- Goldman Sachs' Asia team notes there has been market speculation (reported in the Associated Press on Mar 14) that Mediatek may bid for Trident Microsystems (NASDAQ:TRID), a Tier-1 US-listed TV chipset maker with a market cap of around US$1.2bn.
Although Mediatek has declined to comment on the potential M&A, the firm does not believe such a transaction would add much value to Mediatek as:
1) Trident is trading at 22X 2007E consensus EPS while Mediatek is at 18X (including employee bonus), thus the deal could be dilutive if Mediatek were not able to achieve a price at a discount to the current trading price;
2) Trident is a Tier-1 TV chipset vendor with high-profile customers such as Sony and Samsung, but it faces serious competition to its already-high market share from emerging players such as Mediatek. Customer synergies would be nice to have, but the products are not highly complementary, in firm's view.
They continue to believe Mediatek should utilize its rich cash position to acquire IPs that it lacks, such as networking, broadband, or RF technology, in order to strengthen its product offerings to challenge the territory currently dominated by Broadcom/Marvell.
Notablecalls: TRID went vertical two days after TWP's cautious call (see archives). As I noted, TRID is a difficult stock to short and the violent upward move in the past 3 days pretty much proves my point. Shorts were squeezed with the help of takeover chatter, but looks like GSCO's comments may cool some of this.
Although Mediatek has declined to comment on the potential M&A, the firm does not believe such a transaction would add much value to Mediatek as:
1) Trident is trading at 22X 2007E consensus EPS while Mediatek is at 18X (including employee bonus), thus the deal could be dilutive if Mediatek were not able to achieve a price at a discount to the current trading price;
2) Trident is a Tier-1 TV chipset vendor with high-profile customers such as Sony and Samsung, but it faces serious competition to its already-high market share from emerging players such as Mediatek. Customer synergies would be nice to have, but the products are not highly complementary, in firm's view.
They continue to believe Mediatek should utilize its rich cash position to acquire IPs that it lacks, such as networking, broadband, or RF technology, in order to strengthen its product offerings to challenge the territory currently dominated by Broadcom/Marvell.
Notablecalls: TRID went vertical two days after TWP's cautious call (see archives). As I noted, TRID is a difficult stock to short and the violent upward move in the past 3 days pretty much proves my point. Shorts were squeezed with the help of takeover chatter, but looks like GSCO's comments may cool some of this.
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