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Executives

John Swenson – Director, Corporate Finance & IR

Pete Mangan – EVP and CFO

Sylvia Summers – CEO

Analysts

Rajvindra Gill – Needham & Company

Adam Smith – Rose Lane Capital

Daniel Berenbaum – Arigeria USA

John Kavinsky – Kavinsky Capital Management

Wayne Algor – Strata Capital

Trident Microsystems, Inc. (TRID) Q2 2010 Earnings Call July 29, 2010 5:00 PM ET

Operator

Good day, Ladies and Gentlemen, and welcome to the Second Quarter Trident Microsystems Earnings Conference Call. My name is Kiada, and I will be your operator for today’s call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to your host today, Mr. Don John Swenson. You may proceed.

John Swenson

Thanks very much. Thanks everyone for joining us. Good afternoon and welcome to the Trident Microsystems Conference Call for the Second Quarter ending June 30, 2010.

After the market closed today, Trident issued a press release discussing results for the quarter. The release is accessible online at www.tridentmicro.com. This call is being broadcast live over the web, and is accessible using the link found in today’s earnings press release. A replay of the webcast will be available starting tomorrow by accessing the Investor Relations section of Trident’s website.

Before we begin, please note that during this call, we will make forward-looking statements. These include comments related to guidance on anticipated revenues and operating losses, the phase of restructuring, and the degeration activity, future product shipments, and other statements. We are not obligated to update these statements.

Actual results may differ materially from the forward-looking statements made today, and have in fact done so in the past. These projections or forward-looking statements are subject to certain risks and uncertainties. These risks include in particular our ability to realize the benefits from our acquisition of product lines from NXP, our ability to build upon our core strengths, including our technology, and engineering team, competitive cost structure, and strong balance sheet, the timing of product introductions, the ability to obtain design lens among major OEMs for our products, the availability of wafers from our suppliers, and competitive pressures including pricing and competitors new product introductions, the impact of the uncertain global macroeconomic environment, the increasingly competitive DTV market, and our ability to retain key employees.

These and other factors are discussed in our press releases and in the company’s filings with the SEC. We encourage you to read these documents and to come to your own conclusions about the risks and uncertainties inherent in Trident’s business.

Also please note, we will present non-GAAP financial information in this call. For reconciliation of our non-GAAP information to the comparable information under GAAP, please refer to our earning’s press release.

Okay, on today’s call are Sylvia Summers, Trident’s CEO; and Pete Mangan, Trident’s Executive VP and CFO. Pete will review the financial results for the quarter, and Sylvia will follow with further discussion of Trident’s business. Finally, Pete will provide guidance for the third quarter, and we will then open the calls for questions.

Now I’ll turn the call over to Pete Mangan. Pete.

Pete Mangan

Thanks, John. Welcome, everyone, and thank you for joining the call today.

I am very pleased to present the results for the second quarter of calendar year 2010, which is also the first full quarter with our new TV and Set-Top Box products acquired from NXP.

For the second quarter, net revenues came in at $171.6 million, which exceeded the high end of our guidance by 4%. TV products delivered $128.4 million, or 75% of total revenues, which was fairly evenly split between SoCs and discreet products.

Set-Top Box revenue came in as expected at $43.2 million. Sales concentration for the quarter included Samsung as our number one customer with 23% of total revenues followed by Phillips with 14%.

Geographically, Korea represented 35% of revenues, EMA 26%, and Asia Pacific at 22%. The distribution channel represented 27% of revenues in the quarter. Overall blended average selling price for the quarter was $3.36.

Non-GAAP gross margins for the quarter doubled from the prior quarter to $50.8 million or 29.6% of sales. The gross margin percent was approximately 1.5 points better than the prior quarter, primarily the result of economies as a scale. And better than guidance as a result of favorable product yields in the quarter.

GAAP gross margins for the quarter included the impact of amortization related to the NXP acquisitions. And as a result, totaled $32.9 million or 19.2%.

Non-GAAP operating expenses of $66.6 million came in at the low end of our guidance with R&D in line with our expectations at $48.1 million, and SG&A of 18.4, which was better than our guidance by approximately 10%.

Please note that for the quarter total OpEx included $8.5 million, or 5% of sales from transitional support services from NXP.

The non-GAAP operating loss of $15.7 million for the second quarter improved $10 million from Q1, and was significantly better than guidance as all areas of the P&L outperformed with higher revenues in gross margins on lower operating expenses.

Net loss for the quarter on a non-GAAP base was $14.8 million, or $0.09 per share. This compares with a non-GAAP net loss of $25.8 million, or $0.20 per share in the prior quarter.

GAAP net loss for the quarter was $49 million, which includes $34.2 million of GAAP adjustments. This includes $19.1 million of intangible amortization, $7.9 million related to the impairment of good will, and $4.5 million of restructuring.

The good will impairment relates to the Micronas product lines. Both the product and the IP for Micronas continue to perform and provide value. However, our annual review determined that there was too great of gap between our book value and the company’s current market value necessitating the write-off.

Please also note, we recorded a $3.7 million purchase accounting adjustment to the March, 2010 quarter results reducing the negative goodwill and increasing the GAAP net loss for that period.

For additional information, please refer to the GAAP reconciliation table in the earnings press release.

Now, turning to the balance sheet highlights. Cash as of the end of the quarter was $97 million and in line with our guidance. The decrease in cash in the quarter was driven primarily by the change in working capital and the operating loss.

Related to working capital, trade receivables were $98 million, or 52 days of sales, an increase of $13 million from the prior quarter on higher revenues.

Inventory of $32 million, or 26 days, grew by $6 million from the prior quarter. And accounts payable and accrues of $130 million, or 61 days, increased by $8 million.

In summary for Q2, our financial performance significantly exceeded our expectations at the beginning of the quarter, as well as when we announced the transaction in October, 2009.

This concludes our financial review of the June quarter. Before I address the guidance for the coming quarter, let me turn the call over to Sylvia for her comments. Sylvia.

Sylvia Summers

Thank you, Pete, and thank you all for joining us on a call today.

As Pete mentioned, the second quarter was our first full quarter with the acquired NXP product lines and the first full quarter of the new Trident.

We are a dramatically different company from the Trident of three years ago, and even the Trident of six months ago. Where the old Trident was defined by the success of a single product line focused on mid-range to high-end of a DTV market, the new Trident is an IP-reached, broad-based provider of solutions that enhanced the consumer experience in the connected home.

Our Set-Top Box products are at the heart of the rollout of high definition, as well as advanced functionality and 3D.

Our TV product range include SoCs that drive superior picture quality and connectivity in a DTV mid range and value range.

It also includes this C-def RCs that handle the most advanced technology for 240 hertz, and 3D, and as well as analog CRT, PCTV, and discreet audio analog products. This product breadth was highlighted in the second quarter as FRCs and other discreet products were presented 39% of total revenue, followed by TV SoCs at 36%, and Set-Top Box at 25%.

We believe our total product portfolio is among the most comprehensive in the industry, which provides complete advantage as well as greater revenue diversifications for Trident.

At the same time, we are setting Trident apart as a technology leader. The success of our FRC product lines slows directly from our ability to deliver very high picture quality into the DTV high end, bringing consumers hell-free motion compensated video in combination with 240 hertz and 3D.

This positions Trident to be first to market with the pictures that consumers demand. And first to market with fully integrated SoCs to drive these technologies into the mid end value ranges of customer product lines.

We are establishing technology leadership in Set-Top Box as well, as customers are embracing our Apollo/Shiner product for its advanced enabling features and low power requirements.

There is plenty of room for innovation in our served markets. Although price still matters, we have demonstrated in Korea and in other countries that we can win large chunks of business at price premium to the competition when our performance is clearly superior.

Now let me provide an update on customer and development activity across our business.

In Set-Top Box, we are continuing to transition to new high definition products. Our new Apollo/Shiner platform is being well received based on its advanced power management and low power consumption, best-in class 3D graphic accelerator, leading CPU architecture for application support, 3D video processing, and a host of other advanced features.

On a worldwide basis, we continue to build relationships with Tier One operators, as well as in different development partners to expand our market reach and enhance customer engagement.

Some of this effort is paying off in the second half of the year as we expect to grow the business 10% to 15% sequentially in Q3, driven in part by the ramp of operator programs in North America with Comcast and Direct TV.

In the import cable segment, we mentioned on our last call that we are supplier to Comcast DTA program. Our OEM customer Sysco started to ramp in Q2. And will drive volume in the second half of the year.

For 2011, we expect growth related to DTA including opportunities with additional OEMs. We also believe that DTA can be a spring board for expanding our business in cable, particularly as we continue to roll out Apollo/Shiner.

In the satellite operator segment, we are seeing a significant increase in demand for the second half of this year with existing OEMs serving the Direct TV, high definition, and high definition DVR programs we announced earlier this year.

For next year, we expect to ramp a high definition program with another large satellite operator.

In addition, we have a number of design wins for 2011 revenue in the satellite operator segment for our new Apollo/Shiner platform.

Set-Top Box in China presents a large and growing market for Trident. We believe we are well positioned with multiple operators and OEMs for NGB, next generation broadband, which is a triple play for TV, internet, and telecom services. We are in a designing stage and expect to ramp revenue in early 2011.

In retail, we are achieving strong traction driven by the rollout of high definition, and building on our solid position in greater China. We also are seeing strong demand in the IP TV segment, and are engaged with multiple customers for video on demand services.

We are continuing to invest in our roadmap with Set-Top Box to build on our technology leadership and to expand our market coverage. We are developing three advanced chips that we believe will help us drive share growth in the high definition, high definition DVR, and C client for cable, satellite, and IP TV.

Now turning to TV, we had another strong quarter in TV. Our results could have been even stronger if not for supply constraints, which we expect will continue for the remainder of the year.

We delivered significant volumes of SA1 SoC for the value range based largely on strong demand from Samsung.

We also delivered significant volume of our new 45 nanometer mid range SoC with TD550 primarily to Phillips.

We are now the market leader in FRC with estimated market share of approximately 50%. Continuing a trend we saw in Q1, our decretive business was very strong in Q2.

We also have some surprisingly solid demand for analog CRT products, a segment where market share is approximately 65%. During the quarter, we received first selection of the SXL, our new and cheapest OC for the connected TV value range, and multi function monitors.

We began demonstrating the product in June to areas in Korea, Japan, and China. The back, so far, is very positive.

We believe the SXL is well positioned in terms of picture quality, connectivity, and cost to capture design winds for 20111.

For the DTV mid range, we expect to build on the 2010 success of our 45 nanometer TD550 by broadening its Tier One design wins for 2011. We currently are engaged with three top ODM and one large ODM for 2011 production with this product.

With industry-leading picture quality, low cost MEMC, and 3D support, and a strong connectivity offering, we believe the 550 is the most capable mid range associate in the market today. And we believe it continues to be the industry’s best mid range solution for 2011.

In FRC, we see continued strong interest in our PNX 5100 series products. This has been driven in part by 3D where the industry’s current best-in-class solution is to use two of our 120 hertz PNX 5100 FRCs to drive left and right images.

We also are now funding our next generation FRC product called the FRCV, which will provide a single cheap support for 240 hertz, 3D, and 2 to 3D conversion. Customers worldwide are evaluating the product, which we anticipate will represent a significant portion of our FRC revenue in 2011.

As we look toward TVD design winds for 2012, we expect late this year to tape our [inaudible] for a new flagship TV SoC called Fusion. Fusion will fully integrate the best of Trident’s high IPs, including the leading edge capabilities we offer in the FRC product lines, such as 240 hertz and 3D. We believe it is well positioned to help us continue the momentum of TD550 and to fulfill the industry’s requirements for providing today’s advanced features in a mid range SoC for 2012 mass production.

In conclusion, we are very pleased with our results in Q2 and with the progress of our integration. Our gross margins are tracking ahead of plan. Our products that must drive 2011 revenue are now sampling, and are exhibiting the performance leadership necessary to win.

Meanwhile, operating costs continue to come down in line with our integration plan. And we remain on track to achieve non-GAAP operating break even by year end.

We have a great deal of work to do over these next few months to secure design wins for 2011 and to continue to take costs out of the organization. We expect to succeed in both of these endeavors as we continue to build towards sustainable profitability for the company.

And with, I’ll turn the call back over to Pete.

Pete Mangan

Thank you, Sylvia. I will now provide the guidance for the third quarter ending September 30th, 2010, as well as provide some further comments on our non-GAAP operating break even goal.

In Q3, we expect revenues in the $170 to $180 million range. TV revenues are projected to be essentially flat with Q2 due to supply constraints. And Set-Top Box revenues are expected to grow 10% to 15% over the prior quarter.

We are clearly on a trajectory of gross margin improvement. And expect this trend to continue in the direction of our long term model of 35%. We are now guiding Q3 gross margins in the range of 32% to 34%.

Non-GAAP operating expenses are expected to be in the range of $59 to $62 million, with R&D expenses in the range of $42 to $44 million. And SG&A expenses of approximately $17 to $18 million.

Overall, OpEx is expected to decrease 7% to 11% from Q2 as NXP transitional services will be down significantly from the prior quarter. And we begin to benefit from the restructuring actions taken so far.

Non-GAAP operating loss is expected to be in the range of $2 to $6 million.

I am pleased to note that after eight quarters of significant operating losses for the company, the September quarter is expected to mark a return to positive EBITDA. As such, the projected cash balance at the end of the quarter is expected to be $85 to $95 million with severance cost of $7 to $9 million being the primary cash requirement in the quarter.

Also please note to provide more flexibility in management of working capital. Earlier this month we signed a term sheet with Bank of America for a $40 million line of credit, which we expect to finalize in the current quarter.

In closing, we have guided for the past nine months to our goal of achieving non-GAAP operating break even by year end.

As Sylvia has mentioned, we are reaffirming today that we’re on track to achieving that goal. Given our current outlook for product mix and supply constraints as well as normal seasonality, we expect now to break even in the fourth quarter on approximately $150 to $160 million of revenue with gross margins in line with our long term model of 35%.

That ends our prepared comments. Sylvia and I will now take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Rajvindra Gill of Needham & Company. You may proceed.

Rajvindra Gill – Needham & Company

Yes. Thank you. And congrats on a really good results and execution. A question on the gross margin profile. I might have missed it because I’m going in between calls right now. But gross margins came in materially higher for the quarter as well as for the guidance. You know, maybe if you could maybe talk a little bit about the puts and takes there.

Also, if you’re able to, you know, create gross margin profit now from the Samsung business as that ramps, and kind of what your kind of future outlook is for margins as you go into the second half of ’10 and into 2011.

Pete Mangan

Okay. A couple of things, comparing gross margins for the quarter came in at 29.6%. They were up from the prior quarter comparing them quarter on quarter. The results of economy as a scale with higher revenues. They were higher than guidance though because we had also had better product yields than we had expected. So we were walking into the quarter sort of expecting a little weaker mix of product knowing that we had the economy as a scale, but we got the economy as a scale and better yields that gave us sort of a neutral product mix for Q2.

For Q3, the main driver is really product mix. As we ramp further our mid-range SoCs in the quarter and that is the main driver for our new guidance to 32% to 34%.

And then ending, if you will, on gross margins, we clearly have a strong trajectory, and are looking to achieve by year end now, our original long-term model of 35%.

I still think that 35% for the moment is probably the right long-term model given the competitiveness in the market. But for the moment, we’ll align with that and then in years to come re-evaluate whether there’s further upside on it.

But for now, we’re able to drive a good gross margin.

Rajvindra Gill – Needham & Company

All right. Great. And maybe could you just talk a little bit about the Samsung ramp?

Pete Mangan

So Samsung in the quarter represented 32% of revenues. I’m sorry, 23% of revenues for the quarter, and was made up of a mix of your SA1 low-end product and FRC products primarily.

Rajvindra Gill – Needham & Company

Okay. And do you see Samsung taking share from Phillips, or from Toshiba in the U.S., or other markets? Does that contribute to kind of the upside on the revenue side?

Sylvia Summers

Yeah, Samsung is definitely gaining share everywhere. In fact, Samsung is number one and LG is number two. You see Sony fall behind. And then everybody else behind again.

Does that contribute to the revenue increase? I mean, being 23%, of course, Samsung is very heavy. At the same time, we also mentioned that we were supply constrained. So I think everybody right now is increasing. I mean, most of our customers have upside right now, and have this quarter. The market is going pretty strongly right now.

Rajvindra Gill – Needham & Company

So what is your forecast for the overall TV market? Do you see any particular weakness on the horizon coming out of Europe, or is that not really that big of an issue?

Sylvia Summers

We are hearing about [inaudible] right now. Clearly, pretty much across the board. You’re right to mention, but we’ve heard it also in China. Hard to see what impact it will have. Certainly our guidance reflects the fact that we are taking this into account as well.

Rajvindra Gill – Needham & Company

And maybe if you could just kind of update broadly in terms of how the integration is tracking. Where are you in terms of kind of the restructuring program, in terms of getting the head count to the right level?

Also, in terms of where, you know, Sylvia, where do you think, you know, with the acquisition of Micronas, as well as NXP. How do you think you’re best strategic, you know, strategically positioned to gain share? What differentiation do you see there? Maybe if you could talk a little bit about the 2011 design cycle, when that’s going to ramp and where do you see particular upside or opportunities to gain share?

Sylvia Summers

Okay. So if we take the first question, which is restructuring, I mean, I think we’ve informed everyone that the restructuring would be roughly a $30 million cost for us, and we are about 40% of it. So most of it is in the plan and is on track and will happen on time. This, by the way, also explains some of the guidance that we’re giving.

My view of it is that actually this integration is going pretty well. I mean, I’m pretty bullish about it. Not only because of the results, but also because products are coming out of our R&D. A lot of the transfer of technology between Europe and Shanghai, where all of our major SoC work is happening, is actually ongoing very well. Products are coming out on time, or very fast.

So I’m pretty bullish right now about that. But that’s the status of the restructuring. So we still have some work to do. We also mentioned that this would go on until Q1, I mean, the first half of next year. And it’s a phased approach. So we’re tracking to that.

Pete Mangan

Exiting Q3, we’ll have about 2/3s of the charges, so we’ll have another $7 to $9 million this quarter, and have about 2/3s of the original $30 million that we had mentioned. And the $30 million is still the number we’re tracking to. There’s a little bit more additional, if you will, come the first quarter of ’11, but that $7 to $9 million additional this quarter, there’s another 25% of the 30.

Rajvindra Gill – Needham & Company

Okay. At least you’re kind of expecting [inaudible] any cash first quarter ’11, would you say, or –

Peter Mangan

Well, maybe you missed. We’ve resided our guidance on the loss. We’re projecting $2 to $6 million for a non-GAAP operating loss in the quarter. And are positive EBITDA in this quarter.

Rajvindra Gill – Needham & Company

Okay, yep.

John Swenson

Rajvindra, would you mind jumping back into queue? We’ve got a few other people lined up for this call.

Rajvindra Gill – Needham & Company

Sure. Yep.

Sylvia Summers

I still would like to address the question of differentiation though.

John Swenson

Okay.

Sylvia Summers

Okay? Because I think it is totally central to why it is we do acquisitions. I think we’re sitting on a portfolio of technologies which are really second to none. I mean, the whole industry speaks about 3D for example. We have, for those who care, [inaudible]. I mean, we’ve got excellent products going on in 3D. We mentioned that we were winning at this specific time because of it. 3D picture quality, our products will have all the connectivity that is maybe for connected TV, and this is a result, also of some of those centers of excellence we are keeping in our Europe who are developing advanced technology that are going to be integrated into the next SoC.

So for us now, as we have Shanghai, we can integrate SoCs really well as we have centers of excellence. I think the name of the game is going to become innovation. And this is where now, as we execute on the plan, we’re turning our mind to because we need to be differentiated. We need to be first to market. And as we become that, I think our prices will be able to increase, and then we’ll be able to win more business.

So innovation is going to be the name of the game for us going forward.

John Swenson

Okay. Thank you. Next question.

Operator

Our next question comes from the line of Adam Smith of Rose Lane Capital. You may proceed.

Adam Smith – Rose Lane Capital

Hi, guys. Congratulations on the results. Just focusing on OpEx for a moment. Can you update me, or us, in terms of where you think this finally settles out? What’s the right run rate, whether that’s as a percentage of sales?

And what the break even would be in terms of sales at different levels?

Peter Mangan

Right. So in sort of the update, Adam, on the December quarter we’re looking at revenues of 150 to 160, 35% gross margins. We put OpEx in the mid-50 range, call it 55. So in principle, with the middle performing, break even would be right in line with that outlook for the fourth quarter. And we have some further restructuring that occurs in Q1 ’11, but really, it’s sort of in the mid-to-low 50s is the infrastructure of the company going forward.

Adam Smith – Rose Lane Capital

Okay, great. And then on the gross margin, as you ramp some of these new 45 nanometer products, are they at or above what your target, I guess, would be for 35% gross margin?

Peter Mangan

I think we have two 45 nanometer, technologies, one on the TV side, which is the TD550, and on the Set-Top Box side. And so I think probably the better was to look at it instead of node, is sort of breaking out the discreet products of the company that Sylvia mentioned were 39% of the revenue. The SoCs at 36, and the Set-Top Boxes, where clearly the discreet revenues are higher margin product than SoCs. And the Set-Top Box tend to be, to date, better than the SoCs. But maybe that’s probably the better way of looking at a mix.

Adam Smith – Rose Lane Capital

Okay. Great. And then you mentioned you’re sampling the single chip now. How is that congruent with kind of the design cycles for 2011? Are you comfortable that you’ve got enough product that folks are looking at in order to make those design ins?

Sylvia Summers

The answer is yes. I mean, what we mention is SXL, which is our low-end, low-to-high end – I mean, low-to-mid range product, is absolutely on time for 2011. I will also mention that TD550, which is already shipping with additional applications on the platform, will also be a key product for the mid-range for 2011. So yeah. We have what we need today. FRC as well, as a discreet product, is being designed right now.

So we’ve got what we need for 2011. We’re now working on 2012 products. By the way, same story about Set-Top Box.

I also want to mention that Set-Top Box is a major early-all investment for this company.

Adam Smith – Rose Lane Capital

Okay. Fantastic. Thanks so much.

Sylvia Summers

You’re welcome.

Operator

Our next question comes from the line of Daniel Berenbaum of Arigeria USA. You may proceed.

Daniel Berenbaum – Arigeria USA

Hi. This is Anna for Dan. A working capital question. Now that you’re establishing a baseline for the combined business, how should we think about your working capital metrics in terms of inventory turns and data sales outstanding?

Peter Mangan

Yeah. I think clearly the June quarter got us to the NuCo base, with 52 days of receivables. I would say DSOs are in the mid-50s range. So I think DSOs have leveled out. Inventory’s at 26 days. It’s certainly light in the quarter, it may also lead to, you know, just reference the shortage of supply that we have. Inventory overall should probably be about 40 days to 45. And payables for the quarter came in at 61 days. And I would say there were some payments made at quarter end that drove the days down, where days would typically be more in the 70 to 80 range.

Daniel Berenbaum – Arigeria USA

Thanks.

Operator

Our next question comes from the line of Wayne Algor of Strata Capital. You may proceed. I have to apologize, they withdrew their question. The next question come from the line of John Kavinsky of Kavinsky Capital Management.

John Kavinsky – Kavinsky Capital Management

Hi, guys. How’s it going?

Peter Mangan

Good, John.

John Kavinsky – Kavinsky Capital Management

I had one question here about the supply constraints. How’s that affecting you guys? How negative is that, or what do you plan on doing? What can you do? And how do you see that playing out?

Sylvia Summers

Our quarter, this quarter would have been a lot better if we hadn’t had the supply constraints, which by the way, was across the board, pretty much from each foundry. And we have one, two, three, four different foundry partners today.

It did effect, in particular, our Korean business. We also mentioned in the call, that it is going to remain through towards the end of this year. So the question is, what can we do about it. And obviously, we’re working very hard with our foundry partners, grabbing every piece of wafers that is available throughout the quarter as they constantly are working on their mix.

Looking into the future, I mean, some of those products are becoming very high-volume products. We are building a strategy of second source to be able to meet whatever demand comes in the future.

Peter Mangan

John, as a reference, if you quantify the amount of supply, why we didn’t have for the quarter was about 15% to 20% of revenues.

John Kavinsky – Kavinsky Capital Management

Okay. All right. And one other question. Do you have an idea of what your – kind of a worse case trough cash level would be after all of the severance and everything is out and you’re at break even?

Peter Mangan

Yeah, I mean, our operating results are a little bit better than what we had planned for the first half. So you know, it tends to be in the 75 to 80 million range; 70 to 80 million range is probably the bottom.

John Kavinsky – Kavinsky Capital Management

That’s great. That’s great. I just wanted to say, you know, great quarter. It really does look like the big picture is starting to come together. That’s all, thank you.

Peter Mangan

Thanks.

Operator

(Operator Instructions) Our next question comes from the line of Wayne Algor. You may proceed.

Wayne Algor – Strata Capital

Hi, guys. Sorry about the mix up there.

Peter Mangan

No problem.

Wayne Algor – Strata Capital

I’ll add on the congrats. Nice quarter. I’m trying to understand a couple of things that you said. One thing, Sylvia, you mentioned that you had some of 65% share on that old CRT business. I’m wondering what percent of the TV revenues CRT still makes up?

Sylvia Summers

Can you hold just a minute. Peter’s looking for the answer.

Peter Mangan

I mean, it’s $15 to $20 million of revenue.

Wayne Algor – Strata Capital

Okay. And the just, it really sounds like if you guys could get more capacity you’d be probably guiding to a stronger number the September quarter. I’m wondering, you know, given that you, you know, seasonally we see the TV market grow certainly more than flat. Do you think that you’re giving up market share at any of our key customers because you can’t meet demand?

Sylvia Summers

We may. We may be losing some market share, especially in Korea in TV.

Wayne Algor – Strata Capital

Okay. Would that be on the SoCs or FRCs?

Sylvia Summers

Most SoCs.

Wayne Algor – Strata Capital

Okay. Do you think that strategically something we should be worried about, or you know, something you’ll be able to get back once the capacity comes up?

Sylvia Summers

So, you’re asking a difficult questions because as you know, a the end this year, all bets are off and we’re back to winning 2011. Right? So it’s too early to say. We’re in the middle of the battle pretty much everywhere. In fact, we’ve expanded our customer attack, if I may say it that way. So it’s difficult to say yes for 2011. We’re engaged everywhere, not only with SoCs but also with the Samsung products.

And of course, in Set-Top Box everywhere as well.

Peter Mangan

As maybe going be six months to a year, when we talked about the low end of Samsung, this is really the two-chip solution where the original Micronas audio demod with a Tritan video and we’ve also characterized it as low-margin business. So though you see that the top line being constraint, the margin performance is still there, and the margin dollars are still driving the original financial model we’ve been talking about.

Wayne Algor – Strata Capital

Okay. So you guys are obviously, you know, focusing the production on the higher margin products? Okay. Great. And as we look at the new satellite set-top opportunities for next year, you mentioned that you’re going after another satellite carrier. How big is that opportunity for you guys initially, and how should we kind of characterize that ramp?

Sylvia Summers

Typically we don’t guide to that, right? We don’t tell you the – it’s an important customer for us. That’s all we can say.

Peter Mangan

I mean, we’re working on the design wins now. I think the important comment today was that we’re looking for the Set-Top Box to grow at 10% to 15% in this quarter alone, and is a continued step in the right direction for Set-Top Box.

Wayne Algor – Strata Capital

Great. And one last one if I can on the accounting side. When you guys go profitable here, you know, what’s that going to do to the share count? We’re about 174 million shares now, when we kick over into positive territory, what do we need to do to our share counts?

Peter Mangan

I think you leave them at the 175 million level.

Wayne Algor – Strata Capital

Okay. Great. Thanks, guys.

Sylvia Summers

You’re welcome

Operator

With no further question at this time, I would know like to turn the conference back over to management for final remarks.

Sylvia Summers

Thank you, and please not that we will be presenting in New York City on August 23rd. And the week of September 13th, at the BWS and [inaudible] Conferences respectively.

That concludes our call, and thanks again for joining us today.

Operator

Thank you for your participation on today’s conference. This concludes the presentation. You may now disconnect. And have a great day.

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Source: Trident Microsystems, Inc. Q2 2010 Earnings Call Transcript
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