The Spansion (CODE) and Cypress Semiconductor merger synergies offer substantial further upside, Barclays said.
Analysts see $135 million in synergies expected by both companies, along with opportunity for further savings, namely in fabrication consolidation and sales.
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"Net, net, we believe there is substantial conservatism built into the expected synergies and see the 50% GM/20% OpM target as just a stopping point along the way to improved profitability," analysts said.
Barclays believes there are sizable revenue and cross selling synergies between the two companies that many may not fully appreciate, such as CODE's strong customer base in Japan and the ability to offer customers a full suite of MCU products.
Additionally, Barclays raised its price target on Spansion today to $40 from $30, citing similar synergy benefits.
Shares of Spansion are down 1.76% to $34 in pre-market trading.
Separately, TheStreet Ratings team rates CYPRESS SEMICONDUCTOR CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate CYPRESS SEMICONDUCTOR CORP (CY) 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 solid stock price performance, compelling growth in net income and growth in earnings per share. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."