Samsung, one of the largest companies in South Korea, says it may want to buy US flash chip company Sandisk (SNDK). The US firm’s stock has dropped from a 52-week high of $56.46 to under $14. If flash memory prices stop falling soon, the acquisition would be a great deal.
What appears to be happening now is that foreign money is turning from buying distressed US financial assets and moved its interests to tech. It could be persuasively argued that there is less risk in own American companies with hard assets and fixed customer bases than banks which could still face billion of dollars of write-offs. The great pools of capital sitting outside the US may be realigning their intentions.
It would be an understatement to say that a large number of US hardware and software operations are "on sale." Baidu (BIDU), a relative small internet company in China, has a market cap about half that of much largest online operation Yahoo! (YHOO). And, Baidu’s shares trade near a 52-week low.
The value proposition becomes more pronounced with companies like Motorola (MOT). Its market cap is $20 billion and its handset division, which is shrinking, is worth much less than that. Samsung has 14% of the global market share in the cellphone business. Motorola has 13%. That piece of the worldwide market in on sale for next to nothing.
A look across the tech landscape in the US shows the detritus of over-leverage companies which pushed expansion into a slowing economy or ones that made bad M&A decisions. Corporations including AMD (AMD) and Sprint (S) sell for a tiny fraction of what they were worth two or three years ago.
Foreign money may be slow getting into the American tech industry, but it is likely to find bargains at the bottom of the pile.
Douglas A. McIntyre
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