Telecom & Wireless

5 Potential Takeover Candidates in Telecom and Wireless

One great way for companies to expand growth, earnings and product offerings beyond internal organic expansion is to go the takeover route. While sometimes it can prove to be dilutive, especially if the majority of the deal is done in stock, it can also prove to be accretive by adding earnings immediately. A recent report from RBC spotlighted hundreds of small-cap stocks in multiple sectors that could have a very real chance of being takeover candidates.

We screened the RBC list of takeover candidates for the higher profile and more well-known stocks. These may prove to be solid companies to own, even if they ultimately are not bought or merged. With that in mind, buying any of these companies is for accounts with a very high risk tolerance.

Cirrus Logic Inc. (NASDAQ: CRUS) is a supplier of high-precision analog and digital signal processing components for a variety of audio, energy and industrial applications. The company develops solutions for industry leading global brands. The company reported outstanding earnings and forward estimates that were very impressive. Apple is reported to be its largest customer, accounting for 78% of the revenue in the recent quarter, and some on Wall Street have worried about the concentration of business. Cirrus recently acquired Wolfson Microelectronics, which added some diversification to the revenue stream as Wolfson also supplies to Samsung and other Android phone makers. A mega-cap chip stock like Intel would possibly be a good fit as a buyer.

The Thomson/First Call consensus price target for the stock is $33.75. The stock closed Tuesday at $30.40.

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Finisar Corp. (NASDAQ: FNSR) is a leading provider of optical subsystems and components for telecom and data communication applications. The stock has had a nice run since a monster sell-off last spring almost cut the price in half. The rebound has come as the market starts to appreciate the strong secular demand for optical equipment (driven by the build-out of high-speed LTE networks) coupled with a compelling market share gain story. A large carrier like Verizon may be interested in buying the company to add product and capability.

The consensus price target is posted at $20.35. Shares closed higher than that on Tuesday at $20.84.

JDS Uniphase Corp. (NASDAQ: JDSU) was a pioneer of the optical revolution that began in the 1990s and announced last year a plan to split into two separate companies. One will be an optical and laser company, while the second will be a network and service enablement company. Wall Street analysts feel that this is a very positive catalyst for shareholders. In addition, company management remains very confident about the prospects of the business as the need for bandwidth across the world increases. As a result, the company is seeing strong demand in the Americas for its 100G products and LTE solutions.

The consensus price target is $14.15, and the stock closed Tuesday at $13.51 a share.

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Netgear Inc. (NASDAQ: NTGR) is a global networking company that delivers innovative products to consumers, businesses and service providers. Its products are built on a variety of proven technologies such as wireless, Ethernet and powerline, with a focus on reliability and ease of use. The product line consists of wired and wireless devices that enable networking, broadband access and network connectivity. These products are sold in approximately 45,000 retail locations around the globe, and through approximately 36,000 value-added resellers. The company may be a fit for a carrier or a large networking company, like Cisco, looking to expand product offerings.

The posted consensus price target is $30.50. Netgear closed well above that figure at $32.42 a share.

Verint Systems Inc. (NASDAQ: VRNT) is a leading provider of actionable business and security intelligence solutions. Security has become one of the biggest priorities for corporate America, and the company also stands to benefit from the surge in purchasing going forward. Verint Actionable Intelligence solutions help organizations address three important challenges: customer engagement optimization; security intelligence; and fraud, risk and compliance. It could feasibly be a fit for a large service company like IBM.

The consensus price target is $67.13, and shares of Verint closed Tuesday at $59.20.

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With corporate America flush with cash and highly appreciated stock, and interest rates still hovering near all-time lows, the possibility for more deals is very real. Even if none of these companies are snapped up anytime soon, they all are solid candidates for an aggressive growth portfolio.

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