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Sunday, 03/02/2014 1:44:26 PM

Sunday, March 02, 2014 1:44:26 PM

Post# of 985
Good Time To Get Into Triquint And RF Micro

http://www.forbes.com/sites/nigamarora/2014/02/28/good-time-to-get-into-triquint-and-rf-micro/?partner=yahootix

There are pros and cons of investing in Samsung or Apple, but there is no need to choose between the two. A major new opportunity has emerged in a yet to be born powerhouse that supplies important components to both Apple and Samsung.

NewCo is the tentative name given by RF Micro Devices (RFMD) and TriQuint Semiconductor (TQNT) to their merged entity that will be a radio frequency solutions powerhouse in the second half of 2014. Today’s mobile devices would have not been possible without the kind of RF components that these two companies make.

NewCo is the result of a merger of equals between two formidable radio frequency companies RF Micro Devices and TriQuint. RF Micro shareholders will receive one share of NewCo and TriQuint shareholders will receive 1.675 shares of NewCo. The merger is designed to be a tax free transaction. At the close of the merger, NewCo will do a one-for-four reverse stock split.

NewCo will be able to supply end-to-end solutions to both Apple and Samsung as well as other mobile device manufacturers. To some degree, products of the two companies are complimentary. RF Micro is big in power amplifiers and front-end modules. TriQuint is big in RF filters including bulk acoustic wave, surface acoustic wave and temperature compensated surface acoustic wave filters.

NewCo will also have a substantial business in building wireless infrastructure, defense, and aerospace; an advantage of these sectors is not only diversification but higher gross margins compared to the mobile device segment.

The synergies will save $75 million in costs in the first year and a total of $150 million in the second year. More important than cost savings is that the scale will give NewCo a better opportunity to compete for Apple and Samsung business vs. its competitors.


NewCo has the potential to earn about $1 per share. As of this writing, RF Micro is trading at $7.06. Based on my model, this is only a P/E of about 7 (based on 2017 earnings). If you think Apple is inexpensive, NewCo is dirt cheap.

"Then there was a woman, a lion of a woman."

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