Either Cypress Semiconductor Corp. is practicing a siege mentality, or it is waiting for shares of Ramtron International Corp. (Nasdaq: RMTR) to sink so low that the company will have no choice but to sell itself.
During a siege, invading forces take a strategic position around a target and wait for it to give up. During medieval times, enemy armies would surround castles or other fortresses and cut off food and water supplies. Defenders often starved to death or surrendered.In its most recent letter to Ramtron shareholders, Cypress implies that Ramtron's board is waiting for Cypress to give up.
If you are stalling in the hope that we will lose interest in an acquisition, it bears repeating that we are committed to acquiring Ramtron and that commitment will not waiver. We will not allow you an unlimited amount of time to stand in the way of our offer while failing to provide your stockholders with a fair opportunity to consider it or a superior alternative.
Ramtron seems to be in a better position to refuse the offer than it was back on June 11, when Cypress first offered to buy the company for $1.81 per share. This morning, Ramtron's stock opened trading at $2.64 per share. In its second-quarter earnings release, Ramtron said it was gaining traction in the market and logging design wins. Ramtron CEO Eric Balzer told shareholders:
We are now seven months into our program of driving design wins with new and existing customers after last year’s hiatus in design activity, when our highest priority was to work with our existing customers to manage supply constraints. With a number of new design wins under our belt and emerging opportunities on the horizon, we remain well positioned for growth in 2013 and beyond.
Ramtron reported sales of $14.2 million for the quarter, versus $16.8 million a year earlier. It also posted net income of $69,000, versus a net loss of $683,000 for the second quarter of 2011.
In its letter, Cypress said Ramtron has issued a "weak" forecast for the third quarter.
Our decision to maintain our offer at a price of $2.68 per share was made against the backdrop of Ramtron's ongoing weak performance. As the recently-announced failure to meet expectations for the second quarter clearly shows, the company's "transformation" is not proceeding at the rate management promised. Contrary to your assertion in recommending that stockholders reject our offer, Ramtron does not appear to be "gaining traction" in the marketplace. The weak guidance provided for the third quarter, which is traditionally Ramtron’s strongest, was a surprise and was specifically questioned by even the select few allowed to participate in the recent earnings call.
Cypress also posed a number of questions to the Ramtron board:
Has the board re-evaluated our offer in light of Ramtron’s second quarter results and current stock price, which is now below our offer price?
Why hasn’t the board given Ramtron’s stockholders the opportunity to assess the reasonableness of the company’s projections for themselves?
Did the board and its advisors rely upon projections last year when our prior acquisition proposal was rejected and, if so, how do they compare to Ramtron’s actual results?
When is the deadline for the submission of definitive proposals from bidders in the strategic review process so that stockholders will be able to evaluate other potential transactions relative to our offer?
Cypress extended its offer until 5:00 p.m. EST Aug. 17.
Barbara Jorgensen is community editor at EBN, an EE Times sister publication. This article was originally posted to EBN.