Blockbuster acquisitions by Qualcomm (QCOM) , Broadcom (AVGO) , SoftBank (SFTBF) and Analog Devices (ADI) reshaped the semiconductor industry in 2016 and sure, acquirers will have plenty to digest in 2017.
But despite a narrowing field of chip companies and higher interest rates likely to limit the number of potential deals, there are still a number of targets.
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Maxim Integrated Products (MXIM) , Semtech (SMTC) , Power Integrations (POWI) , Cypress Semiconductor (CY) , Silicon Laboratories (SLAB) and Cavium (CAVM) fit a financial profile that could make them attractive takeout candidates, RBC analyst Amit Daryanani wrote in a Thursday report.
The companies have roughly 60% in gross margins and operating expenses that account for 30% of sales, which Daryani suggested is an appealing combination. The businesses are profitable enough that a large buyer would not have to worry about diluting its margins. Plus, operating costs are high enough that an acquirer could cut them and make the margins even better.
Maxim, which develops circuits for cars, industrial uses, health care, mobile devices and other applications, has projected 2016 gross margins of 63.4%, according to RBC. SemTech, which develops semiconductor products that wind up in smart phones, medical devices, data centers and other applications, has 60.3% gross margins. Both are in line with Texas Instruments' (TXN) 61.4% gross margins.