RIM a Buyout Target? Hedge Funds' Favorite Tech Takeover Targets
Research In Motion (RIMM), the company behind Blackberry, has a strong presence in emerging markets, where the devices' "slightly behind the times" features jive well with infrastructure capabilities.
India for instance has 602 million active smartphone subscribers, and the country Internet carriers are predominately 2G, a service not fast enough to take full advantage of devices like iPhones, and 3G is only slowly breaking ground. For that reason, BlackBerrys, which run under $200 a pop, are flourishing.
RIMM target price cut
Despite promising markets overseas and a new strategy to expand its software to accommodate corporate customers'Apple and Android devices to the BlackBerry network, the company's outlook is still questionable.
RIMM warned of lower profits amid falling sales and an inventory pile up of its PlayBook tablet. In response, at least four brokerages have slashed price targets.
According to Reuters, CIBC slashed its price target on RIM's stock to $25 from $55, saying, "continued negative sentiment will likely keep the share price depressed in the near-term." Meanwhile, Barclays cut its price target to $16 from $23 and said it expects the company to "lose money in devices -- as did Motorola and Palm -- and cannot close it without inflicting great harm on the services unit."
Now, louder than ever, speculators are murmuring the words "takeover target." Are others considering this company, which has a relatively small share of the U.S. smartphone market, a strategic investment?
This consideration is important to investors because when a company announces that another is acquiring it, the target's stock often jumps in price to reflect the takeover premium being paid for the company. This is why analysts pay special attention to rumored potential takeover/leveraged buyout (LBO) targets.
Based on this, we compiled a universe of technology stocks rumored to be potential takeover/LBO targets from various sources including CNN Money and Seeking Alpha. We screened this universe of stocks for those with the most significant levels of institutional buying in the current quarter, indicating that hedge funds and other institutional investors believe these companies have attractive prospects and may be attractively priced.
Do you think these companies are attractive takeover candidates? Use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. Arris Group (NAS: ARRS) : Develops, manufactures, and supplies telephony, data, video, construction, rebuild, and maintenance equipment for the broadband communications industry worldwide. Market cap of $1.25B. Industry: Communication EquipmentTakeover rumor sourced from Seeking Alpha. Net institutional shares purchased over the current quarter at 4.9M, which is 4.45% of the company's 110.02M share float.
2. Cirrus Logic (NAS: CRUS) : Develops high-precision analog and mixed-signal integrated circuits (ICs). Market cap of $1.08B. Industry: Semiconductor-SpecializedTakeover rumor sourced from Seeking Alpha. Net institutional shares purchased over the current quarter at 590.6K, which is 0.93% of the company's 63.37M share float.
3. Infinera (NAS: INFN) : Provides optical networking systems based on photonic integration technology in the United States. Market cap of $744.40M. Industry: Communication EquipmentTakeover rumor sourced from CNBC. Net institutional shares purchased over the current quarter at 6.2M, which is 6.03% of the company's 102.81M share float.
4. Kulicke & Soffa Industries (NAS: KLIC) : Designs, manufactures, and sells capital equipment and expendable tools used to assemble semiconductor devices, including integrated circuits, high and low powered discrete devices, light-emitting diodes, and power modules. Market cap of $673.20M. Industry: Semiconductor Equipment & MaterialsTakeover rumor sourced from Bloomberg Businessweek. Net institutional shares purchased over the current quarter at 956.3K, which is 1.35% of the company's 70.59M share float.
5. Leap Wireless International (NAS: LEAP) : Provides digital wireless services under the Cricket brand name in the United States. Market cap of $697.37M. Industry: Wireless CommunicationsTakeover rumor sourced from CNBC. Net institutional shares purchased over the current quarter at 2.7M, which is 5.53% of the company's 48.80M share float.
6. Power Integrations (NAS: POWI) : Designs, develops, manufactures, and markets proprietary, high-voltage, analog, and mixed-signal integrated circuits (ICs) in the United States and internationally. Market cap of $998.30M. Industry: Semiconductor-Integrated CircuitsTakeover rumor sourced from EE Times. Net institutional shares purchased over the current quarter at 547.7K, which is 2% of the company's 27.43M share float.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Institutional data sourced from Fidelity.
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