Investors aren’t exactly happy about a move by one of Orange County’s hottest companies, Anaheim’s Multi-Fineline Electronix Inc. At least for now.
The company said late last month it’s paying $500 million for Singapore’s MFS Technology Ltd., boosting Multi-Fineline’s business of supplying flexible circuit boards for wireless phones.
On March 30, the day of the announcement, the company’s shares sunk 10%. They fell another 2.5% the next day.
The drop wiped away about $200 million in market value, leaving the company, known as M-Flex, at about $1.4 billion.
The stock regained some of its losses soon after its drop.
M-Flex has seen its stock rise in leaps and bounds in the past year. M-Flex makes flexible circuit boards, the guts of popular phones such as Motorola’s Razr. The bendable boards have allowed Motorola to make stylish designs.
On a conference call after the MFS announcement, analysts asked Phil Harding, M-Flex’s chief executive, about Motorola’s role with the combined company.
MFS has a heavy reliance on Motorola,for about 50% of sales. M-Flex gets more than 80% of its sales from the phone maker.
The thinking goes that Motorola may not want to buy so much of its circuitry from a single company and could look elsewhere.
Another investor concern: the unusual nature of the deal.
MFS is a sister company to M-Flex. Singapore’s WBL Corp. is the parent company of both. MFS’ financial performance hasn’t been as strong as M-Flex’s.
WBL will own a majority stake in the combined companies.
One analyst, Reik Read with Milwaukee-based Robert W. Baird & Co., told investors to settle down.
Sure, there are risks, he said, but M-Flex is a solid company.
“We remain buyers based on strong core revenue prospects, attractive margins and potential net positives related to the acquisition,” Read said in a note.
Motorola isn’t jumping ship just yet, he said.
“We believe Moto-rola’s business will continue to do well as (Motorola) holds share and as (M-Flex) gains new programs,” Read said. “Our discussions with Motorola lead us to believe that M-Flex’s content is value-added and likely to increase on new platforms.”
The MFS buy could add up to $4.8 million in yearly earnings. M-Flex had $17.3 million in earnings during the December quarter.
Financing Leads to Buy
A Newport Beach technology outsourcing company has landed private placement financing worth up to $9 million,and put the money to work.
Caneum Inc. recently said it got $2 million for its preferred stock. The investor, New York-based Barron Partners LP, also got warrants for an extra $7 million in common shares.
The company could use the financing for acquisitions, according to Alan Knitowski, chairman of the company. The company wrapped up the deal in March.
A couple of days later, Caneum bought TierOne Consulting Inc. for nearly $3 million. The Aliso Viejo-based company had been tapped in the past by Caneum for outsourcing help.
Caneum is small and growing. It expects 2006 sales of about $8.7 million to $10.7 million, possibly more than 300% to 400% of 2005’s.
The company has some big customers, including El Segundo-based The DirecTV Group Inc. and Panasonic of Japan’s Matsushita Electric Industrial Co.
Gateway Goes Out of Court
Irvine-based Gateway Inc. has settled another patent lawsuit.
The computer maker ended a patent infringement trial by agreeing to pay an undisclosed amount to an engineer who developed a fix for a problem with floppy disk drive controllers, according to reports.
Engineer Phillip Adams had sued for $150 million, triple the amount he asked Gateway to pay him for the controller fix. The case was handled in Utah.
Before the latest settlement, U.S. District Judge Ted Stewart in Utah had scolded Gateway for destroying or losing evidence.
Stewart said in his ruling that Gateway couldn’t produce a key e-mail that could have shed some light on the case brought by Adams, formerly of IBM Corp.
Gateway said that while it made some errors in handling evidence, it did not intentionally conceal information. Gateway added that when it learned of the problems, it acted promptly to comply with orders for document discovery.
The settlement is the latest for Gateway. It agreed in March to pay $47 million to settle a patent dispute with Hewlett-Packard Co.
Mo’ Money
Irvine-based Networks In Motion has landed a third round of venture funding.
The company,a provider of software and services that allow wireless phones to serve as navigational devices,recently said it raised $10 million.
Networks in Motion plans to use the money to expand research and development and sales and marketing.
Silicon Valley’s Sutter Hill Ventures led the financing as a new investor. Returning investors Redpoint Ventures of Menlo Park and Mission Ventures of San Diego also took part.
Networks in Motion raised $5 million in a second round of venture funding in 2004.
Verizon Wireless and Sprint Nextel Corp. offer Networks in Motion’s software, which allows users to get directions, maps and other services on their wireless phones.
