Analog Devices (ADI) is eyeing Maxim to strengthen its chip portfolio

Analog devices ADI plans to acquire its competitor, namely Maxim Integrated Products MXIM, to strengthen its presence in the chip industry. Reports indicate that talks between the companies are at an advanced level.

We believe that if the transaction takes place, it will be a win-win situation for both companies.

Analog Devices is in negotiations to acquire Maxim for more than $17 billion, which is more than Maxim’s market capitalization, which is currently $17.1 billion.

Moreover, Maxim shareholders will likely receive shares of Analog Devices instead of cash.

Meanwhile, Maxim, an original equipment manufacturer (OEM) of analog and mixed-signal semiconductor integrated circuits, will complement and expand the Analog Devices chip portfolio if the transaction closes.

We believe that the acquisition of Maxim will help Analog Devices create tremendous value for its customers in the coming days. This, in turn, will continue to impact shareholders.

In terms of price performance, Analog Devices has seen a year-to-date return of 4.8%, outperforming the industry’s gain of 3.2%.

Analog devices are gaining

The acquisition of Maxim is expected to fuel Analog Devices’ growth in several emerging markets.

Moreover, the transaction will expand the company’s overall address offering, enabling it to meet the enormous demand in some promising markets, including industrial, automotive and telecommunications.

In particular, Analog Devices’ solution is likely to gain wide traction in autonomous vehicles, 5G and several other applications thanks to Maxim’s robust portfolio of chips that can be used in communications, healthcare vehicles, manufacturing, energy and connected devices.

Additionally, the highlighted acquisition is expected to impact the company’s earnings in the coming quarters.

Analog Devices, Inc. Revenue (TTM)

Analog Devices, Inc. revenue-ttm | Analog Devices, Inc. offer

Summary

Analog Devices’ latest move is in sync with its determined efforts to strengthen its presence in the semiconductor industry, which underpins several other industries and sectors.

Due to the coronavirus pandemic, global semiconductor sales are expected to increase by 3.3% in 2020 and 6.2% in 2021, according to the Semiconductor Industry Association.

We believe that the company’s acquisition strategy and strong focus on developing new technologies to strengthen its portfolio of sensors, data converters, amplifiers and other signal processing products will continue to shape the company’s growth trajectory and maintain momentum in the semiconductor industry.

Zacks Rank and Stocks to Consider

Analog Devices is currently sporting a Zacks Rank #3 (Hold).

Better-positioned stocks in the broader technology sector include Semtech Corporation SMTC and NXP Semiconductors NV NXPI, both carrying a Zacks Rank of #2 (Buy). You can see see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Semtech and NXP Semiconductors’ long-term earnings growth rates are currently pegged at 12.5% and 10%, respectively.

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