Tony,
Thanks for the added facts, however, I still don't fully understand what the value of the transaction is. I would say the purchase price was a bargain (based on 1.2 times sales or whatever the number was) if that number would have subsequently been marked up to LSI's current P/S ratio (somewhere around 2.5). However, that would have caused a big jump up in the stock which didn't happen. I am still waiting for one or two of those great manipulators to tell us how great this deal is so they can get their clients out at higher prices (and I will join them).
Also I found the article that stated Symbios "specializes" in Unix based systems. I didn't say that is all that they do, but that appears to be their point of differentiation which is losing value not gaining value. The article is below.
I just wish the market would agree with you optimists, even if it is a temporary phenom. I think that will happen during earnings week.
(Adds Adaptec CEO comments, details)
By David Lawsky
WASHINGTON, June 25 (Reuters) - Two computer chip component
makers abandoned a merger Thursday, hours before the government
was set to take antitrust action against them, the companies
and sources said.
Adaptec Inc., of Milpitas, Calif., terminated its $775
million deal to acquire Hyundai Electronics America's Symbios,
of Ft. Collins, Colo., as the Federal Trade Commission was set
to vote that the violated the nation's antitrust laws.
"They were going to vote a complaint, which would have put
us into litigation," Grant Saviers, Adaptec's chief executive,
said in an interview. "Where we disagreed significantly was the
definition of the market."
After spending six months on the deal already, Adaptec did
not wish to spend another six months or even longer in a
lawsuit, even though it believed it would have won its case.
After the announcement, the FTC cancelled a scheduled 1:30
p.m. EDT meeting.
A vote by the four-member commission -- a fifth slot is
empty -- would have set in motion an antitrust suit. An expert
said the FTC investigation demonstrates that the computer
industry is now under close scrutiny by trustbusting watchdogs.
"This means that companies in the computer industry need to
be concerned about antitrust even if they're not Intel or
Microsoft," said Howard Morse, a former FTC official and now a
partner at Drinker, Biddle & Reath in Washington.
The FTC last month sued Intel Corp. for violations of
antitrust laws, arguing it abused monopoly power to withhold
key technical information from customers and competitors.
The Justice Department's antitrust division sued Microsoft,
alleging it abused monopoly power in its relationship with
Internet Service Providers and computer makers.
Between them, Adaptec and Symbios have more than 80 percent
of the market for Small Computer System Interface -- SCSI,
prounced scuzzy -- host controllers, chips that permit
computers to communicate with peripheral devices including
scanners, hard drives and CD ROMs.
These host chips are also used in workstations and in
computer servers to provide RAID, or Redundant Array of
Inexpensive Disks, which can protect against the loss of data.
Symbios specializes in controllers that are highly
compatible with the UNIX operating system used in networks.
"They were concerned that the combined companies would have
too much clout in the SCSI area, which we think is a misreading
or a misdefinition of the market," Saviers said.
Saviers said that the market for input/output devices
includes many other communications interface technologies, not
simply SCSI, such as USB (universal serial bus) to connect a PC
mouse, a monitor and a keyboard and IDE (integrated device
electronics) for communications between the disk drives.
In a statement, the companies said that it was pointless to
fight a determined FTC in an effort to save the deal, which was
announced in February.
"While we are not in agreement with the FTC, we have
concluded that it is in the best interests of both companies to
terminate the transaction at this time," Adaptec said.
Adaptec said it would take a $20 million charge in the
fiscal first quarter, ending June 30, in connection with the
decision.
AT&T Corp. sold Symbios to Hyundai in 1995. At that time,
Adaptec was among the bidders for the unit. This winter, the
opportunity to bid again for Symbios came again, as the Asian
economic crises fueled the need for cash among Korean
companies. Hyundai agreed to sell Symbios to Adaptec for $775
million, concluding a bidding war between several companies.
Hyundai Electronics America is part of Hyundai Group of
South Korea.
Saviers said Adaptec will certainly look for other
acquisitions, but he declined to provide any specifics. The
Symbios acquisition was Adaptec's biggest deal in its history. |
