Summit Research Partners commented on the Cypress Semiconductor Corporation CY and Spansion Inc. CODE merger Tuesday saying that the deal represents a "sum greater than its parts."
Analyst Srini Sundararajan noted that “In a Silicon Valley match made in heaven, CY and CODE are planning to get hitched...The post-merger Newco should have a strong position with ~$2B in annual sales combining the following products:
i. Micro-controllers: Embedded MCUs with Spansion's MCU, Cypress's PSoC
Memory: embedded memory with Spansion's NOR Flash and SLC NAND and Cypress's SRAM, nvRAM.”
Sundararajan thought “that the deal will be accretive in 2015 and with continued realization of synergies, the combined companies will likely have slight over $1 in non-GAAP EPS for C2016.”
“The two companies will realize synergies in combining the manufacturing operations as the utilization level at both companies' fabs are about 60 percent - making improvements by combining to be what one would call ‘easy pickings’ or ‘low hanging fruit,’” according to the analyst note.
Sundararajan concluded, “We anticipate almost no regulatory issues in U.S., Germany and China as there are really "minimal to no" product overlaps. In addition, competitors exist for most of the products of the combined entity.”
Shares of both companies have rocketed upwards since the announcement. Cypress Semiconductor recently traded at $12.12, up 16.24 percent and Spansion shares were up 23.50 percent Tuesday to $28.25.
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