Back to top

Image: Bigstock

Microchip's Tekron Buyout to Boost Timing Systems Portfolio

Read MoreHide Full Article

Microchip Technology (MCHP - Free Report) recently announced the acquisition of Tekron International Limited to augment its offerings under the Frequency and Timing Systems business division. The terms of the deal have not been disclosed yet by either of the companies.

New Zealand-based Tekron was established in 2002 and is headquartered in Wellington. The company is a well-known name in manufacturing of clock and timing solutions including the Rubidium Atomic Clocks and high-precision GPS and GLONASS Satellite Clocks. The company’s solutions are utilized by various industries including power utilities, spacecraft development, sports television, and data centres across 90 countries.

Tekron has the distinction of solving the precision time stamping issue for advanced substation automation applications. It also achieved the implementation of IEEE 1888V2 Precision Time Protocol (PTP) standards to update the traditional power grid as revealed by the press release.

Microchip expects the Tekron acquisition to enable it to expand in fast-growing smart energy and industrial markets. This, in turn, will drive the company’s top line in the days ahead and instill investors’ confidence in the stock.

Growth in Clock and Timing Solutions Bode Well

The demand for precise time keeping devices and MEMS-based oscillators has soared as the world becomes digitized. Per a Research and Markets report, the global timing device market is expected to grow at a CAGR of 6.84% between 2019 and 2025.

The report further adds that that the demand for timing devices is being driven by innovative technologies like automated cars (navigation and infotainment) along with rapid proliferation in sectors like power (smart grid technology), healthcare and telecom and communications (5G deployment) verticals.

Timing devices are indispensable for electronic equipment as these devices enable transmission of data at the right time and facilitate uninterrupted synchronisation of signals to ensure proper running of electronic equipment.

Given the revenue growth opportunities, Microchip is expanding its timing solutions portfolio. The company has a wide-ranging portfolio of clock and timing solutions that include clock generators, oscillators, buffers, jitter attenuators, atomic clocks and network synchronisation portfolio for Synchronous Ethernet (SyncE) and IEEE 1588-based applications.

The acquisition of Microsemi in 2018 also expanded Microchip’s timing product portfolio including active hydrogen maser clock, GPS disciplined oscillators and Precision Crystal and SAW oscillators.  Apart from a robust portfolio, the acquisition also expanded Microchip’s total addressable markets. Strong demand for Microsemi’s solutions in Data Center, Communications, Defense & Aerospace markets bodes well for Microchip in the long haul.

Microchip continues to capitalize on enhancing its solutions’ suite and improving capacity constraints along with design wins. This enables it to have a competitive edge in the semiconductor industry.

However, macroeconomic weakness due to the coronavirus crisis led to slowdown in spending across key verticals like automotive and industrial. This could dampen prospects for its offerings at least in the near term.

Zacks Rank & Stocks to Consider

Currently, Microchip carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader technology sector are Garmin (GRMN - Free Report) , Zoom Video Communications (ZM - Free Report) and Jabil (JBL - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Garmin, Zoom Video and Jabil is currently pegged at 6.8%, 25% and 12%, respectively.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Published in