For $55m, Entropic Communications, a semi-conductor company specialising in home networking chips, will acquire the set-top box (STB) business operations of Trident Microsystems. Trident, a provider of semi-conductor solutions for STBs and TVs, filed for bankruptcy on 4 January 2012. Through Trident, Entropic will acquire specific patents and products relating to set-top box systems on chip (SoC), DOCSIS modems, Digital Terminal Adapters, interface devices and media processors.
The acquisition will be subject to US Bankruptcy court approval and would involve other expenses such as Entropic taking an unspecified amount of Trident's debt.
Including this acquisition, Trident's STB business will have had four different owners, in as many years since April 2008 when Conexant sold it, combined with its TV business, to NXP for $110m. Trident then acquired the combined STB and TV business of NXP in February 2010 for $141m. Entropic is only acquiring the STB business unit. Trident retains its TV business
Trident has suffered net losses of $71m, $129m and $106m during 2009, 2010 and the first three quarters of 2011. Moreover, Trident's revenues have almost halved in the current year - $237m for the first three quarters of 2011 against $439m the comparable period in 2010. This decline is due to a loss of market share stemming from delays in bringing next generation products to market, forcing TV set and STB vendors as well as Pay TV operators to look to the likes of Broadcom and STMicroelectronics for these chips. At the high-end, the step to next generation platforms has also resulted in reduced demand for Trident's legacy products, further compounding its loss of market share.
Competing at the low-end, using Trident's legacy products, where price competition is fierce is an unlikely rationale for Entropic's purchase.
Entropic generates most of its revenue from the sale of dedicated Multimedia over Coax Alliance (MoCA) home networking chips. These enable the IP distribution of multimedia content over coaxial cable, and since 2006 have been critical to many North American pay TV operators' multiroom DVR products, propelling Entropic's revenue from $ 41m in 2006 to $210m in 2010. However, Entropic has seen revenues decline from £72m in Q1 2011 to $61m in Q2 2011 and further, to $51m in Q3 2011 as a result of Entropic losing market share, particularly at DirecTV, Dish Network and Motorola. This share has been ceded to Broadcom's STB SoCs, which integrate MoCA into the chip, removing the need for separate Silicon from Entropic in the device. Entropic will almost certainly use this acquisition to develop its own MoCA-integrated STB SoC to compete with Broadcom and attempt to regain market share.
Given Google TV's recent move from Intel to ARM-based Silicon, Trident's ARM- based Android STB SoC range, already deployed with Korean cable operator GBN, could also provide Entropic with growth opportunities should Google TV take off. Entropic would still however, face stiff competition for Google TV sockets with all of the Google TV devices announced at CES 2012 using Marvell's ARM-based SoCs.