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Silicon Motion to Boost Earnings on Shannon Systems Buy

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Within two and a half months of the announcement, leading fabless semiconductor company Silicon Motion Technology Corp. (SIMO - Free Report) has completed the acquisition of China-based Shannon Systems. Details of the transaction will be revealed in the company’s upcoming second-quarter fiscal results.

For full-year 2015, Silicon Motion expects that Shannon Systems will generate total revenue in a range of $14–$18 million. Encouragingly, this, in turn, will likely augment the company’s non-GAAP earnings per share in the second half of 2015. Once the acquisition is completed, co-founder and CEO of Shannon Systems, Dr. Xueshi Yang, will join Silicon Motion’s SSD business unit as head of the executive team. 

This acquisition holds paramount importance for Silicon Motion’s market position in the emerging Chinese markets. This is because Shannon Systems’ leading position in SSD controllers and high-performance solutions in China’s Internet and other industries is extremely lucrative. Moreover, burgeoning corporate and internet infrastructure of China carries tremendous potential for Silicon Motion, going forward.

Four of the top five PC Original Equipment Manufacturers are currently using Silicon Motions’ SSD controllers, making it the second largest merchant supplier of SSD controllers. The general upswing of the demand for SSD is phenomenal, and is expected to continue in the future as well. We believe Silicon Motion’s decision to acquire Shannon Systems will help it further revitalize its SSD portfolio, thus acting as a major catalyst for supplementing top-line growth, going forward. 

Silicon Motion currently carries a Zacks Rank #3 (Hold). Better-ranked stocks include Ambarella, Inc. (AMBA - Free Report) , Integrated Device Technology, Inc. (IDTI - Free Report) and Cavium, Inc. . All three stocks hold a Zacks Rank #1 (Strong Buy).

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