Saturday, May 3, 2008
Over the last few weeks, I have been writing about SiRF. I am amply clear that a merger or acquisition would be the best end-game for the company today. The earnings conference call did not offer any immediate solace to SiRF investors though the company executives promised a turn of fortunes by the end of this year. In this article, I will conclude this series with a valuation of the GPS leader. I have carried this valuation primarily from an acquisition stand-point. To appreciate the perspectives offered in this piece, I recommend catching up on your reading here, here and here.
My most optimistic valuation of SiRF is at $11.70 per share. In estimating the company’s value, I assumed that the company’s management can carry its restructuring exercise well enough to bring its operating expenses back on track and close to 35% of the revenue. Despite my skepticism, I have also assumed liberal market shares in the various segments.
SiRF’s woes primarily are due to its inability to counter the new wave of
Secondly, the driver behind the mass adoption of GPS in mobile handsets is the reduction in ASP. Its high-performance receivers notwithstanding, SiRF runs the risk of being marginalized as more and more mobile chipset providers bundle and aggressively price GPS solutions with their products.
Thirdly, even in segments where it has a dominant presence today, SiRF will find tough
In summary, I don’t see the company getting anywhere close to its glory days again. The 52-week high of $30.61 is but a dream. I have been maintaining so far that its current range for SiRF’s share price is too low. Perhaps, not any more! If SiRF continues to incur heavy expenses and fails to retain its mobile market share, I would value it close to $6. So, the market is justified in its caution.
$11.70 would be my price for an acquisition. If the company decides to stay by itself, the realization of this value will solely depend on efficient expense management and the ability of SiRF to efficiently retain good market share levels.
[I picked up the company’s shares close to its bottom. I will monitor its movement and offload it at around $10-$11 without blinking an eye. But that is just me!]