Next! Who’s next here?

by Jeff Dorsch, December 13th, 2006, 7:00 am

2006 brought a crop of mega-mergers, spin-offs, and buyouts in the semiconductor industry. The popular parlor game now is: Which is the next company to be acquired?

The year has seen Bain Capital’s $3 billion buyout of Sensata Technologies from Texas Instruments, Infineon Technologies’ spin-off of Qimonda through a $628 million IPO, Philips’ sale of its semiconductor division (now NXP) to a private equity consortium for $9B+, AMD’s $5.4 billion acquisition of ATI Technologies, and the $17.6 billion buyout of Freescale Semiconductor. More recently, Advanced Semiconductor Engineering (ASE) is considering a private equity consortium bid of $5.5 billion and LSI Logic is ponying up stock worth $3.5 billion (check that market price!) for Agere Systems. And there’s talk that Intel and STMicroelectronics will each sell their flash memory businesses to private equity firms for about $3 billion.

There’s been a lot of conjecture among industry and stock analysts about which semiconductor companies are attractive acquisition candidates, especially to the private equity crowd, which is newly enamored of the industry’s prospects and looking for companies with positive cash flow and plenty of cash on hand.

Some are whispering about Marvell Technology Group and SanDisk. Both of those companies have been on the acquiring end of buyouts this year. Marvell spent $600 million in cash to buy Intel’s processor business for mobile electronic devices. SanDisk dealt out $1.5 billion in stock to acquire msystems, a competitor in flash memory products. It made that move just after Micron Technology picked up another player in the flash field, Lexar Media, for $850 million in stock.

Some chip companies are beating the private equity investors at their own game. NVIDIA, the graphics processor supplier, is acquiring PortalPlayer for $357 million in cash. Since PortalPlayer, which supplies chips for various iPod models and other electronic devices, has nearly $200 million in cash on its balance sheet, that deal is a steal.