Thursday, September 29, 2011

Atmel to Acquire ADD Semiconductor

SAN JOSE, Calif., Sept. 27, 2011 /PRNewswire/ -- Atmel® Corporation (Nasdaq: ATML) today announced that it has signed a definitive agreement to acquire Advanced Digital Design, S.A. ("ADD Semiconductor"), a privately held company based in Zaragoza, Spain that develops power line communication solutions. The transaction is subject to customary closing conditions and is expected to close in October. Atmel does not expect the acquisition to have a material impact on its overall financial position and results of operations in 2011. 

ADD Semiconductor, a founding member of the PRIME Alliance, specializes in the design of system-on-chip solutions that allow for narrow-band data communication across existing electric power lines. In addition to successfully supporting a number of advanced meter infrastructure ("AMI") pilots in Europe, ADD Semiconductor products are also targeted towards the lighting, building automation and solar infrastructure markets. 

With ADD Semiconductor, Atmel will acquire a portfolio of innovative products and a team of technical experts focused on signal processing and power line communications. This acquisition complements Atmel's existing smart energy product portfolio, better positioning the company for continued success in the growing smart meter, energy management, home and building automation markets.

Monday, September 26, 2011

Entropic invests $10M in Zenverge

SAN DIEGO, Sept. 26, 2011 (GLOBE NEWSWIRE) -- Entropic Communications, Inc. (Nasdaq:ENTR), a leading provider of silicon and software solutions to enable connected home entertainment and Zenverge, Inc., a leading developer of advanced media integrated circuits (ICs) for the connected home, today announced a strategic partnership to co-develop solutions and align product roadmaps for the delivery of content with powerful transcoding technology over a MoCA® 2.0 (Multimedia over Coax) home network. In addition, Entropic has made an investment in Zenverge totaling 10 million dollars (USD).

Service providers are seeking cost-effective ways to broaden delivery of video content beyond TVs, to portable display devices like tablets, smartphones, and laptops. Building on the partnership between the two companies announced earlier this year, a combined Entropic-Zenverge solution will enable service providers to leverage their investment in MoCA networks and the paradigm shift to IP content, to significantly expand the number and types of display devices on which their subscribers can consume content, while maintaining superior quality, security and market leading MoCA home network connectivity. With faster than real-time high definition (HD) transcoding from Zenverge and unsurpassed MoCA 2.0 performance from Entropic, pay-TV, over-the-top or personal video content can be streamed from a DVR, a network attached storage (NAS) device, or a personal computer (PC) and converted to a format most suitable for viewing on tablets, smartphones, or laptops. This content can either be watched immediately in a connected mode, or later from content stored locally.

The product roadmap alignment between the companies integrates the following features and attributes of each company to ensure a superb, seamless content viewing experience throughout the home and on any device:
  • Zenverge's Entertainment Nexus (ZEN) advanced architecture for HD media processing. This powerful architecture results in a high-performance, low-latency, lower power digital media processor capable of transcoding HD content up to four-times faster than real-time, and up to 30-times faster for lower-resolution content. In addition, the Zenverge media processor can simultaneously transcode up to four independent HD streams, or up to 16 independent standard definition (SD) streams, along with supporting full encode of HD content.
  • Entropic's MoCA 2.0 home networking silicon. Entropic brings proven speed and performance with its MoCA silicon and software. Enabling the most robust, predictable and powerful home networking backbone to reliably distribute bandwidth-intensive content throughout the home. With MoCA 1.1 already deployed as the de-facto connected home entertainment standard in the U.S., MoCA 2.0's higher throughput and backward interoperability is perfectly suited to intersect pay-TV provider next generation products and services.
"We're at a critical path in both our development and what the consumer market desires in their home entertainment interests," said Amir Mobini, chief executive officer, Zenverge. "By aligning our paths with Entropic, and maximizing the opportunity their MoCA 2.0 technology brings to the table, we will remain on target to deliver the most groundbreaking new architecture for digital HD convergence — that takes transcoding of digital media entertainment to unsurpassed levels of consumer and operator ease."

"This partnership crystallizes our connected home entertainment strategy and positions us to offer even greater value to our customers, our partners and ultimately the consumer," said Patrick Henry, president and chief executive officer, Entropic. "In addition to the clear strategic benefits of combining two highly complementary silicon products, we believe we can create substantial shareholder value by capitalizing on the consumer demand to have their video content delivered anywhere, anytime and to any device, in the home or on the go."

About Zenverge

Founded in 2005, Zenverge is a fabless semiconductor company devoted to accelerating consumer access to next generation digital content and services. The company is a leading developer of Advanced Media ICs built around the patented ZEN architecture, a core technology for next generation digital media devices. The company is based in Cupertino, California. For more information please visit the company website:

About Entropic Communications

Entropic Communications, Inc. (Nasdaq:ENTR) is a leading fabless semiconductor company that is engineering the future of connected home networking and entertainment by providing next-generation silicon and software technologies to the world's leading cable, telco and satellite service providers, OEMs and consumer electronics manufacturers. As a co-founder of MoCA (Multimedia over Coax Alliance), Entropic pioneered and continues to evolve the way high-definition television-quality video and other multimedia and digital content such as movies, music, games and photos are brought into and delivered throughout the home. For more information, visit Entropicat

Trident announces reduction in force

SUNNYVALE, Calif., Sept. 26, 2011 — Trident Microsystems, Inc. (NASDAQ: TRID), a leading provider of set-top box and TV semiconductor solutions, today announced a key step in its turnaround efforts that will lower its breakeven point through a realignment of its workforce, from approximately 1,275 employees worldwide today to approximately 1,000 employees by early 2012. Headcount will be reduced strategically in all functional areas. As a result of the reductions in labor and other cost saving initiatives, by the first quarter of 2012 the company expects to realize an annual operating expense savings of approximately $40 million to $48 million compared with the annualized run rate as of the second quarter of 2011 and to reduce its annual EBITDA breakeven level (excluding stock-based compensation, restructuring and other non-cash charges) to approximately $340 million to $360 million in annual revenues. The company expects to incur total cash restructuring charges of approximately $8 million to $10 million, including approximately $2 million to $3 million in the current quarter ending Sept. 30, 2011.

“We are taking decisive actions to better position Trident for success as we enter 2012, given the current mass production timing of our new design wins and the soft economic environment,” said Trident’s chief executive officer and president, Dr. Bami Bastani. “Trident has always had very strong technology and good access to customers, both of which are translating into new design wins for our latest TV and Set-Top Box products. By focusing on our core strengths, including connectivity for Smart TV and Smart Box, and our customer centric engagements with a select list of leading OEMs, ODMs, and operators, we intend to position ourselves for stronger financial results and improved returns for our shareholders.”

Tuesday, September 13, 2011

MIPS Technologies Comments on Announcement by Starboard

SUNNYVALE, Calif., September 12, 2011 – MIPS Technologies, Inc. (NASDAQ: MIPS), a leading provider of industry-standard processor architectures and cores for digital home, networking and mobile applications, today acknowledged the receipt of notice from Starboard Value LP (“Starboard”), which owns approximately 9.1% of the outstanding shares of MIPS, regarding its intent to nominate four candidates for election to the MIPS Board of Directors at the Company’s 2011 Annual Meeting of Stockholders. The Company noted that there are three seats up for election at the 2011 Annual Meeting.

The Company does not intend to make a recommendation on Starboard’s nominees at this time and will present its formal recommendation in its proxy statement to be filed with the Securities and Exchange Commission (the “SEC”). The Compensation and Nominating Committee of the MIPS Board will follow MIPS’ policy and procedures for considering director candidates recommended by stockholders.

The Company issued the following statement:

MIPS Technologies’ Board of Directors and management team are committed to acting in the best interest of the Company and all MIPS stockholders. We have had an open dialogue with Starboard since we first became aware of their investment in the Company. MIPS’ Board is actively engaged in the strategy of the Company and is committed to building value for all stockholders.

MIPS has a leading position in the digital home, is strong in wired and wireless networking and is now expanding into mobile. The Company also has a valuable portfolio of more than 580 patent properties worldwide.

MIPS noted that its Board of Directors is comprised of seven highly qualified and experienced directors, six of whom are independent.

Skadden, Arps, Slate, Meagher & Flom LLP is providing legal counsel to MIPS.

Activist Shareholder Starboard launches attack on MIPS

Dear Sandeep,
Starboard Value LP, together with its affiliates and director nominees, currently owns 9.1% of the outstanding common stock of MIPS Technologies, Inc. ("MIPS" or "the Company"), making us the Company's largest shareholder.  This morning, we delivered a letter to the Company formally nominating four highly qualified candidates for election to the Board of Directors (the "Board") at the Company's 2011 Annual Meeting.  
We believe that MIPS' common stock is deeply undervalued and that meaningful opportunities exist to unlock significant value based on actions within the control of management and the Board.  Despite a highly profitable royalty stream, market-leading technology and valuable intellectual property, MIPS stock has dramatically underperformed over an extended time period.  The director nominees we have proposed have the requisite skill sets to assist the Board in evaluating opportunities to improve performance and shareholder value.  
As shown in the table below, MIPS' stock price performance has been dismal dating back to the Company's Initial Public Offering ("IPO") in 1998.  As of August 22, 2011, the last trading day prior to our 13D filing, MIPS shares traded at $4.34 per share, a decline of 69%, versus the IPO price of $14.00.  During the same period, the average share price of MIPS' Peer Group and the broader indices have increased by approximately 120% and 42%, respectively.
    Share Price Performance (1)     
  1 Year   3 Year   5 Year   Since IPO  
Russell 2000 Index
  6.6%  (11.7%)  (6.7%)  42.4%
Peer Group (2)
  8.2%  18.1%  5.9%  119.8%
  (33.1%)  8.5%  (37.2%)  (69.0%)
Underperformance vs. Russell
  (39.8%)  20.2%  (30.5%)  (111.4%)
Underperformance vs. Peer Group
  (41.3%)  (9.6%)  (43.1%)  (188.8%)
1. Performance as of 8/22/11.  
2. Peer Group consists of companies used in MIPS proxy to set executive compensation and include AATI, ARMH, CEVA, ENTR, EXAR, GSIT, IKAN, LAVA, PSEM, PDFS, PLXT, SUPX, TXCC, TRID and VLTR. 
In fact, in the 2011 year-to-date period through August 22, 2011, MIPS' share price declined 71% compared to a decline of only 14% in its Peer Group and 17% in the broader indices.
This destruction in shareholder value is a direct result of the Company's weak operating performance, deteriorating margins and poor capital allocation decisions around internal investments and acquisitions.  In the eighteen months since you were named President and CEO in January 2010, operating margins and profitability have plummeted.  As shown in the table below, operating margins have declined from 22.5% in the third quarter of 2010 to 8.9% last quarter, a reduction of 60%.  While the Company has attempted to drive revenue growth by increasing its spending on research and development and sales and marketing, revenue has actually declined over the last four consecutive quarters and is expected to continue to decline over the coming year.  This continued decline in revenue, together with increases in operating expenses, has caused significant deterioration in operating margins and may continue to negatively impact operating margins into the future.
Weak Operating Performance
($ in millions)
FYE June 30
   Q1   Q2   Q3   Q4  
   Q1   Q2   Q3   Q4  
Royalty Revenue
  9.8   11.4   12.1   12.4   45.7   13.6   14.8   13.4   11.8   53.7   50.4 
License Revenue
  5.2   3.8   5.4   10.9   25.3   8.9   7.0   6.6   5.8   28.4   22.4 
Total Revenue
  15.0   15.2   17.5   23.3   71.0   22.5   21.9   20.0   17.6   82.0   72.8 
  0.1   0.1   0.1   0.6   0.9   0.6   0.3   0.2   0.3   1.3   1.3 
  5.8   5.8   6.3   6.4   24.3   5.9   7.1   7.1   7.6   27.7   32.2 
Sales & Marketing
  3.4   3.6   3.9   4.9   15.8   3.9   4.9   5.4   4.9   19.1   19.9 
  3.1   3.6   3.3   3.6   13.6   3.2   3.7   3.4   3.2   13.5   13.2 
Total Expenses
  12.4   13.0   13.6   15.5   54.6   13.5   16.1   16.0   16.0   61.6   66.6 
Operating Profit
  2.6   2.1   3.9   7.8   16.4   9.0   5.8   4.1   1.6   20.5   6.3 
Operating Margin
  17.0%  14.0%  22.5%  33.4%  23.1%  40.1%  26.5%  20.3%  8.9%  24.9%  8.6%
Source: Company filings.  FY 2012 estimates per Craig-Hallum
Based on MIPS' recently reported fourth quarter results and associated conference call, it appears that the current plan is to press ahead with aggressive spending despite clearly missed expectations.  As the Company's largest shareholder, we have serious concerns regarding the significant deterioration in financial performance and the lack of action to stem the decline in revenues and operating profits.  Further, we are deeply troubled by the apparent willingness of the Board to consider using the Company's cash to pursue acquisitions in light of a terrible acquisition track record and an operating business in need of serious and immediate attention.
As a reminder, on August 27, 2007 MIPS announced the acquisition of Chipidea Microelectronica S.A. ("Chipidea") for an aggregate value of $149 million, plus assumed liabilities.(1)  Prior to the announcement, MIPS shares were trading at $8.17.  As a result of this acquisition, the Company depleted its entire $145 million of net cash and swung to a net debt balance of $11.7 million.(2)  The stated rationale for the transaction was to "strategically enter high-growth segments where analog is essential" and that MIPS expected "to reap significant sales growth from the new partnership."
The Chipidea acquisition proved to be a massive failure.  MIPS' financial results deteriorated and the stock fell to $1.01 per share at its low, 88% lower than where the Company was trading prior to the Chipidea acquisition.  Less than two years later, on May 7, 2009, MIPS sold Chipidea to Synopsis for a mere $22 million, less than 15% of the original $149 million purchase price.  MIPS stated, "Unfortunately, after two big quarters the analog market went into a sharp downturn...affecting our entire business" and that the "limited ability of our balance sheet to absorb that shock is driving this decision."
Given the disastrous results of the Chipidea acquisition and the many years of poor financial performance, we strongly encourage the Board to reconsider its stance on capital allocation.  Instead of pursuing acquisitions, the Company should focus on improving its operating performance and consider allocating capital to buy back shares of MIPS at the current deeply discounted valuation.  We believe this is the best use of excess cash and will significantly benefit shareholders.  
Further, we believe that MIPS' intellectual property may hold substantial value.  To that end, we strongly encourage the Board to explore alternatives for realizing that value for the benefit of all shareholders.
We look forward to continuing to share our views with you.  It should be clear that our nominees are uniquely qualified to assist the Board in evaluating the topics covered in this letter and in taking the necessary steps to enhance shareholder value.  We are happy to engage in a constructive dialogue with you in hopes of reaching a mutually agreeable resolution that will serve the best interests of all shareholders.  
Best Regards,
Jeffrey C. Smith
Starboard Value LP