Here is the Barrons plugged in text:
The semiconductor industry has been mass-producing
integrated circuits for nearly 40 years, and has grown
in that time to enormous proportions.
According to the Semiconductor Industry Association,
global sales this year will total $135 billion.
Oddly, though, in four decades the industry has
produced not a single acquisition worth as much as
$1 billion.
That revelation comes courtesy of John Marren, a
technology investment banker with Morgan Stanley's Menlo Park, California, office. Marren says the industry's historical
reluctance to do big deals stems from several factors,
including chip companies' tendency to suffer from "not
invented here" syndrome -- they prefer to sell parts of
their own design. Chip industry mergers have been hampered,
too, by the cyclical nature of the business.When stocks are
flying high, potential buyers fear overpaying. When they're
lying low, no one wants to sell.
Marren, however, thinks the chip industry is ripe for a round of
large-scale consolidation -- and he contends the process will
start before year-end. For one thing, Marren notes, making
chips has become increasingly capital intensive. To build a
new semiconductor fab from scratch now runs about $1.5 billion.
Few companies have that kind of cash, and fewer still have the
resources to continually upgrade their manufacturing equipment
to keep up with the industry's top-tier producers. Marren says
that's led to a stratification of the industry. On one end of
the scale are top-tier companies with deep pockets, like Intel,
Texas Instruments,STMicroelectronics (the new name for
SGS-Thomson), IBM, Lucent, Philips and NEC. At the other end are
the "fabless" companies, which design chips but farm out their
production, giving them far lower capital expenses. The
vulnerable companies, Marren contends, are those caught in
the middle -- those with less than $2 billion a year in
revenues that rely on their own production facilities.
While Marren won't name names -- some of the companies in
this group are his clients -- among those that fit his
definition are LSI Logic, VLSI Technology, Atmel,
Advanced Micro Devices, Integrated Device Technology
and Cypress Semiconductor.
Marren thinks the top-tier companies will be ready buyers,
seeking to build up their intellectual property base as the
industry increasingly focuses on creating
"systems on a chip," devices that integrate multiple
functions. So when does the mating dance begin? "It's hard
to predict exactly when this is going to start," Marren says,
"but when it does, it's going to touch off a chain reaction."
This rings true......questions:
1.how much is IDTI worth? 14-20 bucks per share
2.Would IDTI sell? NO
3.Which one of the big dogs would want em.
1-IBM
2-TI
3-NEC
I just hope they dont merge with one of the other dwarfs.
Then you endup with a two headed dwarf with no brain |
