Analog (ADI) Buys Symeo, Boosts Radar Technology Offerings

Leading semiconductor company Analog Devices, Inc. (NASDAQ:ADI) acquired a privately held company, Symeo GmbH, for an undisclosed amount.

Based in Munich, Germany, Symeo GmbH develops and manufactures Radio Detection And Ranging (RADAR) hardware and software, used in automotive and industrial applications. The company’s RF and sensor technology enables real-time position detection, distance measurement and telemetry.

Following the acquisition, the Symeo team will join ADI's Autonomous Transportation and Safety (ATS) business unit.

However, the stock has underperformed the industry it belongs to on a 12-month basis. The company’s shares have gained 15.4% compared with the industry’s growth of 24.9%.

What’s Retaining Analog Devices’ Interest?

Analog found the deal appealing because Symeo's signal processing algorithms offer high precision RADAR solutions. These solutions enable system integrators and original equipment manufacturers to work with great precision in rough industrial environments. The deal provides Analog’s customers a RADAR platform with improvements in angular accuracy and resolution.

Also, the acquisition will expand the company’s share in the autonomous automotive segment. RADAR and cameras are sensor technologies that today’s ADAS systems are increasingly using to provide advanced safety features like forward collision warning, pedestrian detection, blind spot detection and autonomous driving mode.

In the last reported first-quarter fiscal 2018, the Industrial segment accounted for 49% of total revenues, which soared 87.4% year over year and 4% sequentially to $743.6 million. Also, Automotive accounted for 16.6% of total revenues and jumped 76.4% from the year-ago quarter and 5.1% from the previous quarter to $252.2 million.

The deal will help the company gain a greater share in both the growing automotive and industrial markets.

Our Take

We see this acquisition as part of Analog Devices’ ongoing investments in products for the industrial, automotive and aerospace markets.

Management is making continuous collaborations with innovative brands to expand its RADAR offerings. Last year, the company collaborated with Renesas Electronics Corporation on a system-level 77/79-GHz RADAR sensor. The new sensor was designed especially for applications in the automotive space that are safer and more connected.

We believe, the development of new technology along with a stronger foothold in Europe and China should benefit the company. We expect the company to leverage its already strong market position to penetrate deeper into these growing markets.

Zacks Rank & Key Picks

Analog Devices has a Zacks Rank #3 (Hold). A few better-ranked stocks in the technology sector are PetMed Express (NASDAQ:PETS) , Teradyne (NYSE:TER) and Brady Corporation (NYSE:BRC) . While PetMed and Teradyne sport a Zacks Rank #1 (Strong Buy), Brady Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for PetMed, Teradyne and Brady Corporation is projected to be 10%, 12% and 7.5%, respectively.

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