Why SYNNEX Shares Skyrocketed

Is this meaningful? Or just another movement?

Brian D. Pacampara, CFA
Brian D. Pacampara, CFA
Sep 11, 2013 at 12:35PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of tech outsourcing services specialist SYNNEX (NYSE:SNX) soared 19% today after agreeing to acquire IBM's (NYSE:IBM) customer-care business for $505 million.

So what: SYNNEX will pay about $430 million in cash, and $75 million in stock for the segment, giving IBM an equity stake in SYNNEX, and essentially making the two preferred partners. As part of the deal, in fact, IBM signed a multi-year agreement to work with SYNNEX for its global customer care and BPO outsourcing needs.

Now what: SYNNEX expects the transaction to add about $120 million in EBITDA, and roughly $0.55 in adjusted EPS in just the first 12 months after closing. "This acquisition will make Concentrix a global Top 10 player in a growing market," said SYNNEX CEO Kevin Murai. "With our collective strengths in the CRM BPO market, this strategic acquisition will create an even more compelling value proposition for our clients and shareholders." Of course, with the stock now having roughly doubled from its 52-week lows, and trading at near-20 P/E, I'd wait for some of the exuberance to fade before buying into that bullish talk.