Cypress Extends Ramtron Bid Again - Analyst Blog

By Zacks | August 22, 2012 AAA

Cypress Semiconductor Corporation(CY) announced that it has extended the time for acceptance of its tender offer to buy all of Ramtron International Corp.'s (RMTR) outstanding stock for $2.68 per share. The initial offer of $2.48 per share was raised to $2.68 per share in July, representing a purchase price of about $95 million. The offer was declined by Ramtron stating that it was inadequate and not in the best interest of its shareholders. The deadline for the offer was scheduled to expire on August 17, which has now been extended to August 24.

However, all other terms and conditions of the offer remain unchanged. This is the third time that Cypress has extended the deadline on their offer to buy Ramtron.

Ramtron International is a fabless semiconductor company with about 34.0 million shares outstanding. It supplies ferroelectric random access memories and has Texas Instruments Inc. (TXN) and Toshiba Corp. as manufacturing partners. In the second quarter of 2012, Ramtron reported revenue of $14.2 million with a net profit of $69,000.

We believe the deal could make sense for Cypress for a number of reasons. First, Ramtron is a fabless company and would fit very well into Cypress' low capex manufacturing strategy. Being a fabless company, Ramtron has the flexibility to move the manufacturing, assembly and testing of products to vendors that offer superior technology and services at competitive prices. It also frees up resources for research and development that would otherwise have been locked up in capital assets.

Also, Ramtron's ferroelectric-RAM (F-RAM) would supplement Cypress' Memory Products Division, which includes Asynchronous SRAMs, Synchronous SRAMs and nvSRAMs, and provide a longer-term roadmap for its non-volatile memory market. Ramtron's F-RAM enables fast read-writes with minimum delay, low power consumption, and high endurance with limited memory loss. The F-RAM is also competitive with newer technologies such as Phase-change-RAM.

If the deal materializes, it would definitely bring synergies on the sales side of Cypress.

Cypressis a semiconductor company offering high-performance, mixed signal, programmable solutions. In the second quarter, Cypress reported earnings of 5 cents, beating the Zacks Consensus Estimate of 3 cents. Higher touch sales, improved gross margins and tight operating expense control contributed to the upside in earnings.

Recently, the company also announced that its board of directors has approved a quarterly cash dividend of 11 cents per share payable on October 18, 2012. The regular dividend payments are a good way of encouraging investor confidence as it returns shareholder value.

Cypress operates in a highly competitive market. In the touchscreen market, the company competes with Atmel Corporation (ATML) and Synaptics (SYNA).

Currently, Cypress has a Zacks #3 Rank, implying a short-term Hold rating.

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