Brightpoint to Acquire Touchstone - Analyst Blog

Brightpoint Inc. (CELL), a leading global wireless device distributor and customized logistics services provider, recently entered into an agreement to acquire privately held Touchstone Wireless Repair and Logistics, L.P. Touchstone is a leading provider of repair and reverse logistics services to the wireless industry. Brightpoint will pay $80 million in cash for this acquisition.

Brightpoint provides a full range of sales & distribution, logistics, and activation services to wireless device manufacturers and carriers. The company enhanced its portfolio of product offerings for customers, while developing new sales channels for its suppliers.

The acquisition of Touchstone will transform the merged entity as a formidable player in the industry offering both forward and reverse logistic services. Brightpoint expects this deal to be closed by end 2010 and slightly accretive to its EPS in 2011.

During the third quarter of 2010, Brightpoint supplied 24.907 wireless devices, up 14.3% year over year and 11.7% sequentially. Management predicted that for fiscal 2010, the company will supply wireless devices within the range of 98 million - 100 million, up 18% - 20% year over year. Out of this, 77% - 80% of its total wireless devices handhelds will be managed through high-margin logistics services.

Brightpoint has a solid global customer base. Management continues to seek new operational initiatives that foster improved customer handling of handsets, in particular PDA's, data and 3G wireless devices. The company will now integrate Touchstone's state-of-the-art asset management and product recycling activities to offer a whole bunch of innovative supply-chain management systems in more than 25 countries.

Brightpoint has an existing agreement with Time Warner Cable Inc. (TWC) to provide transportation management, inventory management, device customization, fulfillment, and reverse logistics for the latter's WiMAX venture. Brightpoint also launched a program to provide call center customer support, emission management services, and activation services to telecom, technology, and pharmaceutical companies.

We maintain our long-term Neutral recommendation for Brightpoint. Currently it is a short-term Zacks #2 Rank (Buy) stock.

 
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