In another sign of its sagging fortunes, Entropic is now exploring a wide range of options for the company's future, including possible sale.
Entropic Communications Inc. (Nasdaq: ENTR) announced Tuesday that its board of directors "has authorized the evaluation of strategic alternatives to enhance shareholder value." The company has also retained an investment banker, Barclays, to assist with these efforts. (See Entropic to Explore Strategic Alternatives.)
In its formal announcement, Entropic cautioned that this exploration of options will not necessarily lead to a sale of the company. It also said that it has not set any timetable or deadline for completing the process.
But some sort of drastic change in course and/or ownership for Entropic seems likely. The San Diego-based chipmaker, which specializes in silicon for pay-TV set-top boxes and chips and products that incorporate Multimedia over Coax Alliance (MoCA) home networking technologies, has been struggling to meet its own revenue targets quarter after quarter. It has also gone through three rounds of staff layoffs in less than two years as its product orders keep failing to meet expectations. (See Entropic Cuts Staff Again.)
Most recently, for example, Entropic laid off nearly a quarter of its global workforce in June, cutting 150 jobs as part of a major financial restructuring. The company also closed facilities in four locations around the world and consolidated other offices as it lowered its financial guidance for the second quarter and reported weaker-than-expected orders for the spring.
The past few months have also been a tough time for Entropic's leadership in other ways. In late June, a Utah court convicted Entropic President and CEO Patrick Henry on charges of assaulting Beverly Hills Nannies star Ariane Bellamar earlier in the year. Although the charge was reduced from a misdemeanor to an infraction and two other charges were dropped, the court action did not exactly put either Henry or Entropic in the best light.
In its announcement today, Entropic indicated that its financial performance will continue to disappoint investors. The company said it now expects third-quarter revenues to total $43 million, lower than anticipated, because of lower-than-expected sales for its satellite TV outdoor unit business and it chips for legacy set-top boxes. It now expects to post a GAAP loss of 28 cents per share for the quarter.
Moreover, Entropic CFO David Lyle said the company expects "continued softness in the fourth quarter as we are again seeing new product development delays." He said Entropic will provide further financial guidance for the fall quarter on its next earnings call in late October.
In a prepared statement, Henry said the company will keep trying to revive its sagging fortunes with new products and greater operational efficiencies. "Although we believe we have executed well on the product development front and have compelling products in the pipeline, delays in service provider launches and shifts in service provider deployment architectures continue to affect financial results," he said. "We have won some key designs, and taken positive steps to lower our breakeven and accelerate our path to profitability, but our transition is taking longer than anticipated. We remain focused on executing on the strategic and operational initiatives we announced earlier this year and returning the company to profitability."
— Alan Breznick, Cable/Video Practice Leader, Light Reading