Tech M&A: Cisco Acquires NDS to Leverage Their Video Services
Cisco (NAS: CSCO) is attempting to increase its presence in the video communications market with an acquisition of NDS for $5 billion. They were brought to Cisco's attention from the customer feedback they were receiving. Nicola Leske and Tova Cohen of Reuters say that this is Cisco's biggest acquisition since they bought Tandberg for $3.3 billion in 2009.
NDS is used by multiple communications companies, and they are owned by private equity firm Permira and News Corp. Cisco agreed to the $5 billion purchase, including the assumption of debt and retention-based incentives, of NDS, which has less than $1 billion in liabilities, according to Cisco CEO John Chambers. The boards of both companies have approved the acquisition, and it is planned to close in the latter half of 2012.
ISI analyst Brian Marshall said, "While we view the price as rich for a company growing sales less than 10 percent year on year, we believe it addresses a large opportunity in enabling service providers to offer comprehensive digital media and integrated video offerings." He disagrees, though, with Cisco's claim that the acquisition will add to earnings per share in the first year, but says that it is possible with job cuts. Chambers said that the claim was due to NDS' "double-digit growth and recurring revenue stream."
Business section: Investing ideas
Cisco's acquisition of NDS is one confirmation in a sea of many takeover rumors. The list below contains tech names that have been floating around the takeover rumor mill that have also seen net insider buying over the last six months, indicating insiders at these companies expect their employers to outperform. Do you think they're likely takeover targets?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. Clearwire (NAS: CLWR) : Provides wireless broadband services. Market cap at $2.12B. Over the last six months, insiders were net buyers of 2,798,989 shares, which represents about 0.78% of the company's 358.49M share float.
2. Cirrus Logic (NAS: CRUS) : Develops high-precision analog and mixed-signal integrated circuits (ICs). Market cap at $1.57B. Over the last six months, insiders were net buyers of 152,115 shares, which represents about 0.24% of the company's 63.44M share float.
3. Entegris: Develops, manufactures, and supplies products and materials used in processing and manufacturing in the semiconductor and other high-technology industries worldwide. Market cap at $1.29B. Over the last six months, insiders were net buyers of 146,710 shares, which represents about 0.13% of the company's 110.22M share float.
4. Infinera (NAS: INFN) : Provides optical networking systems based on photonic integration technology in the United States. Market cap at $860.28M. Over the last six months, insiders were net buyers of 200,000 shares, which represents about 0.19% of the company's 105.82M share float.
5. Leap Wireless International (NAS: LEAP) : Provides digital wireless services under the "Cricket" brand name in the United States. Market cap at $771.31M. Over the last six months, insiders were net buyers of 8,006,000 shares, which represents about 16.25% of the company's 49.28M 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 Danny Guttridge does not own any of the shares mentioned above.
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