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Analysis: TI-National deal a smart use of cash

Posted: 06 Apr 2011 ?? ?Print Version ?Bookmark and Share

Keywords:acquisition? analog? IC? market? semiconductor industry?

Despite the potential hurdles, the acquisition is certain to tip the overall competitive environment heavily in TI's favor while helping boost its analog IC market share past the current 14 percent. TI, in fact, could see its market share expand above the combined 17 percent the two companies currently hold as it leverages an extensive sales network to drive sales of National products.

The 85 percent premium TI is offering for National also indicates the level of confidence TI execs have in the transaction, and their ability to rapidly boost flagging growth rate for National's products. During the conference call, they made it clear that the opportunity to generate higher sales for National products was a key factor. TI, which said it introduces 500 analog parts per year, will automatically gain 12,000 new products in a market where building portfolios "takes a long time," according to Templeton.

"National's growth potential has yet to be met," Templeton said. "We can significantly expand National's sales force and our combined sales force will be 10 times larger than what National currently has."

TI will be taking on debt to finance the transaction, but the company is not expected to have any problems securing the financing. It closed its December 2010 quarter with zero long-term debt, and more than $3 billion in cash and short-term investments. TI also had about $500 million in long-term investments and generates a steady stream of cash from operating activities each quarter. National Semiconductor had about $1 billion in cash and short-term investments at the end of its fiscal quarter ended Feb. 27. This was canceled out by about the same amount in long-term debt.

The higher debt TI will assume as a result of this deal is not a concern to the investment community, however. They will likely be more focused over the next nine months on how quickly TI can get regulatory approval and how soon it can complete the integration of National Semiconductor personnel to realize the promised benefits of the acquisition.

- Bolaji Ojo
??Editor in chief, EBN.com


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