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Technology Stocks : RF Micro Devices (RFMD) -- Ignore unavailable to you. Want to Upgrade?

To: Don Green who wrote (4041)	12/18/2001 11:42:53 AM
From: Don Green	Read Replies (1) \| Respond to of 4849

Alpha/Conexant Deal Gets Mixed Views From Analysts By FRANK BYRT December 17, 2001 DOW JONES NEWSWIRES BOSTON -- Alpha Industries Inc.'s (AHAA) decision to merge its chip-making businesses with that of Conexant Systems Inc. (CNXT) to form a new company focused on wireless applications got mixed reviews from analysts. Under terms of the agreement, Conexant will spin off its wireless business, including its chip-making plant in Newbury Park, Calif., to be combined with that of Alpha's, based in Woburn, Mass. According to the proposed merger, Conexant shareholders will own 67% of the new company, while Alpha shareholders will own 33%. The combined entity will have about 140 million shares outstanding. The new company will buy Conexant's chip-making and module-testing plant in Mexicali, Mexico, for $150 million cash. Dale Pfau, an analyst for CIBC World Markets Corp., was upbeat about the deal, saying the new manufacturing entity will hold a 12% market share in the wireless component sector, and added that the sector has been rebounding since mid-year. "It creates the world's largest independent supplier of components for wireless handsets and the number-one market share in gallium arsenide components for wireless." He expects the deal will give Alpha's shares a long-lasting boost. "The shares of Alpha have been selling at a discount to their group's average and we believe that discount is going to evaporate." But Mark Roberts, an analyst for Wachovia Securities Inc., said that although the deal makes a lot of sense strategically, Alpha carries a high valuation and "will be pretty rich" even after the merger. "We're seeing significant weakness in the Christmas selling season for (wireless) handsets," Roberts said, "and though it won't affect the December quarter, it puts March (fiscal quarter) at risk for lower earnings expectations." Roberts, who rates Alpha as market perform, said he expects increasing competitiveness in the wireless-component sector to prompt more such mergers. Under the agreement, announced Monday, shareholders of Alpha will receive one share of the yet-to-be-named new company, and shareholders of Conexant, Newport Beach, Calif., will receive 0.342 of a share. Conexant shareholders will own 67% of the new company, while Alpha shareholders will own 33%. The combined entity will have about 140 million shares outstanding. The new company, which will operate out of Woburn, Mass., and Newport Beach, will employ about 4,000 people and have a new ticker symbol. Kalpesh Kapadia, an analyst for C.E. Unterberg Towbin Co., said he considers the deal a winner for both companies. Conexant is getting cash and is continuing to spin off businesses in order to focus on its core competencies, while unlocking shareholder value, he said. Kapadia added that it gives Alpha's the size necessary to compete with one of the industry leaders, RF Micro Devices Inc. (RFMD). He estimates the new entity will garner 20% to 25% of the market for power amplifiers in wireless handsets. RF Micro has about a 30% market share. "So, I like Alpha as a wireless pure play and Conexant as a value play with all of this unlocking of shareholder value" Kapadia said. RBC Capital Markets Inc. analyst James Moeller said he's still waiting to learn more details about the deal, but that from a fundamental standpoint "it looks like a very significant step for Alpha in a good way." "The wireless component handset business is more and more driven by bulk and scale and the ability to solve the technical issues facing the top five handset original equipment manufacturers (OEMs)," he said. "So, this expands Alpha's product offering portfolio and ultimately expands their exposure to the top OEMs as well."