Synaptics Jumps After Acquiring Provider of Chips to Apple

NEW YORK (TheStreet) -- Shares of Synaptics (SYNA) are jumping after the company confirmed last night that it had agreed to buy Renesas SP Drivers. Synaptics develops gesture and touch sensing technologies for smartphones. Renesas SP Drivers supplies display driver chips for Apple's (AAPL) iPhone. 


WHAT'S NEW: Synaptics announced that it would buy the outstanding shares of Renesas SP Drivers for $475M. Synaptics said the deal would increase its potential market by 1.5x and advance its touch and display driver integration initiative. Renesas SP Drivers generated about $650M in revenue in the year ending in March, Synaptics reported. Synaptics last night also raised its fourth quarter revenue guidance to $300M-$310M from $275M-$295M.

ANALYST REACTION: In a note to investors earlier today, Craig-Hallum analyst Anthony Stoss wrote that the deal is positive for Synaptics, as the transaction will help the company rapidly scale and accelerate the deployment of its fully integrated touch display driver solutions. The deal will also help Synaptics expand its potential market, according to Stoss, who raised his price target on the shares to $90 from $80 and reiterated a Buy rating on the stock. Meanwhile, John Vinh, an analyst at research firm Pacific Crest, called the acquisition "a game changer" for Synaptics in a note to investors earlier today. By integrating display drivers into its touch controller, Synaptics can position itself for additional sales to Apple and other companies, Vinh believes. The analyst raised his price target on Synaptics to $110 from $80 and kept an Outperform rating on the stock.

WHAT'S NOTABLE: Reuters reported on May 27, citing sources, that Japan's Renesas planned to sell its 55% stake in the unit, which the news service said is the sole supplier of display driver chips for the iPhone, to Synaptics. Apple had also been in talks about a possible purchase of the unit, but the sources said those talks failed to progress, according to Reuters.

PRICE ACTION: In late morning trading, Synaptics jumped $14.64, or 22%, to $81.14.

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