Today: After announcing a $4 billion merger, Cypress Semiconductor and Spansion shares leap on Wall Street as analysts praise move. Also: Tesla Motors wins another Consumer Reports award.
The Lead: Wall Street shows support for Cypress-Spansion merger
The $4 billion merger of Cypress Semiconductor and Spansion received a warm welcome Tuesday on Wall Street, sending both Silicon Valley companies’ shares soaring.
Spansion led the SV150 with a gain of 21.9 percent Tuesday, closing at $27.86 and pushing the company’s market capitalization closer to the $1.6 billion at which Cypress’s bid valued the Sunnyvale firm. Cypress — which will retain its name and San Jose headquarters in the “merger of equals” — increased 14.3 percent to $11.92.
Analysts mostly praised the news Tuesday morning, highlighting the complementary nature of the two companies’ flash-memory offerings: Cypress targets more traditional technology uses, while Spansion is more involved in automotive and industrial uses.
“Cypress has increased its future auto exposure, while the combined company more than likely becomes a broader supplier to auto end markets,” Fleitl analyst Jeffrey Schreiner wrote, later noting, “the Spansion acquisition potentially transforms Cypress’s future business model.”
“The merger is clearly putting together two companies that have good product lines and (operating expenditures) synergies,” RBC Capital Markets analyst Doug Freedman added.
Those synergies could mean jobs lost as the two companies remove duplicative functions in their operations: Cypress and Spansion have a combined work force of more than 7,000 employees, with each claiming about 390 in the Bay Area. While executives were vague about layoffs resulting from the combination, analysts suggested the major reductions would be in manufacturing, which would mostly mean overseas jobs.
“The two companies will realize synergies in combining the manufacturing operations … making improvements by combining to be what one would call ‘easy pickings’ or ‘low hanging fruit,’ ” Summit Research analyst Srini Sundararajan wrote.
The combination efforts will be tricky in this rare type of merger however, tech analyst Rob Enderle told the Mercury News in an interview Monday evening.
“Because these are so rare, the skill set needed to pull this off is almost nonexistent inside or outside of the company,” he told the Merc’s Steve Johnson. “To pull this off they are going to need to make a lot of difficult decisions very quickly. And if they were good at this, the need to merge in the first place would likely have been far less.”
SV150 market report: Stocks gain, Tesla praised again by Consumer Reports
Wall Street bounced back Tuesday on the strength of energy companies like San Ramon-based Chevron, and Silicon Valley tech stocks also advanced as Tesla Motors received another commendation from Consumer Reports.
Tesla’s Model S scored a 98 out of 100 on Consumer Reports’ annual owner-satisfaction survey, the top score for the second consecutive year. Consumer Reports has been a big fan of the first all-electric car fully designed and manufactured by the Palo Alto company, giving it their highest review score of all time and putting it atop its 2014 rankings. The organization did ding the Model S for several issues that required replacement parts earlier this year, but those problems didn’t show up in this survey — the score was only 1 point less than the near-perfect rating from last year’s survey. Tesla’s stock didn’t rebound from Monday’s sharp drop following a public flap with BMW, as shares declined 0.1 percent to $231.43.
Apple also failed to bounce back from Monday’s plunge on Wall Street, losing 0.4 percent to $114.63 as the Cupertino company kicked off a trial in an Oakland class-action lawsuit regarding the iPod and iTunes. Twitter dropped 0.3 percent to $38.91 while announcing a new system for reporting abuse on its platform, which received much scrutiny after Robin Williams’ daughter was harassed and Gamergate led to online abuse. eBay added 0.3 percent to $55.02 despite sales growth slowing overall on Cyber Monday; the San Jose company’s soon-to-be-separated PayPal unit got into the Giving Tuesday spirit, promising to add 1 percent to users’ charitable donations. Hewlett-Packard jumped 1 percent to $38.95 while trying a new approach to retain enterprise customers, and GoPro gained 0.5 percent to $73.89 after settling a copyright-infringement lawsuit.
Up: Netflix, Pandora, Gilead, Intel, Yahoo, EA, HP, Cisco
Down: VMware, Workday, SanDisk, Zynga, Juniper, Intuit, LinkedIn
The SV150 index of Silicon Valley’s largest tech companies: Up 5.04, or 0.3 percent, to 1,686.37
The tech-heavy Nasdaq composite index: Up 28.46, or 0.6 percent, to 4,755.81
The blue chip Dow Jones industrial average: Up 102.75, or 0.58 percent, to 17,879.55
And the widely watched Standard & Poor’s 500 index: Up 13.11, or 0.64 percent, to 2,066.55
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