NEW YORK (TheStreet) -- Qualcomm (QCOM) - Get Report has agreed to buy CSR (CSRE) for $2.5 billion, offering what it hopes is a knock-out blow to win the British Bluetooth specialist which is growing in areas like automotive and wearable devices, Reuters reports.
Qualcomm, the world's number one mobile chipmaker, has agreed to pay 900 pence a share in cash for CSR, a 56.5% premium on the share price before the start of the offer period in August, according to CSR.
At that time, the British company rebuffed an approach from Microchip Technology (MCHP) - Get Report , saying its undisclosed offer was not enough. The two had remained in talks to reach a deal, with a deadline imposed by U.K. regulators for Wednesday, Reuters said.
There is a chance alternative bidders may emerge, Jeffries analyst Robert Lamb told investors in a research note, although he cautioned that the high multiple relative to recent chip mergers which Qualcomm is paying may prove difficult to trump, Reuters added.
Shares of Qualcom are up 0.67% to $72.34 in pre-market trade, while CSR is surging 28.70% to $53.99.
TheStreet Ratings team rates QUALCOMM INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUALCOMM INC (QCOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in stock price during the past year and growth in earnings per share. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues slightly increased by 9.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- QCOM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 3.36, which clearly demonstrates the ability to cover short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, QUALCOMM INC's return on equity exceeds that of both the industry average and the S&P 500.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- QUALCOMM INC has improved earnings per share by 45.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, QUALCOMM INC increased its bottom line by earning $3.91 versus $3.06 in the prior year. This year, the market expects an improvement in earnings ($5.32 versus $3.91).
- You can view the full analysis from the report here: QCOM Ratings Report