Microsemi (NASDAQ:MSCC) has some good things going for it. As a very large (if not the largest) supplier of chips to the defense industry, the company stands to benefit from spending growth, and it is seeing good growth in higher-margin product lines acquired in its buyout of PMC-Sierra. What's more, content is increasing in its commercial aviation business, the satellite market is finally looking good again, and the 100G roll-out should support its optical components business.
That's all fine, but Microsemi's shares aren't cheap on a standalone basis, and I'm not entirely sure how the market will react to a "steady as she goes" quarter and guidance with no real news on the M&A front. There are still multiple potential bidders out there that could acquire this company at a meaningfully higher price and still reap attractive earnings accretion, but relying on M&A to support a valuation is at best risky. While I'm still a willing holder of these shares (largely on the prospect for a bid), it's harder to recommend that new buyers come in unless they are comfortable with the risk/reward trade-off between a firm bid and M&A speculation evaporating.
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'Steady As She Goes' For Microsemi