Trident Microsystems: Next Year Should Be Better

At this time of the year, I look for solid companies that may be beaten down by tax loss selling. Trident Microsystems (TRID) showed up on several screens and has really been hit hard over the last month. I bought some shares on Monday.

Trident designs, develops and markets integrated circuits for high end video graphics, multimedia, and digitally processed television products for the desktop and notebook personal computer market and consumer television market. It has operations in South Korea, Japan, the People's Republic of China, Taiwan, and Europe. The company was founded in 1987 and is headquartered in Santa Clara, California.

On Friday, TRID reported third quarter revenue of $88.2 million a little short of Street estimates. But the company’s lower fourth quarter guidance apparently shocked the street's analysts, and five of them downgraded TRID last Friday (after the stock price already dropped).

Trident forecasted revenues of $70 to $72 million, far below the analyst consensus of $91 million. Trident management said that the LCD TV market is dividing between high-end models sold in specialty stores and more cost sensitive lower end sets sold in discount chains. Trident is strong in high-end TV’s but they face challenges and competition in the lower-end (and less profitable) WXGA markets. But the company forecasts continued revenue growth starting up again in the second half of 2008.

As part of my stock research, I look at several message boards, and found an interesting link on the Yahoo! Trident board from poster mcat96. He predicts that 2008 will be a banner year for HDTV’s with 1080p resolution, and Trident is a dominant leader in this segment. Digital broadcasting still uses the older 1080i or 720p format, but better content for 1080p is expected to come from Blueray and HD-DVD and next generation game consoles.

Another issue to consider is movie frame rate. Trident's HiDTV chips use 120Hz. This article explains why a movie's 24 fps is going to look "smooth as butter" with a 120Hz frame rate.

As the deadline for a digital broadcasting switch gets closer, 1080p HDTVs get cheaper and HD-DVD/BD usage spreads, 1080p HDTVs and Trident should do quite well next year.

Full Disclosure: I am long TRID shares.

Comments

[gary kallanxhi:]

Are you kidding me?

You look at message boards for your research?

2007 Nov 20 03:28 AM

[qwerty man:]

You can find links to related articles - sometimes a lot faster than sifting through the crap from search engines. Investor sentiment is also important and can be gaged from message boards. While message boards can be a valuable tool for further research, one should ALWAYS do hard DD first based on filed statements, technicals, etc...

2008 Jan 26 10:04 PM