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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (53700)	9/13/2011 5:13:15 PM
From: Donald Wennerstrom	1 Recommendation Read Replies (1) \| Respond to of 95530

Chip ETFs Rally On Broadcom's NetLogic Buyout By TRANG HO, INVESTOR'S BUSINESS DAILY Posted 09/12/2011 06:51 PM ET Semiconductor ETFs defied the market's sell-off Monday on news that Broadcom ( BRCM) offered to buy smaller rival NetLogic Microsystems ( NETL) for about $3.7 billion. The deal valued NetLogic, which creates processors for the wireless infrastructure used by smart phones, at a 51% premium over Friday's closing price. NetLogic skyrocketed to an all-time high of 48.50 intraday and closed at 48.12. Shares of Broadcom — which makes chips for mobile devices and networking equipment — gapped down 5.7% at the open. But they regained most of their losses and ended down 1.1% at 33.06. The deal is expected to close in mid-2012 and should add about 10 cents a share to Irvine, Calif.-based Broadcom's earnings next year. "Broadcom's willingness to do this transaction speaks to the strength it sees in its business and the opportunity it sees in wireless infrastructure (or the growth in 4G networks, enabling wireless data traffic)," said Mike Burton, an analyst with Kaufman Bros. "The combination enables Broadcom to deliver best-in-class platforms to its customers, which should also reduce both time to market and development costs," Burton wrote in a client note. But a handful of law firms announced they're investigating NetLogic for "possible breaches of fiduciary duty to current shareholders and other violations of state law by the board of directors." Shares of competitors Altera ( ALTR), Cavium ( CAVM), EZchip ( EZCH), Marvell Technology ( MRVL), PMC-Sierra ( PMCS) also shot up 4.5% to 11% on speculation that they'd also be taken over at a premium. Cavium gapped up 7.1% to 33.10 in more than three times usual trade. EZchip surged 11% to 32.65 in 2 1/2 times usual volume and broke above its 200-day and 50-day moving averages, which could put its uptrend back on track. "There are a lot of deep pockets out there that could make acquisitions," Burton said. In addition, fabless chipmakers have pristine balance sheets and are positioned to weather an economic downturn, said Cody Acree, director of research at Williams Financial Group. They've outsourced manufacturing to Taiwan, so they don't have expensive factories to maintain. "Even in poor times, these chip companies still ... have very healthy balance sheets, little debt and strong cash flow and they're now starting to pay dividends," Acree said. Still Below Trend Lines SPDR S&P Semiconductor ( XSD) — tracking the chip stocks in the S&P 500 — jumped 3.7% to 45.73. IShares PHLX SOX Semiconductor Sector ( SOXX) rose 2.9% to 48.72 in three times average trading volume. Both ETFs trade deep below their 200-day moving averages and have underperformed the broader market since February. XSD and SOXX have lost 16% and 13%, respectively, year to date vs. -7% for the S&P 500. The market sell-off has pummeled chip stocks to historically low valuations. Broadcom is trading at 11 times earnings and it normally trades in the high teens to mid-20s, Acree said. Qualcomm ( QCOM) is trading at a multiple of 15 times but normally trades in the mid-20s. Texas Instruments ( TXN) is trading at 11 times when it normally trades in the high teens. Chip stocks can only fall so much at which point, they become attractive buyout targets, Acree said. investors.com