UPDATE: DA Davidson Downgrades Cadence Design Systems to Neutral; Acquisition Displaces Dividend

DA Davidson downgraded Cadence Design Systems

from Buy to Neutral and lowered the price target from $17.00 to $15.00. DA Davidson noted, "CDNS has entered a definitive agreement to acquire Tensilica, a leading provider of dataplane processing IP, for $350 million, net of $30 million cash. … CDNS has ~$830 million in cash (net cash of $380 million) with roughly 50% held onshore. Last year the company posted an impressive $316 million in operating cash flow; the acquisition price substantially exceeds this level and will leave CDNS in a neutral net cash position. More importantly, this diminishes the likelihood of CDNS initiating a dividend or meaningful stock repurchase program this year (could buy 9% of outstanding), thus removing a potential stock catalyst." Cadence Design Systems closed at $14.58 on Monday.