NY Post : Chinese buyers poised to nab computer chip giant Fairchild


Chinese buyers poised to nab computer chip giant Fairchild

The Chinese are poised to be the new owners of one of Silicon Valley’s oldest and most storied tech firms, The Post has learned.

San Jose, Calif.-based Fairchild Semiconductor is expected to accept a $2.5 billion buyout offer from China Resources Microelectronics and Hua Capital Management, even as US regulators signal growing wariness of foreign buyers, sources said.

Last month, Fairchild revealed it had received an unsolicited $21.70 per-share proposal from the Chinese firms, after agreeing in November to be acquired by rival chipmaker ON Semiconductor for $20 per share, or about $2.4 billion. ON could still try to make a counter bid, sources said.

Fairchild’s board is backing the Chinese takeover despite greater scrutiny from US regulators concerned about cyber spying and other threats to national security.

The US Committee on Foreign Investment (CFIUS) will have to sign off the on the deal. That review is expected to take about four months.

Last month, CFIUS stopped Dutch giant Philips from selling a majority stake in its California-based LED business to a group of investors that included Chinese firms, citing vague “national security” concerns.

But Fairchild believes its deal involves less sensitive areas of technology and could pass the security screening, sources said.

The company, which was a pioneer in semiconductors when it started in 1957, mostly makes components that are used in smartphones, cars and appliances, among other products.

“The US government is comfortable with the Chinese acquiring basic technology, low-margin businesses,” one source said.

By comparison, Philips’ LED business develops technology for military applications.

Fairchild declined to comment.

The Chinese group wants to get the deal signed this week before the Chinese New Year holiday begins, sources said.

In general, Chinese investors are looking to park their money in foreign assets as that country’s stock market falters, hit by concerns about slowing economic growth.

Fairchild shares were little changed at $20.44 in afternoon trading on Tuesday.

>>> Smartwatch sales may double by ’17 – Gartner

Smartwatch sales are expected to soar in coming years, potentially good news for Apple, which is facing slowing demand for its blockbuster iPhone smartphone.

Sales of smartwatches are projected to rise 66 per cent from 30.32m units in 2015 to 50.4m units this year generating some $11.5bn in revenues for a range of global companies. That figure is expected to double from 2015 levels to 66.71m units in 2017, with smartwatch adoption rising “largely due to Apple popularising wearables as a lifestyle trend,” according to Angela McIntyre, research director at Gartner.

The Apple watch, which was introduced only last year, had record sales in the holiday quarter as the company expanded distribution. Some analysts have said the company could unveil the second-generation of the Apple watch at its March event.

Daniel Ives, an analyst at FBR & Co said that the Apple watch could represent a “pivotal opportunity to diversify beyond core devices” and that “the wearables category potentially has a silver bullet product that can start to move consumers towards this new avenue of technology growth and drive adoption of the Apple watch”.

Research from Gartner also offered some hope for wearable cameramaker GoPro — which having misjudged the market with its Hero4 Session camera warned that sales in the fourth quarter would disappoint analysts and that it was axing 7 per cent of its staff.

While GoPro faces increasing competition, the company could stand to benefit from sales of bodyworn cameras that are expected to climb from 50,000 units last year to 1.05m units in 2017, according to Gartner.

Gartner expects wearable device sales to rise 18.4 per cent year-on-year to 274.6m units in 2016 with revenues of $28.7bn.

>>> Fed's George (2016 FOMC voter, hawk): Fed should continue its gradual pace o

Fed's George (2016 FOMC voter, hawk): Fed should continue its gradual pace of rate increases; recent volatility is not necessarily worrisome and not unexpected 
- y/y core inflation figures have risen recently
- inflation is consistent with price stability even below the 2% target level
- decision to raise rates in December was late assuming taking a path of gradual rises
- employment situation improvement expected to slow from what was seen recently 
- are observing how the energy sector jobs will impact the economy

>>> Ansaldo STS bidder Hitachi comments on Elliott statement

Ansaldo STS bidder Hitachi comments on Elliott statement

In relation to the press release issued on the date hereof by Elliott, with reference to the mandatory tender offer launched, pursuant to articles 102 and 106, paragraph 1-bis, of the Legislative Decree no. 58 of 24 February 1998, as subsequently amended and supplemented, by the offeror, Hitachi Rail Italy Investments S.r.l., on all of the ordinary shares of Ansaldo STS S.p.A., please note the following.

The press release issued by Elliott, thus representing a dangerous source of disinformation for the shareholders of Ansaldo STS and risking to mislead the same shareholders in relation to certain essential features of the offer.

In particular, the statement that the price offered “considerably undervalues the Company” does not reflect in any way the objective evaluations already disclosed to the public by Hitachi and Ansaldo STS, with the modalities provided by the applicable law provisions.

Moreover, such merely subjective judgments are rendered by Elliott while a proceeding is pending before Consob, as the authority legally responsible for evaluating the adequacy of the consideration of the offer, of which the public has already been duly informed in the manner prescribed by the applicable Italian law provisions (including the express indication in the offer document relative to the MTO in object).

Just as serious is the fact that the press release issued by Elliott includes vague, generic and debatable statements in regards to the future trends and the expected synergies in relation to a company whose shares are listed on a regulated market.

In the Offeror’s opinion, the press release issued by Elliott spreads to the public, at such a sensitive stage for Ansaldo STS, merely subjective judgments, accompanied by approximate and incomplete arguments and may therefore constitute a violation of the transparency rules provided by the Consob Regulation no. 11971/99 in relation to all of the declarations released during a tender offer. Therefore, the offeror will formally request Consob to ascertain the existence of such violation

>>> Cisco to remain active buyer as technology sector continues to transform, ex

Cisco to remain active buyer as technology sector continues to transform, exec says
* M&A is vehicle for growth, not consolidation
* To ‘move decisively’ in wake of Dell-EMC deal
* Cloudera, FireEye, Fortscale, Nutanix among potential targets

Cisco Systems (NASDAQ:CSCO) will remain an active acquirer in 2016 with an eye on security, big data, cloud, data centers and Internet of Things (IoT), said Rob Salvagno, head of corporate development.

The San Jose, California-based company projects it will maintain a similar acquisition pace as last year, when it agreed to buy 11 businesses – nine of which were software companies, three with security offerings and eight with solutions that enable customers to transition into hybrid cloud, said Salvagno.

Addressing the hybrid-cloud opportunity remains an overarching motivator for Cisco, he said, and will lead to areas within the data center where the company has core assets -- like networking and unified computing system platforms -- and extend to the public cloud and the software assets that enable it.

Cisco will train its sights mostly on companies valued anywhere between USD 10m and around USD 200m, he said. Those targets typically have between 10 and 200 employees.

While most of its acquisition strategy will be to obtain talent and technology, there is a strong probability that Cisco could execute “a platform deal” valued between USD 1bn to USD 3bn, Salvagno said. Cisco historically has made one such purchase each year, he said, citing its USD 2.7bn purchase of cyber security firm Sourcefire in 2013 and cloud-based network company Meraki for USD 1.2bn in 2012.

But do not expect the networking equipment juggernaut to make any buys much bigger than those.

“We continue to believe that mega acquisitions don’t work," Salvagno said. "We think they have a low probability for success and we don’t see them as part of our strategy going forward.”

Blockbuster deals ‘a distraction’

One banner headline Cisco took notice of is Dell’s proposal to buy EMC (NYSE:EMC) for USD 67bn. EMC, a longtime partner of Cisco, is expected to help transform Dell into a full-fledged technology company.

The deal, which is on track to close in 1H16, gives Cisco the ability to “move decisively” around other market opportunities, Salvagno said. The Dell-EMC merger could become a distraction that prevents those companies from aggressively pursuing talent and technology targets that interest Cisco, he added.

Cisco prefers to partner with technology heavyweights rather than try to buy them, Salvagno said. That strategy was on full display in the second half of 2015 when Cisco partnered with Apple (NASDAQ:AAPL) and then Ericsson (NASDAQ:ERIC) to collaborate on the creation of products, services and sales.

While partnerships will continue to serve as a key pillar of Cisco’s innovation strategy, Salvagno said the company also will invest in emerging technologies and survey the global landscape for small- and medium-sized targets that can accelerate the migration of information technology to the cloud.

The current down market could create buying opportunities in the private market, said a venture capitalist familiar with Cisco. Hyper-converged infrastructure player Nutanix could become a target, he said. Nutanix filed paperwork in late December to lay the groundwork for an initial public offering, but the company has seemingly halted those plans as it waits for the volatile public markets to settle.

Public companies could come into play

M&A can indeed become a more viable exit for private companies when the public markets no longer look attractive, Salvagno said. Conversely, public companies that feel they are undervalued could become more receptive to a strategic player like Cisco coming in and offering a better price, he said.

While Cisco has made moves in recent years to diversify beyond its hardware, it still has yet to figure out if it wants to be a subscription software company, according to the venture capitalist. If the firm really wanted to make a big splash in the market, it could look at buying a big data company like Cloudera, he said. Although Cloudera is valued at around USD 5bn, Cisco is one of the few strategic players that could afford such a move. Also, since many large enterprises still run their big data and analytics on premise, Cloudera could help Cisco continue to sell its expensive hardware, he said.

Big data and analytics are emerging businesses and top priorities within Cisco, said Salvagno, noting that Cisco has invested in four companies in that space over the last few years, including Cloudera and MapR. Cisco sees big data as a primary use case for its multibillion-dollar unified computing system business, he said. Big data is a market undergoing a lot of change and it will continue to shape the future of the different markets that Cisco participates in across the technology spectrum, Salvagno added.

Security, meanwhile, is representative of a market where the pace of change is moving much faster than any other area of technology, he said. With the number of threats so diverse and constantly evolving, Salvagno said Cisco will supplement its partnerships and internal build out of security offerings with M&A.

Security information management (SIM) and analytics security are both areas of interest, he noted.

Privately backed Fortscale could be a viable target on the security analytics front, while Exabeam and E8 Security could interest Cisco on the SIM side, the venture capitalist said. A company like Denver-based ProtectWise might interest Cisco for networking security, he said. Cisco also could look at a public company like FireEye (NASDAQ: FEYE), which has lost more than 70% from its 52-week high of USD 55.33 in June, the VC said. The deal would represent a good value — FireEye’s market cap sits at USD 2.30bn — and help Cisco in its efforts to disrupt Palo Alto Networks (NYSE: PANW), he said.

A broad innovation strategy

Cisco’s broad innovation strategy includes a USD 2bn portfolio containing 100 private investments, Salvagno said. The company makes investments in early stage companies that give it a lens into emerging technologies and important regions. As disruptive technology businesses begin to mature and the markets they are in become attractive, Cisco grows more interested in bidding for them, he said. Rather than viewing itself as a consolidator, Cisco looks at M&A as a vehicle for growth, Salvagno said.

Salvagno, who has been with the company for 16 years, oversees 45 people around the world. About two-thirds of them are in Northern California and the rest are in China, Europe, India, Israel and, more recently, Australia, where there has been an uptick in innovation, according to Salvagno.

The corporate development team has the ability to execute all types of transactions, whether it is a USD 1m investment, a multi-billion-dollar acquisition or a cross-border joint venture, Salvagno said. Cisco does engage with investment bankers on a select basis, primarily for third-party valuations, he said.

Since its founding in 1984, Cisco has made more than 180 acquisitions.