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Technology Stocks : EZchip Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: Jim Mullens who wrote (2632)	12/28/2015 1:14:44 PM
From: Squeak22	5 Recommendations Recommended By EzStinger longezch NapaDoc profstok Tartuffe Respond to of 2675

Jim, I agree with your choice of words; clearly it is some, not all, shareholders who would like to receive MLNX stock instead of cash. BTW, shareholders do not need to imagine "a much higher EZCH share price" to defeat the acquisition, though I agree that some shareholders probably feel that way. For me personally, my first choice would be for EZCH to remain independent. We're in the early stages of a significant move to SDN/NFV, and looking ahead five years I believe that a stake in EZCH will be worth more than a comparable stake in MLNX. MLNX is a much larger company so the value created by EZCH will be diluted, especially if MLNX faces competitive headwinds in the non-EZCH part of its business (if it acquires EZCH). But I don't want us to lose sight that more important factor is the buyout price itself. If EZCH must be sold, I want a fair price for the existing NPU business plus value for the nascent NPS and Tile-MX 100 businesses. You don't have to take my word for it; look at EZCH's own proxy statement prepared by their own investment banker. Under the section "Discounted Cash Flow Analysis" is this conclusion: ezchip.com This analysis implied a range of value per Ordinary Share of US$20.07 to US$34.40. Barclays noted that on the basis of the discounted cash flow analysis, the Merger Consideration of US$25.50 per Ordinary Share was within the range of implied value. So if you take the midpoint of the DCF analysis ($28) and add back EZCH's cash ($7) you get $35. (I didn't see any references to the existing cash so I added this back in; it looked like only future cash flows were being considered. If I'm wrong, please show me the Proxy text). $35 is a good starting point but: $35 doesn't include much if any value for the NPS and Tile MX $35 doesn't factor in the strong M&A semiconductor environment that can be tapped into if a fair Go Shop process is implemented. See marketwatch.com PMCS was one of the comparables that EZCH mentioned in its proxy. Just after the proxy was published, PMCS received an offer from SKWS. The price of PMSCS roughly doubled over the next 90 days and it ultimately agreed to be acquired by another company, MSCC. This shows how dynamic to the upside any comparable valuations are (and EZCH is far more innovative and has better financials than PMCS). So you don't have to be a crazed shareholder to reject $25.50 when EZCH is worth somewhere over $35 right now. Just for fun, you could assign $5 to NPS + Tile MX to get $40 (this is a placeholder for the costs of the NPS program plus the Tilera acquisition). Then, add a takeover premium of 25% to get $50. I'm not predicting at all that will happen, but it wouldn't be crazy either. So the question is $25.50 as a sure thing or the possible upside of $35-50? Or more if EZCH remains independent and the NPS and/or the Tile MX-100 are successful? No one has a crystal ball though - GLTA.