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Technology Stocks : Silicon Motion Inc. (SIMO)
SIMO 91.00+0.1%3:59 PM EST
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From: Elroy5/24/2022 2:46:27 PM
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MXL did a presentation at JP Morgan today. There is a webcast on their web site.

Here are some comments that relate to SIMO.

Q: Why will acquiring SIMO benefit MXL? A: We expect to realize synergies of scale both in wafer volumes and IP side. It will be more than 25% accretive (which includes $100m of synergy - 30% from COGS and 70% from Op Ex).

Q: What about the leverage caused by the new debt? A: When announced the new debt will bring MXL to a 4.5x debt to EBITDA ratio, at close (due to growth of EBITDA presumably) it will be 4.0x, and 18 months post-close it will be 3.0x.

Q: What regulatory challenges do you expect? A: We have to go through standard regulatory approvals - HSR, SAMR, China will likely take the longest. They expect the decision in the first half of next year, it could be sooner. Both companies are relatively small, and there is no overlap in product focus.

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Then they discussed the core MXL business which has nothing to do with SIMO.

Someone asked a Question about why the reaction to the SIMO deal is so negative (MXL's share price declined so much)? He said that MXL's business is doing really well despite the recent stock market decline. They wouldn't do a big deal if they weren't confident in their own business. As for SIMO they've only given accretion guidance, and based on estimates that are out their published by others, MXL's guidance is modest, and MXL has tried to be conservative on gross margins. MXL intends to move combined entity gross margins higher.
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