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Cadence Design Systems Inc. Message Board

  • defacto109 defacto109 Apr 6, 2011 2:02 PM Flag

    Buyout bid on CDNS?

    I have a small stake in Cadence Design Systems, Inc (CDNS). I'm a fan of the technology, and I think this part of the tech industry is often overlooked despite how vital it is to chip/semi manufacturers. Major chip-makers need this sort of software/service to design their products.

    I bought shares in this company for this, along with technical and fundamental reasons. Number one, the stock is already up between 18-20% YTD. Earnings have grown steadily since the uptrend began in summer of 2010, and earnings are projected to grow a bit more by the next quarter. And I feel the company is pretty's still no where near its pre-2008 levels, and I think the run is going to continue. Insider trades seem to agree with this sentiment. As of late, insiders have made some sizable stock purchases and there have been no sales. Volume has also picked up a bit lately, and the price has been bumped a bit's punched above its moving average, and looks quite bullish to me. I think that if the stock continues just like it is and earnings continue to grow, we could reach a target price of about $14.50/s within another 52-weeks.

    But now I think the ante could be upped even more! I have strong reason to believe there will soon be a takeover/buyout bid of around $18-$22/s in the next few months. I cannot confirm or refute this with any certainty (and I am in no way affiliated with this company or any insiders), but I think the prospects are good. Some of you may know more about this "rumor" than me, and I'm hoping someone could shed some more light on it and whether you think this is imminent or just nonsense...

    Even if this is just a "rumor", I think there are still some good chances here...and rumors can come true. I remember how I ignored that silly "rumor" about the Starbucks-Green Mountain partnership, and kick myself every day for it! Whether it's a legit tip/rumor or not, think about this business/industry and where CDNS sits... Their clients include large manufacturers such as nVidia and JDS Uniphase, and their software is great. nVidia, for one, has a very close connection/partnership with CDNS. If I were in charge at nVidia, I would definitely acquire this company (or at least a large holding in it), and not only benefit from the self-service aspect but also profit from my competitors' use of this software/service. I also feel like the chip/semi sector is over-due for a rebound, and has been unfairly, we may be moving into a "takeover climate". Texas Instruments latest acquisition has generated a lot of excitement. And I think other big manufacturers are going to consider ingesting smaller peers to grow and gain market share and revenue.

    Anyway, those are my thoughts about this stock and this (yet unconfirmed/uncertain) buyout deal. I think it's certainly possible, and the stock is worth owning anyway (I owned it before this, and it has me a bit excited -- though not holding my breath). So I wanted to see what you think about the stock itself and if you know anything more about this.

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    • Oracle could make a bid. Yes, I know that sounds ridiculous, but with Sun acquisition they are gonna go strong on hardware plays. And with their PLM and Innovation management strategy CDNS fits well. I wouldn't be surprised at all.

    • Also, if an acquisition deal with a large chip/semi company were to happen, do you think regulators would throw a fit and be up in arms over it? Or would it go down without a hitch? I hate market regulation (all artificial state interference), but it seems to me that if the AT&T-Sprint deal was ok, a deal like this should/would be too. Just curious...

      • 1 Reply to defacto109
      • While this does seem like a good outcome, I am struggling to see who could acquire the company. I think that CDNS can, and should, acquire other players to gain pricing control.

        It would cost the acquiring company about $5B to take over CDNS. I dont know of many semi's who can front that, perhaps Intel, TSMC, IBM, TXN, Qcom?. Would they keep the technology out of the market? or dedicated only to their foundry?.

        Too many questions to make this possible.

        I think the companies capitalization today is just about right (a little bit richer than it should) for the FCF and revenues that the company is generating.

        The company has (is) not showing any innovative approach to gaining, pricing control, market share or simplifying the company to increase the profitability.

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