high for anyone to clear.
NO SELLOUT!
Do a secondary with top-tier houses (Salomon, GS, and as Walt suggested, H&Q or RS) underwriting. The credibility is worth the dilution. Private placement is only appropriate if the buyer is someone AMTX wants to gain some leverage on. A private placement might complicate AMTX's dealings with companies: Siemens might not be as enthusiastic about AMTX if ALA gained an equity position.
If AMTX does sell out, my list of approved buyers is: LU, WSTL, PAIR, and maybe CSCO. LU and CSCO would have to offer much higher prices since their caps are so huge and ADSL sales will be rounding error on their balance sheets. I'd much prefer LU to CSCO as I think ADSL is a telco play and LU is the king of telco sales and it's a great fit. CSCO is, in this new market, still a wanna-be. PAIR and WSTL could offer less since their stocks still have much room to move and the merged company would still be an attractive takeover candidate (think MFS buying UUNET, and then being bought out by WorldCom).
NO SELLOUT!
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