NEW YORK (TheStreet) -- RF Micro Devices (RFMD) was rising more than 15% to $6.75 on Monday morning after the chipmaker announced that it would acquire TriQuint Semiconductor (TQNT) for $1.6 billion in stock in a deal that could better position the new company in selling its chips to mobile device makers.
TriQuint shareholders will receive 1.675 shares of the new merged company for each share they own and RF Micro shareholders will receive one share, the two companies said in a joint statement. The companies expect the all-stock deal to create a company with combined revenue of more than $2 billion, and the two entities anticipate saving at least $150 million in costs from the merger.
RF Micro expects the deal to close in the second half of 2014.
"The world's demand for mobile data is growing exponentially," said RF Micro President and CEO Bob Bruggeworth in the company's statement. "The combination of TriQuint and RFMD creates a new leader in RF solutions with expertise in mobile devices and complex infrastructure and global defense applications. With this merger of equals, we will bring under one roof all of the critical RF building blocks necessary to innovate at the heart of what makes mobile mobile - the crucial back-and-forth data flow between the mobile device and the network. We will harness this innovation for the benefit of all our customers - from mobile to infrastructure to defense."
"We rate RF MICRO DEVICES INC (RFMD) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. 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 and compelling growth in net income. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- RFMD's revenue growth has slightly outpaced the industry average of 5.9%. Since the same quarter one year prior, revenues slightly increased by 6.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- RFMD's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.49, which illustrates the ability to avoid short-term cash problems.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- RF MICRO DEVICES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, RF MICRO DEVICES INC reported poor results of -$0.20 versus $0.00 in the prior year. This year, the market expects an improvement in earnings ($0.42 versus -$0.20).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, RF MICRO DEVICES INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: RFMD Ratings Report