AsiaInfo-Linkage, Inc. (ASIA): Controversy Haunts the $890 Million Acquisition

SAP AG is the world leader in enterprise resource planning (ERP) software used for integration of different back office tasks. Over half of its sales come from Europe, the Middle East, and Africa while the U.S. accounts for a quarter.

With a market capitalization of $94 billion, SAP AG is in a league of its own. Amdocs has a market cap of $5.8 billion while the corresponding figure for AsiaInfo-Linkage, Inc. (NASDAQ:ASIA) is $844 million. Stock prices of SAP AG (ADR) (NYSE:SAP) and Amdocs have both shown a consistent upward trend over the past one year.

Among other things, price-to-earnings (P/E) ratio represents the number of years a stock investor is ready to wait in order to recover his investor. AsiaInfo-Linkage’s P/E ratio of 21.6 is better than that of Amdocs’ 15. Here again, SAP AG (ADR) (NYSE:SAP) outperforms both these with a P/E ratio of 25.4.

Conclusion

Because shareholders of AsiaInfo-Linkage will receive no more than 12 USD per share after the deal matures, it is better not to invest in this company unless the investor is willing to risk his funds on the outcome of the investigation.

Stockholders of AsiaInfo-Linkage, Inc. (NASDAQ:ASIA) should hold because the investigation may rule in favor of shareholders causing disproportionately large stock appreciation. Otherwise, the current price of $11.60 is less than what they can make.

The article Controversy Haunts the $890 Million Acquisition originally appeared on Fool.com and is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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