When
Cisco Systems (Nasdaq: CSCO) closes a
$3 billion acquisition, you know it's a big deal. But a
$160 million buyout can be just as big -- when
the buyer is a small cap itself.
That $160 million is how much
Sigma Designs (Nasdaq: SIGM) is paying for
Israeli chip designer CopperGate today. It's a significant
price tag when you consider that Sigma's market cap is only
$360 million today, and a $160 million deal is a huge
commitment for a company that svelte.
The agreement grows in stature when you start thinking
about what Sigma is getting for the price: CopperGate is an
established power in certain kinds of home networking
technologies like the HomePNA standard. CopperGate is setting
HomePNA standards alongside heavyweights like Cisco and
Motorola (NYSE: MOT).
When you combine Sigma's media processors with
CopperGate's networking chutzpah, you get highly capable
networked media platforms that should be able to compete with
the best that
Texas Instruments (NYSE: TXN),
Broadcom (Nasdaq: BRCM), and
Marvell (Nasdaq: MRVL) can produce. It's a
hot market with lots of unrealized potential, and these guys
are ready to
change how we think about home entertainment.
Mr. Market seems a bit queasy about the acquisition --
Sigma shares are down 6% on the day. But
I'm confident this deal will provide Sigma
with enough benefits to justify the dilution and hefty cash
payout. Sigma always seems to be
on the cusp of shooting off into the stratosphere, fueled
by telecoms like
Verizon (NYSE: VZ) and their
IPTVrollouts -- but the pop never comes. CopperGate gives
Sigma a whole new arsenal of tasty technologies that could
become a growth catalyst in a year or two; give these guys a
while to roll their chips together first. But hey, investing
in
Rule Breakerslike Sigma has always called for
a big dollop of patience.
This article was originally published as
How Sigma Plans to Rule Your Couchon
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