Trident Microsystems' Latest Acquisition Will Boost Earnings, Slow Cash Burn

Having recently lost several key Asian customers in the brutally competitive digital TV market, Trident Microsystems (TRID) went shopping in Europe last week to rebuild its top line. On its trip, Trident got a pretty good bargain. It will hand over some seven million shares, valued at roughly $10.3m, to Switzerland’s Micronas Semiconductor for three consumer product lines. We understand that the three units were generating more than $100m a year in sales.

The purchase comes at a crucial time for Trident. Revenue at the company has plummeted from $258m in the past fiscal year, which ended last June. With two quarters and guidance for the third quarter already in the books, revenue at Trident has totaled just $61m. That implies sales for the current fiscal year could well be just one-quarter the previous fiscal year’s figure. Along the way, Trident has slipped from a profitable business to a cash-burning one. Its difficulties haven’t been lost on Wall Street, which values the debt-free vendor at about $100m, just half its current cash level.

Trident’s pending pickup of the three Micronas units should help, both on the top and bottom lines. (Union Square Advisors worked with Trident while Micronas went with hometown bank Credit Suisse Securities.) The company indicated that the acquisition should put revenue at $35m for the quarter that ends in September, essentially matching the previous year’s level. More importantly, the combination will boost Trident’s earnings from the very start and slow its cash burn. The firm will have more to say about the deal, which will dramatically expand its portfolio and end markets, when it reports fiscal third-quarter earnings later this month. Meanwhile, we would note that Trident shares are slightly above where they were when the vendor announced the acquisition

Comments

[flashguy99999]

explain to us why it is a "pretty good bargain" to use stock instead of cash when your stock trades 50% below cash. You're inherently paying an extra 50% over the $10.5 million.

Does that still sound like a good deal to you?

2009 Apr 10 09:00 AM

[buyforeclosures]

Hey Flash...anytime you can avoid raising debt and contribute to even more negative cashflow its a good thing. If the Swiss company didn't feel it was getting a bargain ( or shares with upside ) what was in it for them? I think its a win win and TRID may be a buy if we see real recovery...on the sidelines for now... but I love a stock at that price with 3 bucks per share? still rosky but short term it may play out well....

2009 May 18 06:30 PM