No, hold no position, hence can 'afford' the objectivity. Sticking around to learn something in case I run across similar situation the next time.
So far all I see are no signs that too many people want this company, despite the emotional desires of those who own stocks or options now. IMHO, what's holding the stock down are internal problems that have not been 'broadcasted' but are holding back earnings - namely current costs are not under control and whoever buys it will have to spend quite a bit more to squeeze earnings out e.g. try raising prices, closing facilities, slimming down etc. Last Q the company maxed out in capacity and still did not make much. Without changing the cost structure, not much potential for earnings.
Assuming your $22 STM offer is true - they've looked over everything in details and that's what they would offer max. This thing is only worth only as much as somebody else is willing to pay for it. Right now that's $21.
When I first looked at the stock, it was for the intention to buy in. I was hesitant for 2 reasons. First was cost. If my LSI is any guide, VLSI had to slim down to generate earnings. And if I learned anything from LSI, if and when that happens, the stock will take a beating. Secondly, it was their product offerings and customer base. One customer with 30 to 40% in sales is dangerous. You don't own him, he own you. VLSI's main product line is heading straight at Broadcom, whose's strength in the next generation CDMA. That means they have quite a slug feast on their hands in a year or two. With the fab maxed out, their SOC stuff is not very attractive regardless of how good the technology is. Whoever buys it need to 'create' some extra capacity and that's $$BB. Those who do not build capacity during downturns generally do not do that well during upturns. If VLSI can't make that much margins while running their own fab, what makes you think they can make more using foundries? Foundries charge 100% over their cost during upturns.
As for 'knocking' the company, take a look at the stock price since it's IPO. Speaks for itself. Same league as CY and IDTI. Actually, if I remember right, even below them 'cause those two had one split each at the last upturn.
With the price stuck at $17 to $21, if I were to be holding stock, I would evaluate my opinion on how strong the company is again. Just maybe somebody knows something that I don't know. This takeover has been going on for over three months already. If all other shareholders think like you do and want to hold out for more than Phillips wants to pay, this deal may fall apart. Personally I think it will get done - the arbs will tender all Phillip needs.
patrick |
