Atheros Buyout Sets Tone for More Tech Deals Ahead (ATHR, QCOM, INTC, TXN, ARMH, BRCM, MRVL)

Yesterday brought on a very unusual volume alert for active traders in shares of Atheros Communications Inc. (NASDAQ: ATHR), which was briefly halted on a circuit breaker spike.  The cause was a report that QUALCOMM Incorporated (NASDAQ: QCOM) was about to announce a deal to acquire Atheros for about $45.00 per share.

This morning came the confirmation.  Qualcomm Incorporated (NASDAQ: QCOM) announced that it and Atheros Communications, Inc. (NASDAQ: ATHR) have entered into a definitive agreement where Atheros will become part of QUALCOMM.

The potential target list is probably a large one.  This deal will likely create a belief that companies like Intel Corporation (NASDAQ: INTC) and Texas Instruments Inc. (NYSE: TXN) will need to go do a deal with a company like ARM Holdings plc (NASDAQ: ARMH); it will also bring a focus on Broadcom Corp. (NASDAQ: BRCM) and Marvell Technology Group Ltd. (NASDAQ: MRVL)as those companies are listed as acquirers in most rumor and trading circles.

QUALCOMM gets to expand into new territory here with this deal.  The CDMA giant is intended to help accelerate its technology and platform expansions to new businesses beyond cellular and to “provide access to significant new growth opportunities.”

The initial talk was close to $45.00 per share, or about $3.1 billion.  It was not originally known if QUALCOMM would dilute with stock to buy Atheros or whether it would tap into its $10 billion cash arsenal.  The terms called for $45.00 per share in cash, in-line with the enterprise value discussed of about $3.1 billion.

Atheros shares rose nearly 20% yesterday alone and its shares had risen almost 40% in the 3-month period before yesterday.

As far as what this adds, Thomson Reuters has estimates as being $922.38 million in revenues for 2010 and $935.08 million in revenues for 2011.  Thomson Reuters expects QUALCOMM to have  $12.77 billion in revenues for fiscal September-2011 and $14 billion for fiscal September-2012.

JON C. OGG