While the news started to drift out Friday, it was confirmed this week that chip giant Intel Inc. (NASDAQ: INTC) is in talks to buy Altera Corp. (NASDAQ: ALTR). With more deals in the works and expected in the semiconductor space, and the Intel deal being lauded as a good one for both companies, many investors are wondering who are likely candidates to do a deal, or even to be acquired themselves.
A new research report from Merrill Lynch focusing on the Intel deal also gives a positive nod to potential mergers and acquisitions (M&A) activity, which the firm thinks helps support the overall multiples. The following potential beneficiaries are all rated Buy at Merrill Lynch.
Avago Technologies Ltd. (NASDAQ: AVGO) was originally a part of Hewlett-Packard, and it is a company the Merrill Lynch team thinks could be looking for additional automotive chip assets. The top radio frequency (RF) stocks have been on fire, and the Merrill Lynch price target is posted at $140. The Thomson/First Call consensus target is $139.60. Shares closed Monday at $130.55.
Broadcom Corp. (NASDAQ: BRCM) could benefit in the telecom and networking arena as an acquirer or a potential buyout candidate. The company has extensive business with Apple and Samsung. Merrill Lynch has a $50 price target and the consensus target is $48.06. The stock closed Monday at $44.11 a share.
M/A-Com Technology Holdings Corp. (NASDAQ: MTSI) is another company that could expand in the telecom and networking silo. The company currently manufactures and markets semiconductors and modules for use in wireless and wireline applications across the RF, microwave and millimeter wave spectrum. The Merrill Lynch price target is at $52, and the consensus target is $37.25. Shares closed Monday at $37.
NXP Semiconductors N.V.‘s (NASDAQ: NXPI) recent merger announcement with Freescale Semiconductor Ltd. (NYSE: FSL) was widely applauded on Wall Street, and the Merrill Lynch team thinks the company could spin out the processor division. Merrill Lynch has the stock on its US 1 list with a $114 price target, while the consensus target stands at $107.86. Shares closed most recently at $102.43.
Skyworks Solutions Inc. (NASDAQ: SWKS) may be on the lookout to do a deal that would help diversify the company away from its dependence on the mobile market. The price target for the stock is $110, and the consensus estimate is at $97.71. The stock closed the day Monday at $100.13.
The Intel deal makes good sense, as it helps the company diversify away from the big personal computer dependence. The other companies may be looking to do the same, or be in the sights of somebody looking to add their expertise.