Tag Archives: qcom

China Yanks Western Digital Funds On U.S. Probe; SanDisk Deal At Risk

China’s Tsinghua Holdings pulled its $3.8 billion investment in Western Digital ( WDC ) early Tuesday amid a U.S. government inquiry, prompting the disk drive maker to slash its already threatened bid for flash memory maker SanDisk ( SNDK ). The SanDisk acquisition, announced Oct. 21, will have to hurdle a Western Digital shareholder vote, which would not have been required with the investment by Tsinghua subsidiary Unisplendour. Western Digital stock sank 7.2% to 42.77 on the stock market today , while SanDisk stock lost 1.6% to 66.61. Western Digital Investor Opposes Bid On Monday, Western Digital investor Alken Asset Management wrote an open letter claiming the $19 billion offer for SanDisk was “simply too high.” SanDisk, an Apple ( AAPL ) supplier, faces competitive headwinds in 2016. Alken owns about 2% of Western Digital stock. The vote is slated for March 15. The Unisplendour investment would have given it a 15% stake in Western Digital. Unisplendour terminated its Western Digital investment after the Committee on Foreign Investment in the U.S. said it would investigate. Neither Western Digital nor Unisplendour will pay a termination fee. In December, Summit Research analyst Srini Sundararajan told IBD that Tsinghua Holdings was trying to get its hands on SanDisk technology. Chip-arm Tsinghua Unigroup plans to invest $47 billion in semiconductor technology to become the world’s No. 3 chipmaker, leapfrogging  Qualcomm ( QCOM ). It wouldn’t be the first time a Tsinghua Holdings bid for U.S. technology was shuttered on regulatory concerns. A rumored $23 billion bid for Micron Technologies ( MU ) by Tsinghua Unigroup seemingly fell flat last year on worries that CFIUS would stop the deal. Micron shares fell 5.1% to 10.49. SanDisk Acquisition Remains ‘Compelling’ By terminating its Western Digital investment, Unisplendour triggered an alternative deal between Western Digital and SanDisk. Western Digital will now pay $67.50 per share in cash and 0.2387 in stock for SanDisk, for a value near $78.50 per share at Western Digital’s Monday closing price. The original deal valued SanDisk at 86.50 a share. Despite the failed Unisplendour bid, the demand for data storage is rising, Western Digital CEO Steve Milligan said Tuesday in a statement. By acquiring SanDisk, Western Digital would get easy access to Nand (flash memory). “We believe the strategic rationale of this acquisition is even more compelling today than when we first announced it in October last year, given industry trends and strong execution by both companies,” Milligan said in the statement. The SanDisk deal has been expected to close in Q2. Western Digital said it continues to see $500 million in synergies within 19 months of the closure and $1.1 billion by 2020. If the deal fails, Western Digital must pay SanDisk $184 million. Toshiba Could Benefit Western Digital RBC analyst Amit Daryanani sees the Western Digital-SanDisk deal being 34% dilutive without the Unisplendour investment. The ongoing shift to 3D Nand has pressured average sales prices for SanDisk’s bread-and-butter Nand business, he wrote in a research report. “While we think the long-term rationale of owning HDD (hard disk drive) and Nand under one umbrella is logical, the near-term implications of this could be negative,” he wrote. Needham analyst Richard Kugele notes the $17 billion debt that Western Digital will incur if it acquires SanDisk. But a partnership with Toshiba via SanDisk could buoy Western Digital. Toshiba manufactures SanDisk’s Nand. “Nothing will change the aggressive nature of the Nand industry, but partially owning a fab through the Toshiba partnership should help Western Digital over time navigate those waters,” Kugele wrote in a research report. Daryanani rates Western Digital stock outperform and has a 68 price target. Kugele rates Western Digital stock a strong buy and has a 90 price target.

Western Digital Cuts SanDisk Offer After China Yanks Funds

China’s Tsinghua Holdings pulled its $3.8 billion investment in Western Digital ( WDC ) early Tuesday amid a government inquiry, prompting the disk drive maker to slash its already threatened bid for flash memory maker SanDisk ( SNDK ). The SanDisk acquisition will have to hurdle a Western Digital shareholder vote, which would not have been required with the investment by Tsinghua subsidiary Unisplendour. Western Digital stock was down 7% in midday trading on the stock market today , near 43, while SanDisk stock was down 2%, near 66. Shares of both have fallen 37% and 10%, respectively, since the deal was announced Oct. 21. Western Digital Investor Opposes Bid On Monday, Western Digital investor Alken Asset Management wrote an open letter claiming the $19 billion offer for SanDisk was “simply too high.” SanDisk, an Apple ( AAPL ) supplier, faces competitive headwinds in 2016. Alken owns about 2% of Western Digital stock. The vote is slated for March 15. The Unisplendour investment would have given it a 15% stake in Western Digital. Unisplendour terminated its Western Digital investment after the Committee on Foreign Investment in the U.S. said it would investigate. Neither Western Digital nor Unisplendour will pay a termination fee. In December, Summit Research analyst Srini Sundararajan told IBD that Tsinghua Holdings was trying to get its hands on SanDisk technology. Chip-arm Tsinghua Unigroup plans to invest $47 billion in semiconductor technology to become the world’s No. 3 chipmaker, leapfrogging  Qualcomm ( QCOM ). It wouldn’t be the first time a Tsinghua Holdings bid for U.S. technology was shuttered on regulatory concerns. A rumored $23 billion bid for Micron Technologies ( MU ) by Tsinghua Unigroup seemingly fell flat last year on worries that CFIUS would stop the deal. SanDisk Acquisition Remains ‘Compelling’ By terminating its Western Digital investment, Unisplendour triggered an alternative deal between Western Digital and SanDisk. Western Digital will now pay $67.50 per share in cash and 0.2387 in stock for SanDisk, for a value near $78.50 per share at Western Digital’s Monday closing price. The original deal valued SanDisk at 86.50 a share. Despite the failed Unisplendour bid, the demand for data storage is rising, Western Digital CEO Steve Milligan said Tuesday in a statement. By acquiring SanDisk, Western Digital would get easy access to Nand (flash memory). “We believe the strategic rationale of this acquisition is even more compelling today than when we first announced it in October last year, given industry trends and strong execution by both companies,” Milligan said in the statement. The SanDisk deal has been expected to close in Q2. Western Digital said it continues to see $500 million in synergies within 19 months of the closure and $1.1 billion by 2020. If the deal fails, Western Digital must pay SanDisk $184 million. Toshiba Could Benefit Western Digital RBC analyst Amit Daryanani sees the Western Digital-SanDisk deal being 34% dilutive without the Unisplendour investment. The ongoing shift to 3D Nand has pressured average sales prices for SanDisk’s bread-and-butter Nand business, he wrote in a research report. “While we think the long-term rationale of owning HDD (hard disk drive) and Nand under one umbrella is logical, the near-term implications of this could be negative,” he wrote. Needham analyst Richard Kugele notes the $17 billion debt that Western Digital will incur if it acquires SanDisk. But a partnership with Toshiba via SanDisk could buoy Western Digital. Toshiba manufactures SanDisk’s Nand. “Nothing will change the aggressive nature of the Nand industry, but partially owning a fab through the Toshiba partnership should help Western Digital over time navigate those waters,” Kugele wrote in a research report. Daryanani rates Western Digital stock outperform and has a 68 price target. Kugele rates Western Digital stock a strong buy and has a 90 price target.

Apple Supplier ARM Topples On Mobile Decline; Eyes IoT, Cloud

U.K.-based  Apple ( AAPL ) supplier ARM Holdings ( ARMH ) stock toppled Wednesday, as its earnings disappointed despite Q4 sales topping Wall Street expectations, amid a strategic shift into the Internet of Things and cloud markets. ARM stock fell 8.8% Wednesday, to 37.74, and touched its lowest point since July 2013. Shares under-performed IBD’s 41-company Electronic Semiconductor-Fabless industry group, which fell a fraction after touching a 16-month low this week. ARM isn’t pretending the smartphone market hasn’t stalled, Rene Haas, the company’s executive vice president and chief commercial officer, told IBD. But ARM still has headroom for growth, he said. “It’s nothing we haven’t been expecting nor planning for,” he said. “But about half our revenue comes from outside smartphones.” For Q4, ARM reported $407.9 million in sales and 8.2 pence (12 cents) earnings per share ex items. Both measures were up 14% year over year, ARM said. The consensus of 11 analysts polled by Thomson Reuters modeled $398.1 million and 38 cents (26.2 pence). The designer of mobile chips saw sales rise 15% for the year, to $1.49 billion. EPS rose 25% to 30.2 pence (44 cents). Fourth-quarter licensing sales fell 2% to $1.58 million, but royalty sales rose 31% to $216.7 million. Software/tool sales rose 19%. However, smartphone-chip sales fell 3%. ARM guided to 2016 sales “broadly in line with market expectations” at roughly 9.7% year-over-year growth to $1.63 billion in sales, William Blair analyst Anil Doradla wrote in a research report. Doradla reiterated his outperform rating on ARM stock, but Canaccord Genuity analyst Matthew Ramsay cut his price target to 55 from 60, citing continued macroeconomic semiconductor uncertainty. He maintained his buy rating on ARM stock. ARM Finagles Stalled Mobile Industry Roughly 45% of ARM’s sales stem from smartphones, down from 60% in 2010. The smartphone slowdown won’t slug ARM nearly as hard as its rivals, Haas told IBD. During Q4, ARM shipped 4 billion chips. Half of the smartphone chips shipped contained ARM’s 64-bit processor, which commands higher royalty fees than ARM’s older, 32-bit processor. About 40% of smartphone chips shipped contained ARM’s graphics processing unit (GPU), Mali, and 10% held eight or more cores. “What that means is that even as growth slows from a unit standpoint, we still have good room to grow because underneath the hood we have three strong factors that drive growth in the market,” Haas said, referring to processors, GPUs and cores. ‘Cars Are Just Getting Smarter’ In 2016, ARM expects to grow further into the cloud and Internet of Things markets, Haas said. Licensing in both segments could be a boon. Networking market share grew to 15% in 2015 vs. 10% in 2014, and ARM now counts Broadcom ( AVGO ) and Marvell Technology Group ( MRVL ) among its networking chip clients. Advanced Micro Devices ( AMD ), Nvidia ( NVDA ) and Qualcomm ( QCOM ) also use ARM-based server chips, according to ARM. “That (5% jump in networking) is a pretty big jump, given what’s going on in that marketplace and given that those markets have some stickiness once you’re inside,” Haas said. In the Internet of Things market, Haas expects ARM to benefit from burgeoning automotive intelligence. Most “embedded technologies” — thermostats, motors, drones and vehicles — use older technology. But the 8-bit micro-controllers powering those technologies are rapidly being replaced by the 32-bit architecture, Haas says. “The fact is cars are just getting smarter,” he said. “There are cars today that could have 100-plus chips inside them. A smartphone might only have one or two chips using ARM technology.”