Friday, September 28, 2007

Paperstand (CY, BALL)

Barron’s Online reports that Thurman J. Rodgers, founder and CEO of Cypress Semi (CY), may be warming to a breakup of his co. If so, it could be a windfall for Cypress investors. Cypress has seen its stock rise 74% this year, largely on the strength of the shares of SunPower (SPWR). But Cypress is still undervalued, say investors and analysts. With Cypress' mkt cap at $4.4bn, and its 55% stake in SunPower worth $3.6bn, the rest of Cypress is being valued at about $5 per share, drastically below its fair value of $11, say some analysts. A splitting up of Cypress' chip business and the subsidiary could boost the valuation of the chip unit and endow the co with billions in cash. Rodgers has resisted breakup calls from hedge funds as recently as last year to restructure. For one thing, he has to pay taxes on SunPower if he does anything before Nov’09. But analysts say a tax-free deal could be engineered quickly. And some say that lately they sense a greater willingness on Rodgers' part to entertain such possibilities. That's a good bet to take. For, even if Rodgers did wait, investors buying Cypress shares today would get a valuable chip business trading at a mere 1x rev with almost a bln in cash and a demonstrated willingness to buy back shares. "Take all the cash Cypress is sitting on, and the bang-up job they're doing streamlining the [chip] business, and you've got good upside without any more outperformance from SunPower," says Kevin Landis, of Firsthand Capital Mgmt. But that's not reflected in Cypress' share price, says Landis, b/c, "You've got a sandwich of a turnaround story [at Cypress] and a growth story [at SunPower]," and it's hard for investors to appreciate both stories at once.

“Inside Scoop” section reports that two Ball (BALL) execs have decided to seal in some profits. On Tue Raymond Seabrook, exec VP and CFO sold 61K shares for $3.8m. On Sept. 19, Harold Sohn, senior VP of corporate relations, sold 4K shares, totaling $222K. With the co set to announce 3Q earnings on Oct. 25, execs are approaching a window in which they will be prohibited from trading stock. Ben Silverman, of, notes that the co previously warned that the 2H07 would be softer than normal. "The stock is up significantly, trading near its all-time high, and you do have an earnings report on the way. With selling ahead of the report, opposed to after, the timing is fairly significant," Silverman says. "The signal we're getting suggests it might be time to take some money off the table. Following the insiders and taking profits might not be a bad idea."

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