SAN JOSE, Calif. – Home networking specialist Entropic Communications Inc. bid $55 million to acquire set-top box SoC assets of graphics chip designer Trident Microsystems as Trident filed for Chapter 11 bankruptcy.
Entropic's move will put it into competition with set-top box SoC and ASIC makers such as Broadcom, ST Microelectronics and Cisco Systems. Broadcom announced today a new line up of integrated set-top box SoCs supporting the MoCA 2.0 home networking standard, a specification Entropic helped pioneer.
Separately, RDA Microelectronics Inc. (Shanghai, China), a Nasdaq-listed
fabless chip company that markets RF and mixed-signal ICs, has signed a license and development agreement with Trident
covering its SX5 digital TV SoCs. RDA has agreed to pay $16
million in cash for a non-exclusive right to develop and
sell derivative versions of the Trident SX5 chips for ten years. The move will enable
RDA to enter the mainstream of the digital TV market.
For its part, Entropic intends to support existing Trident chips and customers and extend Trident's product lines to include MOCA support. The company has grown with the success of the MoCA coax home net standard it pioneered which is increasingly being adopted in IPTV and cable TV set tops.
At the end of 2010, Entropic's chief executive said the company had sold 30 million MoCA chip sets to date. He believed the industry was on a ramp to buy as many as ten million a quarter by the end of 2011.
Trident's set-top box assets include a family of chips and blocks for global satellite, terrestrial, cable and IPTV networks as well as DOCSIS modems and media processors. Trident's chips use a range of ARM Cortex-A9 cores supporting Adobe Flash, HTML5 and OpenGL ES 2.0, standards also generally supported by Broadcom which uses a MIPS-based processor core.
Under the deal, Entropic would also acquire related Trident patents and intellectual property as well as reference designs and related software.
If its so-called stalking horse bid is approved, Entropic would hire approximately 385 Trident employees located primarily in China, India, the United Kingdom, Taiwan, Korea and the United States. Entropic would also acquire facilities in Austin, Texas; Belfast, Northern Ireland; and Hyderabad, India and would use portions of Trident's facilities in China, Taiwan and Korea while it evaluates whether it will keep those offices open.
In addition to the $55 million purchase price, Entropic would take on an unspecified amount of Trident's debt. The deal is subject to bankruptcy court approval in the District of Delaware as well as court terms that allow other qualified bidders to submit competing offers.
Entropic expects that court hearings to approve bidding procedures, break-up fees and expense reimbursement will be held within the next two weeks, followed by an auction. The transaction could close in the first quarter of 2012, Entropic said.
The acquisition "provides an important strategic opportunity for Entropic by enabling us to combine our best-in-class MoCA solutions, including MoCA2, with Trident's system on a chip business to deliver a complete system solution," said Patrick Henry, president and CEO, Entropic in a press statement.
"Trident's set-top box SoC business is highly complementary to Entropic's leading MoCA solutions product line
"Our multi-year history of product collaboration, should allow a seamless hand-off for our OEM customers and service providers," said Bami Bastani, president and CEO, Trident. In September, Entropic invested $10 million in Zenverge Inc., a maker of MPEG transcode chips, saying the two would develop integrated products supporting MoCA 2.0. Early last year, Entropic said it would start sampling its MoCA 2.0 chips in June 2011.--Peter Clarke contributed to this report.
The market today decided this wasn't a good deal. From an engineering perspective, it sounds exciting that Entropic can combine MoCA with the existing Trident IP and offer more integrated solutions for IPTV and STB customers.
Is $55M too much to pay for bankrupt Trident? I guess it all hinges on the exact details of "Entropic would take on an unspecified amount of Trident's debt" -- which is around $500M. If unspecified amount means something close to zero, this could be a very smart move by Entropic.
Even that is a Wow! Their end of Sept quarterly filing listed total liabilities of $112M. Seems like either the $215M is wrong or there was some fraud involved in the Sept filing. Their burn rate certainly would not have added $100M in debt in one quarter.
This is interesting. Entropic+Trident provides STB integrated chip. Zenverge provides transcoding piece either directly or by educating Entropic in developing it themselves. Presumably they have all the CA and encryption technologies covered. Where does that leave a smaller player like Canadian Government step-child ViXS Systems, Inc.?
Financial data about Trident is all over the map, depending on which news source you read, and yesterday their stock rose almost 17% and today it's up another 44%.
I suspect there is a future news story brewing here...
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