Daily Archives: June 4, 2007

Amgen Buys Ilypsa, Diversification Via Acquisition

Amgen (AMGN) is paying a hefty sum to diversify its Aranesp and Epogen franchises.  The company is acquiring developmental-stage Ilypsa, a biotech company based in San Francisco that focuses on kidney disease care, for some $420 million in cash.  Ilypsa’s lead drug candidate, ILY101, is a phosphate binder for the treatment of hyperphosphatemia in chronic kidney disease (CKD) patients on hemodialysis.  ILY101 has completed Phase 2 trials in patients with CKD who are on hemodialysis.

After all of the problems the company is having on side effects from the Aranesp and Epogen franchises, you can hardly blame them for wanting to acquire their way into new treatments.  It’s obvious they will need to replace some of the lost business now and down the road.  it also will be perhaps the first biotech to come undef ire if there is a major regime change or policy shift because of the attack on reimbursements to biotechs with no generics on the market.

The only issue here is if the company is making the right move focusing on renal functions since this and anemia are such a large source of its current blockbuster drug portfolio.  The hope is that this will be able to replace it.  Current Amgen investors will have to hope that this diversification is not so close to its existing line that it isn’t robbing Peter to pay Paul, and they better hope the price is justifiable.

Amgen ended last quarter with $4.777 Billion in cash and equivalents, $2.15 Billion receivables, $2.11 Billion in inventory; total assets after backing out goodwill and intangibles were more than $17.5 Billion; and total liabilities were $12.855 Billion. Shares closed Monday down less than 0.1% at $56.91, and AMGN’s 52-week trading range is $52.36 to $77.00.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 10:08 pm in Biotech, Mergers and Buy Outs, Pharmaceuticals,

Cramer Calls For a Citigroup Break-Up (C)

On tonight’s MAD MONEY on CNBC, Jim Cramer said that he wants to address the board of Citigroup (C-NYSE) because they are sitting on a goldmine: He questions the whole strategy besides Chuck Prince.  Cramer says the one-stop shop doesn’t work and they can unlock value by breaking it up.  Cramer says it is time to break the company up.  He said it would go from $54.00 to $63.00, or 17% upside.  This is on top of the $5.00 if Chuck Prince would leave, or if they could even do a restructuring.  Cramer bought shares for his trust and here are the 5 units it would become: Consumer business (banking, cards); intl consumer business; golbal markets; alternative investments; transaction services. 

Cramer says this is not inevitable at all and he is not sure it would happen.  Cramer did not address the fact that Prince Alwaleed Bin Talal, its largest shareholder, just announced last week that he was against breaking the company up for the longer-term strategy.  I have been vocal about Chuck Prince needing to go, and while Prince Alwaleed Bin Talal gave a vote of conficence in Chuck prince I am not yet inclined to believe that he won’t fire him.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 5:17 pm in Cramer,

ETF Winners & Losers (June 4, 2007)

Stock Tickers: OIH, DBB, ITB, UVT, GWL, URE, DUG, EZA, HHK, FBT, INP, EWZ, PGJ, CHN

ETF WINNERS JUNE 4, 2007:
Oil Services HOLDRs (OIH)                                             $174.35; +2.7%
PowerShares DB Base Metals (DBB)                            $27.66; +2.6%
iShares Dow Jones US Home Construction (ITB)       $37.29; +1.6%
Ultra Russell2000 Value ProShares (UVT)                   $72.18; +1.28%
SPDR S&P World ex-US (GWL)                                       $33.65; +1.25%
Ultra Real Estate ProShares (URE)                                $62.52; +1.23%

ETF LOSERS JUNE 4, 2007:
UltraShort Oil & Gas ProShares (DUG)                         $48.90; -2.4%
iShares MSCI South Africa Index    (EZA)                       $128.25; -1.6%
HealthShares Cancer (HHK)                                            $29.25; -1.05%
First Trust AMEX Biotech Index (FBT)                              $25.52; -1.05%
iPath MSCI India Index ETN (INP)                                    $60.54; -1.03%
iShares MSCI Brazil Index (EWZ)                                     $60.65; -0.90%

 

DJIA                        13,676.32; +8.21 (0.06%)
NASDAQ                2,618.29; +4.37 (0.17%)
S&P500                 1,539.18; +2.84 (0.18%)
10YR Bond            4.9290%; -0.0270%
NYSE Volume       2,713,846,000
NASDAQ Volume  1,947,730,000   

If you can believe it, the PowerShares Golden Dragon-China (PGJ) only fell 0.04% on 278,000 shares, not bad for a day that Shanghai fell 8%.  Even the closed-end fund The China Fund Inc. (CHN) only saw a 0.33% drop.

Please note that is you see other winning or losing ETF’s that are the same category as one of the winners and losers that is not in here, it is because we try to default to the most liquid ETF that is means to track any given sector.

Today the main winners were led by oil & gas trackers in various segments in the oil patch: United States Natural Gas (UNG) 3.7%, iShares Dow Jones US Oil & Gas Ex Index (IEO) 2.5%, Ultra Oil & Gas ProShares (DIG) 2.45%, iShares Dow Jones US Oil Equipment Index  (IEZ) 2.35%, SPDR S&P Oil & Gas Equipment & Services (XES), SPDR S&P Oil & Gas Exploration & Prod (XOP) 2.2%, Energy Select Sector SPDR (XLE) 1.5%.

After seeing how many oil and energy ETF’s are on the market we would formally like to ask ETF managers not to open up any more oil and gas variations of ETF’s.

Jon C. Ogg
June 4, 2007

Posted on: June 4, 2007 – 3:44 pm in ETF, , , , , , , , , , , , , ,

Cramer’s ASCO Biotech Stocks (CELG, ONXX, WMT)

On today’s Stop Trading segment on CNBC, Jim Cramer said he was shocked that Revlimid from Celgene (CELG) was hardly noticed and he thinks it’s ready to run here.  This down move in Celgene is a mistake.  He’s sticking with his Onyx Pharmaceuticals Inc. (ONXX) after they gave positive data at the American Society of Clinical Onclogy ("ASCO") after the company extended the life of liver cancer patients. 

Cramer said he’d still buy Wal-Mart (WMT-NYSE) here even after the run from the news Friday and after the upgrades today. 

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 1:49 pm in Cramer, ,

Cramer’s Apple Strategy Ahead of iPhone (AAPL)

Jim Cramer on TheStreet.com video gave an Apple (AAPL) stock strategy going into the June 29 release date.  The video is more detailed but in short he thinks you can Sell some Apple as we get closer to the release, but not necessarily all of the stock. It’s ok to take some profits and you don’t want to lose all of that $30.00 per share profit that the iPhone gave the stock: $90.00 to $121.00.  He thinks that if the iPhone hype equals the expectation then it stays equal, but if it fails to meet the hype then the stock could get crushed.  He thinks there is only a 20% chance that the iPhone will exceed the hype and he lays out issues of going to AT&T Wireless and the issues of changing carriers.  This is actually a more detailed plan than he offered on last Thursday’s "Sell Block" on CNBC’s Mad Money, and this lays out more of the thinking behind the trade.  It’s at least a "schnitzel."

On the video he also noted several other stocks.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 1:03 pm in Cramer,

Scholastic: Would Harry Potter Already Take Profits? (SCHL)

Scholastic Corp. (SCHL-NASDAQ) is up more than 13% after announcing the $200 million accelerated share buyback plan after the close on Friday.  This is always a tough decision, but what do you do when almost your entire goal and entire expectation of a trade is reached in a sinle day?  The answer is usually, "take the money, jump on your magic broom, and fly off to the bank."

We surmized that Harry Potter was buying Scholastic (SCHL) stock with the news on Friday because it looks like most of the Harry Potter profits from this book release are being put to use to repurchase shares to shrink the float.  On a fully diluted equal basis, by reducing the float by 14% and if everything else remains entirely static then you could imply a theoretical 13% to 17% expected stock move depending on your math.  Of course, the world isn’t static and the opinions of the impact on shares from buybacks varies as much as the opinions on the Harry Potter craze.

With shares up more than 13% at $36.95 and with it hitting a new 52-week high of $37.30 today and with the shares already up in that estimated ’stock impact range,’ it would be hard to imagine that Harry Potter himself would be doing anything other than hopping onto his Nimbus 2000 and flying off to the bank. 

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 12:30 pm in Stock Buybacks,

AT&T (T): Expand Overseas?

The new CEO of AT&T (T) says he is looking outside the US for acquisitions. His company has already sucked up every regional Bell except Qwest (Q) and Verizon (VZ). He would not comment on whether his company would like at a very large target, particularly cell service provider Vodafone (VOD).

The fact that the company is talking about drawing more of its business from outside the US may be a concession to the risk that AT&T’s three domestic businesses are facing.

Landline customers are dropping fairly quickly. Everyone from Skype to cable companies is offering VoIP, and its price point puts real pressure on AT&T, making it difficult to prevent customer erosion.

Wall St. loves AT&T Wireless. The cell service provider part of the company is growing and drives excellent cash flow numbers. But, has new 3G networks and WiMax come to market, AT&T’s cell business could face the same issues that it has now with landlines.

The final leg of AT&T’s plan going forward is its bundled broadband, TV, and voice product for consumers. Although the package certainly works fine, AT&T has not been able to convince investors that there is a clear path to steal this business from the cable companies.

Looking overseas is looking like a good idea.

Douglas A. McIntyre

Posted on: June 4, 2007 – 12:16 pm in Uncategorized

Blackstone IPO Terms Set

The Blackstone Group L.P. has set its IPO terms for its 133,333,334 million limited partnership units in an initial range of $29.00 to $31.00 per unit.  These are units rather than ’shares’ because of the limited partner structure.  Its units will trade under the ticker "BX"on the New York Stock Exchange.  This also sets the final terms with the People’s Republic of China’s "State Investment Company" prior $3 billion stake of non-voting common units at a purchase price per common unit equal to 95.5% of the initial public offering price in this offering. The number of non-voting common units purchased by the State Investment Company will be reduced if necessary so that its equity interest in Blackstone remains under 10%.

A 20 million unit overallotment has been granted to underwriters, and at the high-end of the offering it would generate a $4.753+ Billion offering.  Morgan Stanley and Citigroup are the lead underwriters with co-managers listed as Merrill Lynch, Credit Suisse, Lehman Brothers, and Deutsche Bank.  This private equity and public equity manager has rapidly grown in recent years, as you can tell by its assets under management: $13.3 Billion in 2000, $27.0 Billion in 2003, $69.5 Billion in 2006, and $88.37 Billion as of current assets under management as of May 1, 2007.

Its 2006 revenues were $1.12 Billion plus gains of $7.587 Billion, and net income was listed as $2.266 Billion for the year.  After this offering and based on the mid-point pricing of $30.00 Blackstone is indicated to have a market capitalization in excess of $32.5 Billion.

As far as some size differences, you can see Blackstone will be the horse of the public private equity, hedge fund, and alternative investment vehicles in the US: Fortress Investment Group, LLC (FIG-NYSE) $11.1 Billion market cap; American Capital Strategies (ACAS-NASDAQ) $7.8 Billion market cap; Allied Capital Corp. (ALD-NYSE) $4.9 Billion market cap.  Franklin Resources (BEN-NYSE) has perhaps the highest market cap in mutual fund advisory and asset management of the public companies in its sector with a $34 Billion market cap, with traditional assets under management stated as $601 Billion.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 10:14 am in Financial Stocks, IPOs, Private Equity, , , , ,

iPhone Pre-Sale Major Premiums on eBay (AAPL, EBAY)

Since the Apple (AAPL-NASDAQ) iPhone has been given the actually release date of June 29, 2007, it looks like the eBay (EBAY-NASDAQ) auction scalping is back on.  Keep in mind that despite the actual release and ship dates, this is really no different than the auction being a ’short sale’ with the key difference being an iPhone rather than shares of a stock.  The retail prices exclusively through AT&T (T-NYSE) on a first come first serve basis are 4GB at $499.00 or 8GB  for $599.00.

Two different auctions ending this evening already have a premium to the pricing with more than 12 hours to go.  These are pre-sale items, both are the 8GB versions.  One is already at $660.00 with 29 bids and another is at $610.00 with 18 bids.

What is perhaps more interesting (actually funny or ludicrous) than the iPhone scalping is the raw number of web domain name auctions that are pending.  One such auction has a minimum $1,000.00 indication and a BUY IT NOW feature price of $29,999.00 for ‘27 premium iPhone domain names.’  If you look up the domain names you may have some questions as to who would want them, because none of the domain names are "Why didn’t I think of that domain name?" web addresses that consumers would just randomly type in to see what iPhone services are out there.  This auction ends on Thursday June 7, 2007, and has no bids.

The domain name ‘apple-iphone2007.com’ did sell for $305.00 (Auction number 140120996252) on June 1, 2007 on eBay.  There was also an 8GB iPhone that sold for $99.00 (Auction number 330124992229).  There is always a premium on demand to supply for major limited release products.  But at what point does greed versus fear actually become crazy?

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 9:10 am in Consumer Electronics, Internet, Product Review, Technology Companies, Wireless, , ,

The Krispy Creme (KKD) Donut Boat Don’t Float

Krispy Creme (KKD) lost more money last quarter, again. And, to make matters worse, revenue dropped. The company is slowly disappearing.

The top line dropped over 7% to $111 million. People must be going to Dunkin Donuts. Net loss rose to $7.4 million from $6 million in the same quarter a year ago.

By the way, the company is eating cash. The green stuff dropped from $36 million at the end of the January quarter to under $31 million at the end of April.

The stock opened down 3%.

Douglas A. McIntyre

Posted on: June 4, 2007 – 8:31 am in Uncategorized

Dominion’s $6.5 Billion Asset Sale

Dominion Resources Inc. (D-NYSE) has been trying to trim down its focus on more core assets via assets sales and select combinations. This morning the company has enetered into two seperate asset sales in a combined deal worth more than $6.5 Billion.

Loews Corporation (LTR-NYSE) is buying Dominion’s operations in the Permian Basin, Michigan and Alabama for $4.025 billion, including reserves of approximately 2.5 TCFE on Dec. 31, 2006.

XTO Energy Inc. (XTO-NYSE) is buying Dominion’s operations in the Rocky Mountains, Gulf Coast, San Juan Basin and South Louisiana for $2.5 billion; including proved reserves of approximately 1 TCFE on Dec. 31, 2006.

The company says it now has enough data on a post-sale basis for forward investment models.  Domonion is internally projecting 2008 fiscal operating earnings per share to come in at $6.00 per share, with 4% to 6% growth thereafter.  Here is a site link for its newer 2008 model on a post-sale basis. http://www.dom.com/investors/ir.jsp

XTO is an obvious play, but Loews Corp was a bit of a surprise from an outsider’s viewpoint.  Loews does already own LNG storage and pipeline operations, but many were not expecting the company to spend this much to add on to LNG operations.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 8:30 am in Mergers and Buy Outs, Oil & Gas, Shareholder Issues, , ,

Pre-Market Stock News (June 4, 2007)

(ANSW) Answers may be an indicated Internet takeover target according to “TheDeal.Com”; shares trading up 2.2%.
(CBI) Chicago Bridge & Iron won a $775M LNG pact in Chile.
(CELG) Celgene up 2% on positive multiple myeloma study data presented at ASCO.
(CRAY) Cray trading down over 15% on lowered guidance.
(CSIQ) Canadian Solar Inc. trading up 2.5% on partnership with City Solar AG on large solar projects in Spain and Germany.
(DIGE) Digene up 34% after being acquired by QIAGEN (QGEN).
(DNA) Genentech trading down 0.5% after ASCO data presentation.
(DNDN) Dendreon shares trading down 5% after it announced a $75 million convertible note offering in a private placement.
(EMU) Energy Metals Corp. is being acquired for some $1.5 billion by SXR Uranium.
(GE) General Electric noted as potentially going to $50.00 according to Barron’s.
(HTV) Hearst-Argyle TV reached a select content pact with Google’s YouTube.
(MEH) Midwest Air holders received a recommendation from Glass Lewis to not vote for Midwest Air nominees and instead vote in favor of the Airtran nominees.
(NVT) Navteq noted as potential Microsoft or Google buyout target, but he said this is pure speculation rather than news or even rumors. 
(ONXX) Onyx Pharma trading up over 5% on ASCO data showing that liver cancer patients survived 3 months longer on Nexxvar.
(PALM) Palm is selling a 25% stake to Elevation Partners for $325 million; shareholders receive a $940 million distribution; shares up 11%.
(SCHL) Scholastic is using $200 million for an accelerated share buyback via Deutsche Bank.
(SLR) Solectron trading up 16% on news that it is merging with Flextronics (FLEX) in either cash ($3.89) or stock (0.345 FLEX shares).
(SNE) Sony announced price cuts on their new Blu-ray DVD players.
(WMT) Wal-Mart trading up 1.5% on 4 upgrades after Friday data at shareholder meeting.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 7:55 am in Pre-Market Activity

Wal-Mart Gets 4 Upgrades (WMT)

In our Friday article noting that the ‘less bad is good’ for Wal-Mart (WMT-NYSE), we noted that the
way the news was presented and the initiatives that were being continued were the sort that would probably create multiple upgrades from Wall Street research shops.

That appears to be what is going on this morning.  This morning there are already four key upgrades from major Wall Street firms.  Wal-Mart shares have seen the following upgrades this morning: raised from neutral to "Overweight" at HSBC ($61 target) , raised from market perform to ‘outperform" at Wachovia, raised at J.P.Morgan from neutral to an "Overweight" rating, and raised at Morgan Stanley from equal-weight to "Overweight."

Shares of WMT are indicated up over 1% in pre-market activity.  If it wasn’t for the huge drop in China and perhaps the news of a foiled terror plot at JFK Airport this might be indicated higher.  After the company released all of its positive data at the shareholder meeting Friday, shares closed up almost 4% ahead of today’s upgrades.

Jon C. Ogg
June 4, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 7:02 am in Analyst Calls, Retail,

Dendreon Taps Financing Sooner Than Expected

Shares of Dendreon (DNDN) are trading down some 7% pre-market after the company announced that it was going to offer $75 million in convertible senior subordinated notes that are due in 2014.  The offering is being made under Rule 144A to qualified institutional buyers, so the securities will not be required to be registered until a reseale period.

The terms are still T.B.A. and are being negotiated, plus their is a $25 million overallotment option.

The Company intends to use the net proceeds of this offering to finance its activities relating to the potential commercialization of Provenge®, expand its manufacturing facilities for the commercial production of PROVENGE, fund ongoing and new clinical trials for PROVENGE and its other product candidates, support research and preclinical development activities for its other potential product candidates, and for general corporate purposes, including working capital.

This financial offering seems far sooner than the company had previously focused on.  It never did give a formal date on "when it would raise cash" under its existing shelf filing with the SEC, but the body language signal out of the company would have led you to believe this was being set for much later in 2007.

Jon C. Ogg
June 4, 2007

Jon Oggcan be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 4, 2007 – 6:35 am in Biotech, FDA, SEC, Secondary Offering,

Europe Markets 6/4/2007

Most markets in Europe were off about one-half of one percent.

British Air (BAB) was down 1.3%. GlaxoSmithKline (GSK) was down 1.5%. DeutscheBank (DB) was down 1.4%. Volkswagen was up 1.7%. Alcatel-Lucent (ALU) was down 1.4%.

Data from Reuters.

Douglas A. McIntyre

Posted on: June 4, 2007 – 6:29 am in Uncategorized

Earlybird Analyst Calls (June 4, 2007)

ALDN cut to Sector Perform at CIBC.
AUO started as Outperform at Credit Suisse.
CAS started as Buy at Jefferies.
CCO cut to Hold at Deutsche Bank.
CM cut to Outperform at RBC.
CNK started as Buy at B of A; started as Outperform at Credit Suisse.
DB cut to Underweight at JPMorgan.
GES started as Buy at Deutsche Bank.
ISRG raised to Buy at Oppenheimer.
LPNT cut to Hold at Jefferies.
MOT raised to Outperform at CIBC.
NSM raised to Overweight at JPMorgan.
OCNF started as Buy at B of A.
SIRI raised to Outperform at bear Stearns.
STI cut to Neutral at B of A.
UHS raised to Peer Perform at Bear Stearns.
WMT raised at HSBC, raised at Wachovia, raised at JPMorgan, and raised at Morgan Stanley.
WNG cut to Neutral at JPMorgan.
ZQK cut to Neutral at Baird.

Jon C. Ogg
June 4, 2007

Posted on: June 4, 2007 – 6:19 am in Analyst Calls

Media Digest 6/4/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Palm (PALM) will sell 25% of itself to Elevation Partners.

Reuters writes that Hearst-Argyle (HTV) will supply Google (GOOG) YouTube with programming under a revenue-sharing partnership.

The Wall Street Journal writes that Ruport Murdoch might make some guarantees of editorial independence if Dow Jones (DJ) agrees to his acquisition offer.

The WSJ also writes that Apple’s (AAPL) new iPhone will launch on June 29.

The WSJ reports that its new Sony (SNE) Blu-ray high definition will come to market with a price $100 less than was expected.

The New York Times reports that software maker Cadence Systems (CDNS) may be sold to private equity interests.

The New York Times writes that phone equipment company Avaya (AV) may be sold to private equity or a strategic buyer.

FT reports that India car company Tata Motors is launching a car that will cost less than $3,000.

Barron’s writes that GE’s (GE) stock is undervalued and may be worth $50 a share.

Douglas A. McIntyre

Posted on: June 4, 2007 – 4:16 am in Uncategorized

Palm (PALM) Gets A Face-lift

Palm (PALM), the smart phone company which has been the subject of endless takeover rumors, solld 25% of itself to Elevation Parners for $325 million

According to The Wall Street Journal: "Palm will pay $940 million in cash, or about $9 a share, to existing shareholders whose ownership of the company will drop to 75% under the deal’s terms." The company will take on $400 million in debt to help cover the payout.

Elevation will bring in several executives including Apple’s (AAPL) former CFO and head of hardware development.

The deal looks like a loser. Palm gets to add $400 million in debt, gets no new strategic partner, and adds a few people who have as their claim to fame being fomer managers at Apple.

What Palm needs is a much larger strategic partner who can give the company a broad distribution and product development platform. Instead, investors get a company which may be too small to compete in the smartphone busines and a great deal of debt.

Rumors of a buy-out from a larger company had lifted the stock recently. Sprint (S), Motorola (MOT) and Nokia (NOK) have been mentioned.

Palm’s revenue per quarter runs about $400 million. With the iPhone coming to market, it needs a big brother. It hardly got that with the Elevation deal.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 4, 2007 – 3:56 am in Uncategorized

Another Dog Day For Shanghai Composite

At 1.31 AM New York time, the Shanghai Composite is down 4.8% and has dropped below the critical 4,000 level to 3,808.

At the same time, the Hang Seng is up 1% to 20,814, and the Nikkei is higher by .3% to 18,010.

China Petroleum (SNP) is up 3.4% to 8.84, and China Unicom (CHU) is up 3% to 11.78.

Douglas A. McIntyre

Posted on: June 4, 2007 – 12:35 am in Uncategorized

Cadence Design Systems On The Block

The New York Times is reporting that Cadence Design Systems (CDNS) may be talking to private equity interest at KKR and Blackstone. The firm makes software used to design chips. According to The Times: "Cadence is regarded as one of the most innovative chip software makers."

The question about Cadence is why anyone would want the company? Its shares have almost doubled this year to $23. Synopsis (SNPS) which is in a closely related business trades for 3.3 times sales. Magna Design (LAVA), another company in the industry trades for 3.1x. Cadence has a multiple of 4.1x, and its has a trailing twelve-months P/E of 42.

Cadence’s growth has not been phenomenal. In 2005, its revenue was $1.329 billion. In 2006, the figure was $1.484 billion. 

Cadence may be bought, but whoever gets it will likely pay too much.

Douglas A. McIntyre

Posted on: June 4, 2007 – 12:14 am in Uncategorized