Cypress (CY) Ups the Ante for Uphill; Raises ISSI Offer Price

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Cypress Semiconductor Corporation CY has raised its offer to buy all outstanding stock of Integrated Silicon Solution Inc ISSI for $20.25 per share.

Cypress made an initial offer of $19.75 per share earlier in May, which has now been raised to $20.25. The news came on the heels of the announcement made by Uphill Investment Co. to increase its offer price to $20 from $19.25 for each outstanding share of Integrated Silicon Solution.

California-based Integrated Silicon Solution manufactures integrated circuits for auto, communications, industrial and digital consumer markets. Its products include high speed and low power SRAM, and low and medium density DRAM, NOR flash products and analog and mixed signal integrated circuits. In the second quarter of fiscal 2015, Integrated Silicon Solution reported revenues of $80.1 million with a net profit of $1.1 million.

In our opinion, this is a highlight profitable deal for Cypress for a number of reasons. Firstly, being a fabless company, Integrated Silicon Solution would fit into Cypress’ low capex manufacturing strategy. Also, Integrated Silicon has the flexibility to move the manufacturing, assembly and testing of products to vendors offering superior technology and services at competitive prices. As a result, resources, which would otherwise have been locked up in capital assets, can be channelized toward research and development.

Integrated Silicon’s products would supplement Cypress’ products, especially in the auto market, since both the companies are chipmakers. If the deal materializes, it would definitely bring synergies on the sales side of Cypress by helping it to continue to shift focus to automotive customers. The buyout will further strengthen its leadership position in the semiconductor integrated circuits market and expand its market share.

Cypress is a semiconductor company offering high-performance, mixed signal, programmable solutions. In the first quarter of 2015, Cypress incurred a loss of 53 cents per share, significantly disappointing the Zacks Consensus Estimate of earnings of 1 cent. However, revenues of $209.1 million were up 13.6% sequentially and 22.8% year over year.

Currently, Cypress has a Zacks Rank #3 (Hold). Other stocks worth considering in its sector are Broadcom Corp. BRCM and NeoPhotonics NPTN, both carrying a Zacks Rank #1 (Strong Buy).

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