8 Companies That Could Be the Next Big Technology Buyout

All of the headlines will focus on how Texas Instruments (TXN)purchased National Semiconductor Corporation (NSM) for $6.5 billion, a sizable premium from the previous market capitalization. But savvy investors should ignore the headlines and focus on the fact that National Semiconductor was an inexpensive stock before the announcement. In hindsight, most deals seem obvious, but it may have been more so in this case. Using valuations similar to what National Semiconductor was trading at prior to the announcement, we can put together a list of potential technology buyout candidates.

Before the Texas Instruments acquisition agreement, National Semiconductor was a $3.4 billion market capitalization company that traded with a forward P/E of 11.44, a PEG ratio of 1.43 and a trailing return on assets of 15%.

Here are a list of technology companies with similar valuations:

SANDISK CORPORATION (SNDK)
Forward P/E: 10.24; PEG Ratio: 0.85; ROA: 12.36%
SanDisk Corporation is an industry-leading maker and designer of NAND flash storage products. While they may be most synonymous with memory cards to the average consumer, their primary end markets are mobile phones, consumer electronics and computing. In 2010, around 65% of sales were from original equipment manufacturers and 35% were from retail.

They're not the cheapest name on this list, but they may be the most interesting because of their relationship with Apple Inc. (AAPL). Flash memory amounts to around 10% of the iPad's cost. Acquiring a hardware manufacturer is a divergence from Apple's method of operation, but it could be advantageous to secure a market leading supplier of an integral component. This would not be the first time that SanDisk has attracted buyout attention. In late 2008, Samsung (SSNLF.PK) offered to acquire SanDisk for $5.9 billion, but was rejected and eventually withdrew their offer.

Even without a bid from Apple, SanDisk remains interesting. Secular growth in smartphones and portable internet devices should continue and Eli Harari's retirement at the end of last year may make SanDisk a more willing target.