Entropic Takes $55M Stab at Trident

LR Cable News Analysis Jeff Baumgartner, Senior Editor, Light Reading 1/4/2012

Multimedia over Coax Alliance (MoCA) specialist Entropic Communications Inc. (Nasdaq: ENTR) has filed a $55 million "stalking horse" cash bid to purchase the set-top system-on-chip (SoC) assets of bankrupt Trident Microsystems Inc. (Nasdaq: TRID). Entropic intends to expand its lineup of chipsets and place itself in more direct competition with Broadcom Corp. (Nasdaq: BRCM) and Intel Corp. (Nasdaq: INTC).

Trident, which filed for Chapter 11 bankruptcy protection Wednesday, makes a range of set-top box chips for satellite, terrestrial, cable and IPTV networks, as well as silicon for Docsis cable modems. The company has recently developed chips that power simple Digital Terminal Adapter (DTA) devices that cable operators are using to help support their analog spectrum reclamation efforts.

Entropic said it will hire 385 Trident employees based in China, India, the United Kingdom, Taiwan, Korea and the United States. In addition to set-top box products and its people, Entropic is also in line to pick up Trident's STB patents.

Trident posted a third-quarter net loss of $39.1 million, or 22 cents a share, on revenues of $80.1 million. Trident's been operating in the red, but it's been able to sign on several big companies as customers, including Cisco Systems Inc. (Nasdaq: CSCO), Samsung Corp. and Sony Corp. (NYSE: SNE).

Why this matters
If completed, the purchase looks to expand Entropic's product line and market opportunities well beyond MoCA chips and scale its business to compete with larger set-top and cable modem silicon makers such as Broadcom and Intel.

For troubled Trident, the deal would help it unload its STB business as it explores strategic alternatives for its remaining business units. It has already struck a deal with RDA Technologies, which has obtained a non-exclusive license for Trident's SX-5 SoC for televisions for an upfront fee of $7.5 million, with an additional $8.5 million to be paid "in the near term."

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— Jeff Baumgartner, Site Editor, Light Reading Cable