(CY) Cypress Semiconductor Revises Ramtron Proposal

Cypress Semiconductor Corporation (CY) has raised its all-cash bid to buy all of Ramtron International Corp.'s (RMTR) outstanding stock for $2.68 per share, a 48% premium to Ramtron's closing price of $1.81 on June 11. This new offer would represent a purchase price of about $95 million.

Ramtron International is a fabless semiconductor company with about 35.0 million shares outstanding. It supplies ferroelectric random access memories and has Texas Instruments Inc. (TXN) and Toshiba Corp. as manufacturing partners. In the first quarter of 2012, Ramtron reported revenue of $15.0 million with a net profit of $445,000.

This is Cypress’ third attempt in two years to take over its peer Ramtron International. Earlier this month, Cypress offered about $87.6 million or $2.48 per share for the purchase, which was Ramtron turned down because it wanted to explore more options, including a sale. Since then, Ramtron's stock has jumped more than 50%. (Ramtron had rejected Cypress’s March 2011 offer of $3.01 per share).

We believe the deal could make sense for Cypress for a number of reasons. First, Ramtron is a fabless company and would fit very well into Cypress’ low capex manufacturing strategy. Being a fabless company, Ramtron has the flexibility to move the manufacturing, assembly and testing of products to vendors that offer superior technology and services at competitive prices. It also frees up resources for R&D activity that would otherwise have been locked up in capital assets.

Second, Ramtron’s ferroelectric-RAM (F-RAM) would supplement Cypress’ Memory Products Division which includes Asynchronous SRAMs, Synchronous SRAMs and nvSRAMs, and provide a longer-term roadmap for its non-volatile memory market. Ramtron’s F-RAM enables fast read-writes with very little delay, low power consumption, and high endurance with limited memory loss.


F-RAM is also competitive with some of the newer technologies such as Phase-change-RAM. The Memory Products Division segment generated 44% of revenue in the first quarter and was down 9.1% sequentially due to inventory adjustments and lower demand from major SRAM wireless customers.

The impact of the deal on Cypress’ financials is unknown but will definitely bring synergies on the sales side.

Cypress is a semiconductor company offering high-performance, mixed signal, programmable solutions. Though the broader semiconductor industry was hit late last year by a slowdown in demand, Cypress had reported double-digit percentage sales growth bolstered by strong demand for its touchscreen controllers used in smartphones and tablet computers. Touch sales disappointed in the last quarter, resulting in a quarterly loss of 5 cents per share. Management expects a rebound in the current quarter.

Cypress operates in a highly competitive market. In the touchscreen market, the company competes with Atmel Corporation (ATML) and Synaptics (SYNA).

Currently, Cypress has a Zacks #3 Rank, implying a short-term Hold recommendation.

ATMEL CORP (ATML): Free Stock Analysis Report

CYPRESS SEMICON (CY): Free Stock Analysis Report

RAMTRON INTL CP (RMTR): Free Stock Analysis Report

SYNAPTICS INC (SYNA): Free Stock Analysis Report

TEXAS INSTRS (TXN): Free Stock Analysis Report


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