"The merger with Spansion in 2015 was big [valued at $5 billion]. But we don't do acquisitions just for scale. We are very disciplined about what we do. We did acquire the Broadcom's wireless IoT business in 2016 [valued at $550 million]. We are now in radio because of our MCU business. We also acquired a software company in 2018 [Cirrent Inc.]. We're always looking. Standing still is not an option."
El-Khoury will not release any information on any upcoming deals but is willing to set the scene. "Our debt is the lowest it has ever been and with that liquidity we've been buying back shares. You could argue that Cypress is ready to do something."
This leads to the observation that a wave of consolidation that swept the semiconductor industry in 2015 through 2017 seemed to recede in 2018.
"There is always consolidation. In 2016 and 2017 you were reading about it in the public domain. China was attempting to buy a lot of companies but often didn't close. Now China is not putting players up for obvious reasons," said El-Khoury.
El-Khoury pointed out that Cypress is in a sort of middle region between small, which he defines as less than $1 billion in annual sales, and big, which he defines as greater than $5 billion in annual sales. But he is sure this will change. "In five years' time Cypress will be much bigger – either because we have acquired or because we have been acquired."
"We are growing, stable and predictable which puts us in an area where we can be disciplined. In terms of acquisitions I can wait. I am not going to overpay. But for the right target we can move fast, assimilate quickly and monetize the deal. We can be the consolidator."
What market areas can Cypress expand into?
"IoT is not so much a market as a capability that runs across all our markets. It is the smart-home, the connected factory, the connected car," he said re-iterating Cypress's consumer, industrial and automotive interests.
Next: Don't get distracted