200 DMA and downside protection

Over the last 2/3 years I found one particular comforting aspect of picking stocks after their fall from grace (assuming that they are not on their way to Chapter 11). While 2/3 years is definitely a very short period to draw conclusions about price behavior, it does seem like building a bucket of such stocks provides a good downside cushion during the regular pullbacks of the overall market. i.e these undervalued shares tend to fall by a smaller amount than the rest of the market. This will most likely hold over even longer terms as long as these picks don't fall into the wildly speculative category.

It is still possible that a shock, whether it be a long-term recession following a crash or a 9/11 like tragedy, will cause these seemingly cushioned picks to break the lower threshold and drop sharply. Haven't seen it happening, but that the strategy may indeed be a double-edged sword.

The 200 day moving average (DMA) provides a great way to make sure that one is not overpaying for a takeover/turnaround bet. It should also help you to avoid buying at or close to 52-week highs. Occasionally, a buyer is willing to pay a premium that over and above the 52-week high, but that should not make you give up this hard rule about value. Given that buyers have used the 200 DMA as a benchmark when they decide to make a bid, buying a stock below the 200 DMA should be part of your timing strategy. Ofcourse, by itself the 200 DMA is worthless - make sure that there are other strong supporting facts like insider buying, a low price-to-book ratio and a dividend yield.

The takeover, earlier this week, of Meta Group (METG) by Gartner is a good example of the exception where a buyer pays - overpays - a premium over the recent highs! Gartner paid a 54% premium over Meta's most recent and 52-week high price in an all-cash deal. While I had been watching Meta Group for a while now and even recommeded it to a few friends, I could not convince myself to buy it given its high price. I was wrong on this one - but I am not allowing it to change my buying policy.

EMC buys another ...

EMC recently purchased closely-held Smarts, an application/infrastructure management solutions company. Compared to the 3 earlier buys over the past year, Legato, Documentum, VMWare, this one seems off-focus to me. What is EMC trying to get into with this purchase ? and why ?

This purchase takes EMC farther beyond storage, archival/search and virtualization and I don't see why customers would prefer an incomplete offering from EMC as against buying a full suite from other vendors.

I just hope EMC has a smart plan that triggered this buy.

Performance ? That is a stretch!

Stock picking columns in various investing mags go through this exercise of evaluating their own performance at the end of the year. These self-evaluations (is that an oxymoron ?) make for some laugh-out-loud pieces.

Here are three - I am leaving out names for obvious reasons.

• One particular list of stocks was cited by a magazine as having beaten the market this year. On close analysis, you see that 80% of the picks have lagged, and the one that went up the most was responsible for bringing the portfolio on the market-beating side. I would have been happy if it stopped here. Go deeper, and you see that this one big runup stock, is a very illiquid stock and if you had even attempted to sell your holdings to convert your virtual gains into real ones, you would have ended up moving the stock lower!
  
• Then there is the case of another stock-picker, who had the gift of looking at the sunny side of everything. With most of his cheap/value shares recommended earlier in the year moving lower, he suggested buying more of them since they were even cheaper now. Hey, what happened to the numbers ?
  
• Ready for more ? Another column, whose picks lagged the market this year, took solace in the fact that if you combine the last 2 years picks, it had still beaten the market. Whoever makes the rules here ? Carryover ?
  

My point ? Why make up excuses ? I would rather listen to a stock-picker who tells me that he has made a mistake and the market has beaten him this year.

Personally, I dislike the focus on such short-term benchmarks - one year is just too short a period to measure performance, especially if you are picks are undervalued/turnaround bets. Give it atleast 3 years, please!

HSBC not looking stateside ?

HSBC is reported to be buying Korea First bank - does this indicate that HSBC has put on hold its US expansion plans ?

Rumors earlier this year indicated that HSBC was seriously considering buying Washington Mutual (WM), which has helped the latter's stock to trade in a narrow band.

Korea First bank is tiny ($2.5 billion) compared to Washington Mutual's market cap of $40 billion. So this single purchase by itself won't change HSBC's plans drastically. But this could also be the first in a series of Asian bank acquisitions for HSBC, in which case Washington Mutual may be the loser!

Private-equity groups on a tear ?

It now looks like 2005 will be a banner year for private equity funded buyouts. The Wall Street Journal reported today that their share of the M&A activity has already reached a new high of 14% of all buyouts this year.

Now, some are aiming at much bigger deals. A couple of groups have been reported to be building close to $10 billion funds that will be put to work next year. Given the blows some of the retailers have suffered this year, I expect a good deal of that money to go towards taking them private.

A small number of my hits have been private equity led buyouts. While the fact that these are cash deals make them very attractive, the premiums tend to be on the low side.

Here are my retailer picks that these funds will surely find attractive (the ones I own have a * next to them) -

• Sharper Image (SHRP) *
  
• Gap (GPS)
  
• Hot Topic (HOTT)
  
• Ann Taylor (ANN)
  
• Rite Aid (RAD) *
  
• Gymboree (GYMB)
  
• Guess (GES)
  
• Pathmark (PTMK)
  
• Pier 1 Imports (PIR) *
  
• Mothers Work (MWRK) *
  
• Restoration Hardware (RSTO) *
  
• Bombay (BBA) *
  
• La-Z-Boy (LZB) *
  
• Wild Oats Markets (OATS) *
  
• Saks Inc (SKS) *
  
• Tiffany & Co. (TIF) *
  
• Winn-Dixie (WIN) *

Most of the above are still great buys, assuming you are ready to sit on them for a while (> 2 years).

Slate is sold

Does selling of Slate indicate Microsoft's lack of interest in content ? Not really, since this seems a very specific, Slate-related action.

MSN will remain an important part of its search/portal focus. And it is also likely to bring in more specialized content, provided by the likes of iVillage (IVIL).

Will Microsoft end up buying iVillage ? As I mentioned in an earlier post, iVillage remains an attractive target for Microsoft and Yahoo.

Hints from Bear Stearns and others ...

This week's earnings releases from major Wall St investment banks have included hints that M & A consulting fees will be higher next year. Since these firms are part of the backstage negotiations that go into M & A, the talk of a deal backlog can only come from information that these guys are privy to.

This is one of the strongest indications so far, of 2005 becoming a big deal year.

Interactive Corp to spin off Expedia

It has happened, finally! Inteactive Corp (IACI) took some action to get people to respect its stock!

The market welcomed the spin-off by sending its shares around 6% higher. I have been buying Interactive shares as a value bet. Even after today's move, its revenue/cashflow is being ignored by the market.

The spin-off itself, Expedia, will be a good buy. Spin-offs tend to move lower during the first few weeks when the parent is part of an index. This is true due to the huge volume of money that tracks/flows into index funds these days. Index funds, by their very definition, cannot hold onto the shares of the spinoff, causing a temporary fall in the new shares. They recover within a few months as non-index funds pile on the undervalued shares after a while. There is also a chance that once an independent entity, the spinoff can end up on an index too, sending it a lot higher.

One person extemely glad about this announcement today must be Bill Miller. Interactive Corp forms a sizable part of his fund's holdings. The stars seem to be lining up for Miller to beat the S&P a 14th time, though it looked impossible just a few days ago that his streak would continue over to this year!

An additional thing to keep an eye on - Expedia can now focus on only the travel business and will be looking for more acquisitions. Will Priceline be the next target ? Ctrip, Lastminute are other possible targets.

Everybody is talking about it!

One blockbuster week and every business/investing publication is talking about a coming 2005 boom in M&A. I have on my desk the latest issues of 4/5 business mags and most of them cite M&A as one focus for investing in the next year.

Not sure if this consensus is good. Putting my contrarian hat, I would say that this has pushed back the merger binge by a few months atleast!

I have been bulking up on targets for close to 2 years now and plan to continue doing the same as long as required. I still feel that when the M&A surge comes, its intensity will surprise most people. The desperation on the part of buyers in growing, and it will have to materialize at some point in the form of increased activity on the ground.

Siebel looks to do more ...

As expected, Siebel (SEBL) has started moving to more valuable services that are natural extensions to its CRM business. It bought Edocs, an electronic billing software/services provider. This is a step in the right direction - it remains to be seen if Siebel will make more drastic moves - to areas like customer data mining/analysis or call center management software/services.

With the Edocs purchase, one potential loser is Portal Software (PRSF), a billing software maker. Siebel was one of the strongest possible candidates for buying Portal.

Hit #30

It is official - Symantec (SYMC) is buying Veritas (VRTS)
for around $29/share (since it is mostly a stock swap, this will vary with Symantec's current share price). This price is a 55% premium over my average cost of $18.75/share paid for Veritas a few days after its shocking earnings warning earlier this year.

As I have said earlier, I do not like this merger and will be selling the Symantec shares that I get as part of the deal. The market also doesn't seem to like this deal and has punished Symantec by pushing down its shares some 20% since the deal was announced.

Another way to play this is to buy Symantec shares right now in the hope that the deal will fall through, pushing up Symantec shares in turn. I am definitely on the side wishing that this merger comes undone!

And I am still stunned by the absence of competing bids - HP, wake up!

Hit #29

Now that the Nextel/Sprint deal is official, I can claim Nextel as a hit.

Nextel was a turnaround bet that I bought mostly at $7/share and sold around $15/share, close to a year ago, since I couldn't really understand its rapid rise.

I did buy a few more later as a takeover bet. My average price was $19.2/share and the Sprint buyout values the company at around $30/share for a 56% premium.

Continuing my earlier negative tone on this merger, I think the wireless sector has started doing more mergers with just size as a motivation. That is not a good sign. Moreover, there doesn't seem to be enough enthusiasm by rival players, like Verizon or SBC to go after Nextel and that is very disappointing.

I own a few Sprint shares too, both PCS and FON. Ofcourse, the wireless tracking stock, PCS was merged back into the parent a few months ago. Overall, I got the Sprint shares for around $13/share. They stand today at $24/share. I do not plan to keep the shares of the Sprint-Nextel combine - will use the first chance to sell them.

It is not over yet!

The gold takeover web is getting even more tangled, with Gold Corp (GG) getting a bid from Glamis Gold (GLG). This, just when I thought Wheaton River Minerals (WHT) had finally settled down to a buyout from Gold Corp! The complex merger/attempted merger chain has now grown to include 7 players!

This latest entry has taken the merger craze among gold players to the next level with better quality miners now getting involved. This is a good sign. Expect real competitive bids for the remaining entities to start emerging soon.

I wish the same level of enthusiasm is exhibited in other sectors that have started seeing M&A activity, specifically enterprise software.

The last ten days ...

The M&A activity has finally reached a pace where it can be termed fever pitch. The last 10 days were the most active 10 days for M&A in over 4 years.

While the number/size of the transactions is impressive, the general lack of competing bids is of real concern. It looks like most of the bigger/potential buyers are still on the sidelines. There is still a lot of (unwarranted ?) caution.

I am sure that a few of these hesitant players will regret their (in)decision. The sooner that happens the better. The current convoluted bids and counterbids among the gold players is the kind of action I would like to see in the software/content/oil sectors - with the only additional cnodition being that it involve not tens, but hundreds of companies over the next 3 years or so.

Another thing of concern is the amount of detail leaked before the actual formal merger announcements. Shouldn't we be hearing something from a regulatory body about it ?

Patina picked up.

In an earlier post, I listed the possible takeover targets among the Rockies oil / gas players. The first one in the list, Patina Oil and Gas (POG) got acquired today by Noble Energy for a 15% premium.

I did not own any shares of POG since the stock was priced for perfection and I was waiting for a pullback.

The others mentioned in that list still remain attractive targets, but most have a takeover premium already priced in.

The ones I am watching closely are :

• Transmontaigne (TMG)
  
• Credo Petroleum (CRED)
  
• Whiting Petroleum (WLL)
  
• Chesapeake Energy (CHK)
  
• Petroleum Development (PETD)
  
• Vintage Petroleum (VPI)

I own a few of TMG and CHK, but will wait for further weakness to add more. Credo does look attractive at the current price, but I have to learn a bit more about it.

The Rockies sector saw heavy consolidation activity earlier this year and election time put a temporary halt to it. Now that Bush is back in power, and (unfortunately) is likely to open up more areas to exploration, there is bound to be a free for all in the coming weeks.

With the purchase of Patina, the only quality takeover target left is Anadarko Petrolem (APC), but it is not cheap either.

3Com buys Tipping Point

3Com (COMS) yesterday bought intrusion detection/prevention devices maker Tipping Point Technology. While 3Com's move is in the right direction, they grossly overpaid for this purchase given that Tipping Point shares were near 52-week highs after a big runup over the last year, and 3Com still paid a decent premium.

This is a real waste of 3Com's cash pile. There were other undervalued/cheap players they could have bought that would have provided more bang for the buck. With this buy 3Com has really shown a complete disregard for shareholder value creation. The market seems to think likewise, sending 3Com's shares sharply lower!

3Com is among my turnaround bets. I own a small number of shares hoping that a private equity fund will pick them up (at a premium ofcourse), work some magic and take them public again a couple of years later, a la Seagate!

I am giving up on 3Com for now. If it becomes ridiculously cheap, I will be adding more, but I need to see some real explanation for the recent purchase.

Hit #28

With all the drama surrounding the Oracle / PeopleSoft merger, I forgot to mark it as a hit! I got my PeopleSoft shares at $15.2/share. Oracle's offer of $26.5/share represents a 74% premium over my average cost/share.

Coming rate hikes - another reason for a M&A surge ?

Read an interesting piece that said that the coming interest rate hikes could also push companies to buy now while the borrowing costs are low. I think this will be less of a factor compared to the junk-bond financed merger days of the 80s. Companies are likely to use their cash instead for purchases. In fact, in one recent merger, the buyer intentionally avoided raising cash through a bond offering, so as to preserve its credit rating.

That said, a new report this week said that this year has been the best year for junk bonds since 1998, though none of that seems to be going to fund acquisitions.

Symantec buying Veritas ? Please say it ain't so!

Reports today indicate that Symantec is close to buying Veritas (VRTS) for around $13 billion. This just doesn't make sense for Symantec!

While Symantec has a few storage utilities, they can mostly be termed as desktop and not enterprise tools. Symantec is better off expanding its security business more deeply into related areas like firewall, intrusion detection, remote computing and identity management. A buy of Checkpoint (CHKP), Internet Security Systems (ISSX), Entrust (ENTU), SonicWall (SNWL) or Secure Computing (SCUR) would have made more sense.

I sure hope Veritas gets competing bids. Since Oracle is about to consume PeopleSoft, it may not go after Veritas though the combination is really attractive. Also, Oracle did say that it is looking for more application software buys, which makes a target like BEA Systems (BEAS) more likely.

The other player that stands to gain the most from acquiring Veritas is HP. I hope they don't miss this chance. Veritas, over the last couple of years, has made some smart software acquisitions that also fit neatly into HP's plans.

I do own Veritas shares, bought after the most recent earnings warning, bought mostly at around $17/share. Symantec is likely paying around $28/share. I think a rival bid nearing $33/share is justifiable.

A one-time shot in the arm for M&A ?

A recent proposal that allows US companies to bring back profits made outside the country, at a one-time low tax rate of ~5% (instead of the usual 35%) should add to the existing environment that is predicting a big M&A binge over the next couple of years.

Atleast 4 companies can potentially bring in $10 billion each! Among them, Johnson & Johnson is a likely buyer of more companies ( in addition to Guidant, which is rumored to be announced this week ).

2 of the 4 become even more attractive takeover targets just because of this new cash pile - Schering Plough (SGP) and Bristol Myers Squibb (BMY). These are already juicy baits given their low valuation right now. And, to top it, both pay handsome dividends! I own a few of both and will be adding at current prices.

A detailed analysis of all the companies that can potentially bring back cash under this new legislation, could award a careful investor handsomely.

The final word on Oracle/PeopleSoft

This merger battle ended with a whimper! While a Oracle victory is more than welcome, after 18 months it would have been worth watching what the Delaware court would have ruled in Oracle's fight against PeopleSoft's poison pill clause.

As noted in today's WSJ, there was a good chance that the court would rule against the takeover defense in this particular case, and that would have set a precedent! Coming from the most corporate-friendly state in the US, it would have been a nice blow to such shareholder-unfriendly measures.

In fact, it now seems like an impending loss of face in the courts may have pushed PeopleSoft's top brass to agree to a final/higher offer.

Nextel - more to come ?

When Sprint/Nextel merger rumors started a while ago, I certainly hoped that there would be a competing bid for Nextel from others. So far it has not happened and that is quite surprising.

Nextel, with its loyal (and unique) customer base should be attractive to the likes of Verizon and SBC. While SBC may still be digesting its recent buy (along with BellSouth, via Cingular) of AT&T Wireless, Verizon has no such problems.

A race to get Nextel would also surely help Bill Miller extend his 13-year S&P-beating streak!

Sprint racing ahead.

This is definitely an item for an SEC investigation at some later point, but by now every publication has reported about the final round of merger talks between Sprint (FON) and Nextel (NXTL) . I own a few of both, bought at substantially lower prices - will post additional details when the merger is officially announced.

The market sees this as one of those great combinations - shares of both companies inched up after the leak. I personally don't see much upside after the merger, and will be selling my shares of the combined entity as soon as I get a chance. Both Sprint and Nextel, while cleaning up their balance sheets over the last 2/3 years, haven't really done much to innovate, retain customers or to provide high-end services. I personally have experienced the Sprint touch, and after 3 painful years switched to Cingular recently!

What does this merger mean for AT & T (T) ? It was rumored earlier that Sprint was in the running to buy AT & T. It now looks like BellSouth becomes the strongest contender to take out AT & T. At the current price, AT &T is a high-risk buy, but if it drops below $15/share, without a dividend cut, it is a good speculative takeover bet.

This transaction also should bring to an end any speculation that Sprint would go after MCI (formerly WorldCom). Sprint's earlier attempt (in 2000?) to merge with MCI was torpedoed by trust-busters. But MCI (MCIP) is still surely up for sale. Will Leucadia National (LUK), which already owns a minority stake, buy the rest of MCI ?

A bitter pill - for investors!

I had made a comment earlier about poison pills (a.k.a takeover defenses). Now a formal study has shown that companies that adopt such measures have a higher chance of defaulting on their debt! The correlation is not fully established just by one study, but this should not come as a surprise given the nature of companies (or more appropriately the characters that run them) that cling to such clauses!

More M&A surge pieces

Wall St. Journal carried an informative piece recently on the surge (in total number of deals and the volume of the deals) in precious metals M&A. The gold/silver miners' merger activity should hopefully see a follow-through that involves more quality deals.

Bill Miller was quoted (in the WSJ) predicting a great 2005 with increased mergers and acquisitions being among the contributors. When Mr. Miller talks, you can bet that there is something worth listening to. This probably is now the most repeated line in the financial journals, but I have to restate it here - Bill Miller runs the only fund that has beaten the S&P for 13 consecutive years. Looks like it won't be 14 due to this year's lackluster performance of his fund, but an 11th hour miracle may be in the works, with Nextel seeing a runup due to Sprint buyout news and the slow recovery of Interactive Corp's stock. Wishing him good luck!

Wheaton finally gets the right partner!

Wheaton River Minerals (WHT) , a Canadian gold miner, agreed to be acquired by GoldCorp (GG). This brings an end to a very confusing number of merger/takeover attempts over the last year or so.

Wheaton earlier got a hostile takeover bid from Coeur d'Alene (CDE), which Wheaton's shareholders rejected. Iamgold (IAG) made an offer for Wheaton next, but Iamgold's shareholder voted against it. Iamgold itself is attempting a merger with Gold Fields (GFI), while Gold Fields got a hostile takeover bid from Harmony Gold (HMY)! If that doesn't give you a headache, then I bet the coming months' action among gold/silver miners will surely do.

I listed Wheaton among my early hits since I sold off after the surge following the first takeover attempt.

I own shares of quite a few small gold/silver players, including

• Coeur d'Alene Mines (CDE)
  
• Bema Gold (BGO)
  
• Durban Roodeport Deep (DROOY)
  
• Hecla Mining (HL)
  
• Apex Silver Mines (SIL)
  
• Pan American Silver Corp (PAAS)
  
• Harmony Gold (HMY)
  
• Newmont Mining (NEM)

Some of these are just hedges against a falling dollar and a slowing US economy, while the smaller ones are takeover targets as gold retakes its position as a "hard" asset as the dollar depreciates.

Forbes sees a merger surge in 2005

The latest issue of Forbes has an interesting piece that predicts a surge in mergers next year. The article also lists potential targets - though, most of those targets seem to be fairly valued to me.

One target mentioned that I wish to comment on is Synopsys (SNPS). I definitely don't see it as a takeover target, mainly because I cannot think of a potential buyer. If anything, Synopsys is a great value buy right now since it appears undervalued. Buying now and holding for 3 years is going to reward you.

Synopsys ofcourse, will keep buying other companies and speculating on those potential targets could also be very profitable.

More on Netegrity acquisition

Computer Associates just completed its takeover of Netegrity - in just over a month after the takeover announcement. This is one of the fastest transactions I have seen among my hits - the speed, combined with the fact that this was an all-cash takeover makes this the most desirable kind of acquisition. You have dead money for a very short duration.

I have not studied CA's past takeovers, but if this is the speed at which they move, going after CA's possible targets will be a very fruitful strategy.

CA seems to go after small companies with a guaranteed (via license/maintenance fees) revenue flow and a larger customer base and whose products have atleast a slight overlap with CA's existing products. The overlap implies that CA can move these customers to its existing (and more expensive ?) products slowly. Cost-cutting at the acquired company also ensures that the new revenue adds directly to CA's finances.

With the above in mind, I see Quest Software (QSFT) as the next target for CA. I have used a few Quest products myself and I think they are worth acquiring from CA's standpoint. But at its current price, Quest is very expensive - I will wait for atleast a 30% pullback before I buy its shares.

Companies like Visual Networks (VNWK) and Entrust (ENTU) also seem likely targets though their customer base is much smaller than that of Quest. I own Visual Networks and Entrust shares and am buying at current prices. Compuater Associates is not the only potential buyer of these 2 companies.

Recent M&A pieces.

Just a small list of articles related to M&A that I have read recently

• An interesting piece on cross-border mergers and how most fail due to cultural differences - in Strategy + Business. I am waiting to see a study on how the recent spate of European cross-border bank mergers fare.
  
• A WSJ piece on GE's latest (and expensive!) acquisition spree.
  
• A Worth feature that had one of the most detailed analysis of mergers.

The latest Barron's (or was it IBD ?) had one money manager taking a different line on what companies will do with all the cash they have piled up over the last 4 years. He sees companies not doing much with the cash but keep adding to the pile! Not something I would like to see happen.

Taking advantage of merger disruptions.

Occasionally a publicly announced takeover/merger runs into trouble either due to anti-trust issues or authorities needing a few questions answered. This has the effect of the shares of one or both the entities pulling back creating a short-term buying opportunity. In most cases the transactions are never in real danger.

Take the case of Wellpoint - Anthem merger that was blocked by California (and the not-so-powerful state of Georgia). Investors who bet that the merger will ultimately go through would have made a neat profit if they had jumped in when the shares pulled back.

There were other transactions (think GE/Invision, PNC/Riggs) that created similar profit windows.

There are ofcourse those that drag on like the Oracle/Peoplesoft battle, but so far cases like that seem to be an exception. Most get resolved favorably.

Hit #27

I have mentioned Ebookers (EBKR) in 2 earlier posts marking it as a target. Today, Cendant announced that it is acquiring Ebookers for around $12.38/share in an all-cash transaction.

This price is a very small ( < 10%) premium over yesterday's closing price, but a 40% premium over my average price of around $8.85/share.

I was pleasantly surprised to find that it was 40%, since I remember buying Ebookers at around $16/share. But as I averaged down, I ended up making the bulk of my purchase at around $5.2/share with the resulting average being the earlier cited $8.85/share.

With a takeover target on which you have strong confidence, averaging down is a must especially when the original undervalued state turns out to be just the beginning of a long slump!

It was revealed that Priceline was also in the running to buy Ebookers. I definitely think that Priceline will now go after Lastminute (LMIN) and a decent premium is possible even at the current price.

InterActive Corp (IACI) was also rumored to be looking to buy smaller players - maybe Priceline (PCLN) itself ?

Synopsys tries another buy!

Synopsys today announced the acquisition of Nassda for a 60% premium! This came as a surprise to me given Synopsys' earlier aborted attempt to buy Monolithic Systems

I still see Monolithic Systems (MOSY) as a target and will be buying at the current price.

In addition, Magma Designs (LAVA) looks cheap now, after the recent earnings miss. Synopsys or the other players will surely end up buying it. I am buying at the current price.

Ultimately, Synopsys and Cadence will remain as independent players - the rest will be assimilated. That means at some point when it becomes cheap enough, Mentor Graphics (MENT) will also make for a good takeover target.

Synplicity (SYNP), Ansoft (ANST), PDF Solutions (PDFS) and Verisity (VRST) are the other smaller entities. I don't know enough about them yet, though I do remember reading an interview with PDF Solutions' CEO, where he did not rule out a sale of the company.

For conservative investors looking for a 100-150% return over the next 2-3 years, Synopsys itself is a great non-speculative bet. Just buy now and don't look at it for a long time!