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MaxLinear (NASDAQ:MXL) fell 4% amid a downgrade to hold from buy at Deutsche Bank due to risks associated with Silicon Motion’s (NASDAQ:SIMO) arbitration claim over its terminated deal.
The arbitration claim “injects significant uncertainty for the company’s outlook via both the magnitude of potential payments (ranging from $0 to a $160m matching the break fee, or even higher should damages be assigned) and the timing of a resolution (typically takes up to 18 months), resulting in a potential positive or a negative,” Deutsche Bank analyst Ross Seymore wrote in a note on Thursday.
MaxLinear (MXL) shares are likely “range bound” until the Silicon Motion (SIMO) arbitration overhang uncerainty is removed, Seymore added.
Seymore cut his price target on MaxLinear (MXL) to $23 from $32.
Earlier this month, Silicon Motion (SIMO) said it started an arbitration against MaxLinear (MXL) for breaching its May agreement to acquire the company.
MaxLinear (MXL) in late July said it exercised its contractual rights to terminate its $3.8 billion planned purchase of Silicon Motion (SIMO), saying SIMO suffered a material adverse effect” and is in material breach of representations, warranties, and covenants. Silicon Motion formally terminated its sale to MXL in August.
MaxLinear (MXL) is scheduled to report Q3 results on Wednesday after the close. Silicon Motion (SIMO) will reports its Q3 results and conference call on Nov. 1-2.
