An S&P study showed that the EMU Peripheral countries are rapidly rebalancing their economies with exports leading the way, except in Greece. Unit labor costs are declining to more competitive levels, particular in Ireland. The rating agency expects Spain, Portugal & Ireland to achieve 2013 current account surpluses, which could be the key to an early GDP recovery despite some heightened challenges that lie ahead. Overall, the study found Rebalancing Progress Metric (RPM) scores much higher in 2012 vs. 2011, which in general is a positive.
Lately the chatter in the Euro zone has been subdued, with many investors not focused on the region and its debt problems. Over in Greece, the Troika has called on Athens to scrap automatic pay hikes, as Greece gets ready to start talks on minimum wage. The Euro zone issue always seems to pop back up time and again, and will continue to do so in the near future. The Euro zone may cause some disruptions in the market, but nothing that the US economy cannot absorb. Effectively, the macroeconomics over the pond will not be able to derail the current momentum in the US stock market. With mergers and acquisitions expected to pick up this year, many are looking to the tech and telecommunications sectors for bargains. With increased M&A activity expected in 2013, finding solid small to mid-cap companies that are attractive could provide some great returns.
Sonus Networks (NASDAQ: SONS) provides voice infrastructure products. The company’s hardware and software enables customers to deploy a packet-based network carrying both voice and data traffic. Sonus sells its products to service providers, such as long distance carriers, ISPs and cable operators. On Monday, the stock was up a whopping 16% to $2.67, as Oracle made a bid for Acme Packet for $29.25 a share. Acme, a competitor to Sonus Networks, is expected to accept the bid without any other competitive offers on the table. The notice of the acquisition lifted all the stocks in this sector, as many believe this sector is a hot target for larger companies looking to make acquisitions. The other sector that is expected to be very active this year is computer security firms, as hacking and viruses have become a tremendous obstacle.
There has been chatter as of late that perhaps Cisco will be making a competitive offer for Sonus Networks in the near future. Smaller companies in this sector tend to get gobbled up when the economy is improving, and SONS is one of the perfect candidates at $2.67 a share. Other competitors in the business that may be targeted acquisitions include Sykes Enterprises, Exlservice Holdings, Teletech Holdings, Igate corp and Unisys Corp. All of these companies have a market cap of $1bln or less, and may be viable candidates for a takeover due to their price and business model.
SONS has a market cap of about $740mm, and a 52-week range of $1.36 to $3.11. Looking ahead, SONS may be a nice play on the voice and data traffic sector, especially with the company’s earnings announcement coming up on the 28th of February. The company has beat three of the last four earnings announcements. The consensus estimate for this past quarter is $0.000, with three out of the six analysts that cover the stock with a buy recommendation.