NEW YORK (TheStreet) -- Shares of Entropic Communications (ENTR) were gaining 10.4% to $2.98 Wednesday following news that RF chipmaker MaxLinear (MXL) will acquire the satellite and home networking chipmaker.
MaxLinear will pay $297 million in cash and stock to acquire Entropic. As part of the deal Entropic shareholders will receive $1.20 in cash and 0.22 MaxLinear shares for each share they own.
"We are very excited about the opportunity to bring together two talented and largely complementary teams, as we increase our capabilities to solve the most difficult analog and mixed-signal RF challenges in Broadband markets," MaxLinear CEO Dr. Kishore Seendripu said in a statement.
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The deal is expected to close in the second quarter of 2015.
TheStreet Ratings team rates ENTROPIC COMMUNICATIONS INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate ENTROPIC COMMUNICATIONS INC (ENTR) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 131.6% when compared to the same quarter one year ago, falling from -$11.94 million to -$27.64 million.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ENTROPIC COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.14%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 138.46% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- ENTROPIC COMMUNICATIONS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, ENTROPIC COMMUNICATIONS INC swung to a loss, reporting -$0.73 versus $0.04 in the prior year. This year, the market expects an improvement in earnings (-$0.47 versus -$0.73).
- The revenue fell significantly faster than the industry average of 9.3%. Since the same quarter one year prior, revenues fell by 23.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: ENTR Ratings Report