Analog Devices to Acquire Hittite Microwave Corporation
ADI expands RF portfolio with acquisition of microwave and millimeter wave leader - ADI reaffirms third quarter financial guidance
Chelmsford, MA 06/09/2014 -
Analog Devices, Inc. (NASDAQ: ADI), a global leader in high-performance semiconductors for signal processing applications, and Hittite Microwave Corporation (NASDAQ:HITT), an innovative designer and manufacturer of high performance integrated circuits, modules, subsystems and instrumentation for RF, microwave and millimeter wave applications, today announced that the two companies have entered into a definitive agreement whereby ADI will acquire Hittite for $78 per share in cash. The closing price of Hittite’s common stock on June 6, 2014 was $60.56 per share.
The dividends are indeed a sign of confidence. However, in the CC it seems that certain parts of the business are still questionable: a) the gallium arsenide business is being emphasized but the silicon business is not even mentioned. This is interesting since all the design centers – Turkey, Canada, Norway, Colorado Springs are doing all their work in silicon. b) All the VPs that pushed for the existing design centers are now gone. Does this mean that the reward vs. cost of these entities is questionable and their future is in doubt?
Last earnings report, the stock shot up on guidance. Stock has come down since but the company did beat the revenue guidance. Going forward, guidance is in-line but the dividend is a sign of confidence in that they can sustain cash flow growth as revenue ramps up. Margins are also going to return to low 70's. Oversold at this point and i'd expect an open in the red followed by gradual increase in trading price throughout friday and on toward the next reporting date.
Sentiment: Strong Buy
Good, bad, or indifferent, it seems that some significant changes in personnel are being ignored by most:
Nancy O'Regan/ Susan DiCecco, Norm Hildreth/Thomas Hwang/ Larry Ward…
Probably additional names should be mentioned but the above occurred within the last 6 mos and I found them after a 10 minutes search.
Maybe the changes were long overdue and are going to improve the outlook for the company (one would hope!).
Just wondering whether any of the analysts at the quarterly conference call are going to ask some real questions:
• How are Hittite design centers affected by the turmoil in countries like Turkey (large center) and Egypt (reported a few quarter ago) both in terms of output and future extensions
• What are the results of the enthusiastically reported acquisition of design center in Norway - 2 years after the intro of their products
• What are the results of the enthusiastically reported acquisition of Velocium
• Foundry contractual issues – GaAs and silicon
(PE), price to earnings growth (PEG), price to sales (PS), and price to cash flow (PCF).
The valuation rating for HITT remains a MOST RISK. Jefferson Research downgrades HITT to sell - … Valuation suggests a higher amount of price risk, and
Operating Efficiency is weak. Also assets turnover are weak compared to previous Q. When combined, HITT deserves a SELL rating.
An unfavorable valuation (a MEDIUM RISK or MOST RISK rating) implies higher potential downward price risk that is evidenced by a company price multiple that is higher than the corresponding sector average. The valuation rating is based on both absolute and relative levels at HITTITE MICROWAVE CORP compared to its peers within its sector based on price to earnings
Some views of analysts opinions:
Hittite Microwave Corp.'s earnings have declined to an estimated $2.28 from $2.72 over the past 5 quarters, they have shown deceleration in quarterly growth rates when adjusted for the volatility of earnings.
The company has generated a negative trend in earnings per share over the past 5 quarters. However, while recent estimates for the company have been lowered by analysts, HITT has posted results that fell short of analysts expectations.
Hittite Microwave Corp is currently rated as having Aggressive Accounting & Governance Risk (AGR®), receiving an AGR score that places them in the30thpercentile among all companies in North America, indicating higher accounting and governance risk than 70% of the other companies.
Fourth quarter ending December 31, 2011 to be in the range of $58.0 million to $61.0 million and net income to be in the range of $15.2 million to $16.5 million, or $0.50 to $0.54 per diluted share.
Yahoo estimates are rev of 70M and earnings of .68.
Current qtr was not bad. Next qtr looks like a big let down.
I followed the AH trading yesterday as well. I acutally had a buy order at 42.50 in AH if it went that low.
But you are right, it traded as low as 45-46 last night.