Ramtron Rejects Cypress Again

Cypress Semiconductor Corporation’s (CY - Analyst Report) revised bid to buy all of Ramtron International Corp.'s (RMTR) outstanding stock was rejected yet again.

This was Cypress’ third attempt in two years to take over its peer Ramtron International. The initial bid of $2.48 per share was raised to $2.68 per share, representing a purchase price of about $95 million. Ramtron declined the revised offer, stating that it was inadequate and not in the best interest of its shareholders.

Ramtron International is a fabless semiconductor company with about 35.0 million shares outstanding. It supplies ferroelectric random access memories and has Texas Instruments Inc. (TXN - Analyst Report) and Toshiba Corp. as manufacturing partners. In the first quarter of 2012, Ramtron reported revenue of $15.0 million with a net profit of $445,000.

We believe the deal could make sense for Cypress for a number of reasons. First, Ramtron is a fabless company and would fit very well into Cypress’ low capex manufacturing strategy. Being a fabless company, Ramtron has the flexibility to move the manufacturing, assembly and testing of products to vendors that offer superior technology and services at competitive prices. It also frees up resources for research and development that would otherwise have been locked up in capital assets.

Second, Ramtron’s ferroelectric-RAM (F-RAM) would supplement Cypress’ Memory Products Division which includes Asynchronous SRAMs, Synchronous SRAMs and nvSRAMs, and provide a longer-term roadmap for its non-volatile memory market. Ramtron’s F-RAM enables fast read-writes with minimum delay, low power consumption, and high endurance with limited memory loss.

The F-RAM is also competitive with newer technologies such as Phase-change-RAM. Ramtron’s Memory Products Division segment generated 44% of revenue in the first quarter and was down 9.1% sequentially due to inventory adjustments and lower demand from major SRAM wireless customers.

If the deal materializes, it would definitely bring synergies on the sales side of Cypress.

Cypress is a semiconductor company offering high-performance, mixed signal, programmable solutions. Though the broader semiconductor industry was hit late last year by a slowdown in demand, Cypress had reported double-digit percentage sales growth backed by strong demand for its touchscreen controllers used in smartphones and tablet computers. Touch sales disappointed in the last quarter, resulting in a quarterly loss of 5 cents per share. Management expects a turnaround in the current quarter.

Cypress operates in a highly competitive market. In the touchscreen market, the company competes with Atmel Corporation (ATML - Analyst Report) and Synaptics (SYNA - Snapshot Report).

Currently, Cypress has a Zacks #3 Rank, implying a short-term Hold recommendation.