International Rectifier (IRF) and Vishay Intertechnology (VSH) have finally settled their long-standing dispute. International Rectifier refunded $30 million in lieu of money paid by Vishay for the acquisition of its Power Control Systems (PCS) business.It was also made to license some additional technology to Vishay that was developed subsequent to the closure of the deal. IRF was able to eke out one small advantage. The "not-to-compete" clause in the agreement was amended in its favor. Accordingly, subject to certain specified conditions, IRF is now able to develop, design, manufacture and sell products that are based on technologies already sold or licensed to Vishay.The sale was completed in April 2007 for $290 million. A year later, VSH wrote down the newly acquired automotive modules and subsystems business (part of the deal) by $32.3 million. It also claimed damages from IRF ...

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International Rectifier Corp.’s (IRF) results have been held up by an accounting irregularity investigation. The company was the target of an acquisition bid by Vishay Intertechnology (VSH) that does not appear to be enough to strike a deal. Further the company has several patents expiring in 2008, which will result in a loss of $40 million in annual revenue. Consequently, we continue to rate shares of IRF a Hold.

The proprietary products business is expected to grow fast enough to replace the lost revenue, while supporting a total topline growth rate in the mid-single digits. Margin expansion should be a byproduct of the shift in product mix. Gross margins have already moved from the mid-30s to the mid-40s over the past two years, as the higher-margin proprietary analog and power systems business displaced portions of the legacy component business.

We see a potential ramification of attempting to increase the revenue

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