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Technology Stocks : Adaptec (ADPT)
ADPT 17.33-0.2%Nov 3 3:59 PM EST
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To: Mark who wrote (1213)3/17/1998 8:30:00 PM
From: Patient Engineer  Read Replies (1) of 5944
 
Mark, Thank you for your excellent analysis.

Re:"I am not a holder yet (and I never short), and would love an entry
point <$20 plus some answers to those questions ! (The "dilution"
one could easily take this stock down 10 - 20%)"

Here is what the press release had to say about financing of the deal:

"Assuming the necessary regulatory clearances are obtained, Adaptec will complete the transaction by purchasing all of the outstanding stock of Symbios for
cash, using a portion of Adaptec's cash reserves and some borrowings.

This acquisition will be accounted for under the purchase accounting method. Adaptec will evaluate the allocation of the purchase price to assets acquired,
which include in-process technology that will be written off, and goodwill which will be amortized over the benefit period."

So there will be no dilution. Adaptec traded one asset (cash) that earned $20M/year pre-tax, for another (Symbios) that earns $69M after tax ($100M pretax?). Plus Adaptec's taxes will drop for a time due to the R&D writeoff. Costs will be lowered assuming they can keep the fabs full with their own chips. Pricing power will be increased due to the consolidation of Symbios as competition. There is some risk to the integration process, but their return on assets is up 500% for the deal. Seems pretty good to me.

With Symbios out of the picture, is there any credible competition for Adaptec in SCSI chips?
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