Cypress Semiconductor (CY) Deca Spinout in '18 Likely - Wedbush

Wedbush analyst, Betsy Van Hees, hosted a management access call with Cypress Semi (NASDAQ: CY) CFO, Thad Trent and EVP of Data Communications Division (DCD) Badri Kothandaraman.

CY is moving in the right direction, particularly with the pending acquisition of Broadcom's (AVGO) assets in Wi-Fi, Bluetooth/BLE, and ZigBee driving diversification beyond memory. The company has the right go-to-market strategy to drive better than 17% Y/Y revenue growth and likely improve upon the 50% GM as it targets the consumer, industrial and automotive IoT segments with the assets it is acquiring from AVGO. CY reiterated that it expects the transaction to be accretive to EPS in Q1:17, $7MM of synergies, and will close in early Q3.

ASE licensing Deca's M-Series Fan-out Wafer-Level Packaging (FOWLP) validates Deca’s technology and provides a second source to help drive the adoption. CY believes Deca could be profitable in late 2017/early 2018 and a spinoff in late 2018 depending on the ramp with the $60MM investment from ASE providing about half of the CF needed for an IPO.

No change to Outperform rating or $11 PT.

For an analyst ratings summary and ratings history on Cypress Semi click here. For more ratings news on Cypress Semi click here.

Shares of Cypress Semi closed at $9.43 yesterday.

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