What Will TI-NSM Acquisition News Mean for Semiconductor Sector?

National Semiconductor stock skyrocketed April 4 on some important news: After the market closed, Texas Instruments announced it had agreed to buy Santa Clara, CA-based National Semiconductor (NSM) for $6.5 billion cash  (http://www.computerworld.com/s/article/9215480/TI_buys_National_Semiconductor_for_6.5B). The $25-a-share offering price was a more than 77 percent premium on NSM’s $14.07 closing price April 4, boosting the market price up $10.20 in after hours trading to more than $24.

National Semiconductor makes analog integrated circuits and “will bring 12,000 analog products into the Texas Instruments portolio,” according to Computerworld, adding that analog semiconductors convert analog data into digital signals for smartphones, PCs and other devices.

Many experts predict this acquisition could signal a market contraction and consolidation which could affect many other companies in all parts of the semiconductor industry. Some of the larger names cited as potential targets include Linear Technology and NXP Semiconductor, companies with $7.6 billion and $8 billion market capitalizations, respectively. The Philadelphis Semiconductor Index was up 2.3 percent on the news.

Perhaps some of the small cap stocks in the sector could also be consolidation targets. It’s difficult to predict which ones, but here are four smaller companies in the periphery of the semiconductor industry.

Danbury, CT-based ATMI Inc (Nasdaq:ATMI, http://www.atmi.com/) supplies materials and materials delivery systems with applications in the semiconductor, flat panel display and life sciences industries. The company stock did not respond to the acquistion news and was up only 3 cents, to $18.41 on April 5. The stock is trading near the top of its 52-week range of $12.13-$22.05 and was named one of “four top stocks worth investigating” by Seeking Alpha in March, citing research done by Zachs.

Chandler, AZ-based Amkor Technology (Nasdaq:AMKR, http://www.amkor.com/) is part of the semiconductor supply chain and provides outsourced semiconductor packaging and test services in the U.S. and internationally. (Its $1.2 billion market cap puts it at the high end of our smallcap niche). The stock is currently trading at about $6.75, at the lower end of its 52-week range of  $5.05-$8.81 and there is some concern that its operations have been seriously affected by the recent earthquake and tsunami problems in Japan. The company reported that a facility was damaged but no doubt this is a story worth watching…

Beverly, MA-based Axcelis Technologies Inc. (Nasdaq:ACLS, http://www.axcelis.com/) designs, manufactures and services processing equipment used in the fabrication of semiconductor chips in the U.S., Europe and the Pacific Rim. A Seeking Alpha post in March named ACLS as one of eight undervalued stocks with big upside potential,  noting its low price/sales ratio of 0.84. Its stock price more than doubled from a low of $1.35 last September to $3.60 in late December but has been sliding since. It currently trades for about $$2.50.

Billerica, MA-based Entegris Inc. (Nasdaq:ENTG, http://www.entegris.com/) makes products and materials used in processing and manufacturing in the semiconductor industry. The company received a mention in Barron’s April 2 in an article about the Needham Growth Fund, which has been buying ENTG because “the company has $1 per share of cash and has paid down debt.” If it were a consolidation target, all the better. The stock is currently trading at $8.35.

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