Not resigned to Harari's resignation

Shlomi Cohen

Intel gets in to iPhones and iPads, for obvious reasons. Dr. Eli Harari gets out of SanDisk, and it is not yet clear why.

Intel is an untiring buyer, and announced yet another deal this week, this time buying the wireless processor business of Infineon.

Intel will be short revenue of around $600 million, 5% of its current quarter's revenue, in order to meet its optimistic guidance which it gave in July, and apparently this will not happen.

It is clear that nearly all the sales that Intel is missing have moved in recent weeks from laptops and netbooks based on Intel processors to the tablet computers like Apple's iPad, which have been grabbed by buyers like fresh bread. As is known, Intel is not in those iPads, and like many others was surprised by their strong success, and especially their cannibalism of the mobile computer sector, which Intel leads, along with its smaller competitor AMD.

With the acquisition of Infineon's unit, Intel will grab a share of the market considered the most "sexy", iPhones and iPads. But it won’t do so through its computer processors, but through communications processors, a market to which it is returning four years after it sold DSP to Marvell Technology Group (Nasdaq: MRVL).

Another Israeli aspect is Ceva Inc. (Nasdaq:CEVA); LSE:CVA), which I hold in my portfolio tracked by "Globes", which today sells DSP IP to iPhones and iPads through Infineon, and will certainly be happy that Intel will become its customer with the close of the deal in the beginning of 2011.

Harari: Cause or effect?

Since I spoke with SanDisk Corporation (Nasdaq:SNDK) CEO Dr. Eli Harari three weeks ago, and got the impression from his words that the company’s situation as far out as the eye can see is excellent, and that is why he is resigning precisely this year, the share price fell more than 25%.

Much of the collapse occurred since the company issued $1 billion in convertible bonds about ten days ago. The giant turnover that has taken place since then, more than half the company's shares, hints to me that the offering was just a trigger to set off the collapse, but not its primary reason. That is despite the fact that it is known that offerings of this type are always accompanied by short activity and pressure on the shares.

In continuation of what I already wrote, that I do not accept that Harari's resignation is as innocent as he presents it, and that precisely because we are in the midst of a mergers and acquisitions season the likes of which we have not seen in a long time, and because Samsung has tried in the past to take over SanDisk, I see in these events signs of new attempts at control, that have not yet been publicized.

The immediate expansion in July of SanDisk's board of directors, with the addition of the CEO who will replace Harari; the signing in July of a new cooperation deal with Toshiba, which gives it the right of refusal to SanDisk's part in their production lines; the quick raising of $1 billion in debt - all these look to me to be fortifying the walls ahead of a battle for control.

The giant turnover, as well, despite taking place during a fall in the share price, I suspect is connected to takeover processes, which sooner or later will be made known. Perhaps big institutional investors, who were relying on the acquisition of the company, fled, after they realized in the past two weeks that it will not happen this year.

Published by Globes [online], Israel business news - - on August 31, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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