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Rumored Xilinx Bidder Qualcomm Better Off Buying Apple Supplier NXP

Xilinx ( XLNX ) stock rocketed near the close Tuesday on a rumored $15 billion takeout offer, but Cowen analyst Timothy Arcuri says Apple ( AAPL ) supplier Qualcomm ( QCOM ) — often cited as a potential Xilinx buyer — would be better off targeting NXP Semiconductors ( NXPI ). Street Insider first reported the rumor of the offer, citing sources familiar with the matter, but didn’t identify the bidder. Xilinx stock shot up 5.7% near the close Tuesday and was up a fraction in after-hours trading. Arcuri retained his outperform rating and 60 price target on Qualcomm stock. Earlier Tuesday, MKM analyst Ian Ing reiterated his view that Broadcom ( AVGO ) and Qualcomm are potential Xilinx suitors. But Arcuri says Xilinx wouldn’t “move the needle” for Qualcomm, which may not be completely committed to the data center path. Xilinx’s field programmable gate array (FPGA) chips are ideal for data center acceleration, Ing wrote in a research report. “In some ways, Xilinx would clearly accelerate Qualcomm’s data center initiatives, but we wouldn’t view a Qualcomm/Xilinx deal all that favorably for Qualcomm and would much rather see it buy an asset like NXP,” Arcuri wrote in a research report. “This would simply be a huge amount of money to spend for a deal that isn’t transformational.” Acquiring NXP would allow Qualcomm to tap into offshore cash, which wouldn’t be possible in the case of Xilinx, Arcuri noted. And as Xilinx suits up for a FPGA battle against Intel ( INTC ), it’s planning on spending a lot of dough. “If we were Qualcomm, this factor argues it is better off to wait,” he wrote. Still, Xilinx is the singular merchant FPGA player following Intel’s $16.7 billion acquisition of rival Altera late last year, William Blair analyst Anil Doradla noted earlier Tuesday. The rumored takeout bid follows Xilinx’s late Monday analyst day. But Doradla wasn’t too impressed, saying the event “lacked confidence.” Xilinx is focusing on cloud computing, embedded vision, industrial Internet of Things and 5G markets rather than its bread-and-butter wireless and wireline markets.

Could Lam-KLA Marriage Face ‘Deal-Killing’ Objection By Intel, TSM?

Lam Research ( LRCX ) and KLA-Tencor ( KLAC ) could be forced to trim competitive segments to push through the $10.6 billion merger that threatens to swallow rival Applied Materials ( AMAT ), Semiconductors Advisers President Robert Maire said Monday. And unlike Applied Materials’ failed attempt to acquire Tokyo Electron, Lam only sees $250 million in initial savings and therefore has less wiggle room to negotiate potential antitrust remedies, Maire wrote in a research report. “Both Lam and KLA are already superbly run companies without a lot of cleaning up to be done,” he wrote. “This suggests that there is not a lot to be gained in efficiency by the combo as they are already quite profitable as separate entities.” The synergies, however, have likely prompted antitrust concerns. Last week, the U.S. Department of Justice sent a “ second request ,” asking for more information into Lam’s plan to buy KLA. Now, the duo could be forced to sign a “plea bargain,” Maire said. KLA products measure competitors’ dep and etch tools, leading to a “fox guarding the hen house” paradigm where a Lam-owned subsidiary would be charged with rating rivals’ tools. Under the DOJ consent decree, KLA could be forced to divest those businesses or license its technology. “The range (of potential remedies) is quite broad, from almost zero cost to deal-killing cost and everything in between,” Maire said. Applied Materials and Tokyo Electron eventually called off their merger in the face of stringent regulatory concerns. After the DOJ rules, the Lam-KLA deal still faces potential fights from regulators in Japan, China, Korea and the Netherlands, where a number of rivals operate. And major chip manufacturers Intel ( INTC ) and Taiwan Semiconductor Manufacturing ( TSM ) also will likely have objections, Maire says. “We would imagine that they are concerned about their suppliers gaining too much leverage against them and holding too much consolidated power,” he wrote. “Both are probably happier with the status quo.” On the stock market today , Lam and KLA stocks were each rose a fraction, trailing a 1% rise in Applied Materials stock. No. 1 chip-gear maker ASML ( ASML ) stock also rose a fraction Monday.

Apple iPhone, Samsung Galaxy OLED Swap May Juice Applied Materials

Stout competition to take a chunk of Apple ‘s ( AAPL ) iPhone and Samsung’s Galaxy business drove Applied Materials ‘ ( AMAT ) Q2 display orders to grow nearly sixfold, and Applied Materials CFO Robert Halliday doesn’t see that slowing this year. On a year-over-year basis, display orders soared a whopping 483% to $700 million, accounting for 20% of Applied Materials’ record-busting $3.45 billion in Q2 orders. For the year, mobile will push more than 70% of those display orders, Halliday predicts. “The great majority of that is focused on the OLED market this year in terms of the order rate,” he said late Thursday on Applied Material’s fiscal Q2 earnings conference call with analysts. “It’s not a one-quarter event, and we see the concentration in mobile.” In afternoon trading on the stock market today , Applied Materials stock rocketed more than 13%, near 22.50, touching a 14-month high. Chip-gear rivals Lam Research ( LRCX ) and KLA-Tencor ( KLAC ) stocks jumped 4.5% and 2.5%, respectively. ASML ( ASML ), the No. 1 maker of chip manufacturing gear by market cap, was up 2%. Applied Materials’ equipment enables chip manufacturers such as Taiwan Semiconductor Manufacturing ( TSM ) and Intel ( INTC ) to produce chips. Last year, Applied Materials unveiled two systems that enable high-volume production of OLED displays. OLEDs, organic light-emitting diodes, are used to create thin, flexible displays and lighting panels for TVs and mobile. Apple is reportedly switching to OLED iPhone displays and might have tapped Samsung to make them, according to AppleInsider.com. The OLED opportunity is huge, Applied Materials CEO Gary Dickerson said on the call. “New display technology, such as OLED, are enabled by materials innovation,” he said. “This is creating significant new market opportunities for Applied.” At least four investment banks boosted their price targets Friday on Applied Materials stock, with Needham and Credit Suisse analysts noting Applied Materials’ huge opportunity in China, where the company has a 30-year-plus relationship. During Q2 ended May 1, Applied Materials reported $1.97 billion in silicon orders, up 15% year over year. Nand (flash memory) accounted for 49% of those orders, as companies like Micron ( MU ) and Intel ramp their 3D Nand technology. “The almost $1 billion in Nand bookings confirmed Applied Materials’ strong positions around 3D Nand with multiple products,” Needham analyst Y. Edwin Mok wrote in a research report, as he boosted his price target on Applied Materials stock to 26 from 22. Mok rates the stock a buy. Chinese orders hit $903 million, accounting for 26% of the total, as memory customers transition to solid-disc drives (SSD) from hard-disc drives (HDD), Credit Suisse analyst Farhan Ahmad said Friday. Dickerson noted Thursday that the company has doubled its sales in China over the last two years. Chinese customers are talking about spending $20 billion to $30 billion over the next four to five years, Halliday added. Ahmad boosted his price target on Applied Materials stock to 25 from 23 and kept his outperform rating.