From the
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Price to Earnings Multiples
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According to multiple reports this AM, Cisco’s $3 Billion bid for video vendor Tandberg is not being met with approval by all of Tandberg’s shareholders.
A group of 21 shareholders, holding 24% of Tandberg’s stock wants more from Cisco.
I’m not surprised.
A week after Cisco made its offer for Tandberg it made an offer for wireless vendor Starent for $2.9 Billion. The big difference between the two proposed acquisitions has to do with the relative valuations that Cisco is willing to pay. It’s a point that was actually raised during the Cisco/Starent analyst call this week. One analyst asked Cisco’s Ned Hooper, why Cisco was paying more for Starent on a price to earning ratio multiple than they were for Tandberg. Hooper (in my view) danced around the issue and didn’t really provide a solid answer.
According to a Reuters estimate, Cisco is paying 40 times Starent’s 2010 earnings estimates while Tandberg is valued at at about 23 times next year’s projected earnings.
That hardly seems fair in my (fairly simplistic) view, and it looks like a few of Tandberg’s shareholders agree.