NXP takes 60% stake in Trident as companies combine DTV, set-top box businesses

NXP, which will become the single largest shareholder in the expanded Trident, notes the deal continues its plans to focus in high-performance mixed signal.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 10/5/2009

NXP Semiconductors will take a 60% stake in Trident Microsystems Inc through a transaction that will see Trident merge NXP's television systems and set-top box business lines into its digital media applications IC and software portfolio.

With the deal, Trident will remain fabless but will have the ability to access technology and manufacturing capacity from NXP’s manufacturing facilities, as well as the partner foundries and subcontractors of both companies. The Santa Clara, Calif-based company said that in order to drive cost efficiencies it expects to retain a core set of technology centers of excellence in Europe and North America, while growing and leveraging the engineering presence that each of NXP’s home business unit and Trident already has in Asia.

Following the close of the transaction, expected in Q1 2010, Trident said it intends to continue supporting the existing customers and design wins of each company. In addition, Trident plans to develop a converged product roadmap, leveraging the substantial IP of both companies and cost structure of Trident. NXP and Trident specifically noted their intent to cooperate in the development of complementary end-to-end solutions in NXP's car entertainment and silicon tuner product lines.

“As the fragmented consumer IC market continues to consolidate, the ability to leverage IP across multiple segments is becoming increasingly important due to the R&D investments necessary to deliver leading-edge innovation,” said Sylvia Summers, president and CEO of Trident, in a statement this morning. “Through this transaction, Trident will become one of the leading global suppliers with the product portfolio, IP, and operational infrastructure required to effectively serve the large, high-growth digital home entertainment market.”

Under the terms of the transaction, NXP will receive newly issued shares of Trident common stock equal to 60% of the total shares outstanding post-closing, including approximately 6.7 million shares that NXP will purchase at a price of $4.50 per share, resulting in cash proceeds to Trident of $30 million.

Including revenue from the acquired product lines, Trident estimated it will have revenue of approximately $500 million in 2009, with approximately 60% attributable to television and 40% to set-top box.

Upon the NXP deal's closing, Trident will have a portfolio of consumer IP applicable to a range of markets, with more than 2,000 granted and in-process patents including motion estimation/motion compensation and conditional access, as well as 45-nm SOC technology.

“Success in the consumer business requires a company culture based on rapid decision making, a fast pace of innovation, and a highly competitive cost structure,” Summers said. “This proposed transaction enables Trident to achieve the economies of scale required to compete in the digital home market, while also taking advantage of our start-up culture and cost-efficient Asia-based engineering and operations. As a result, Trident will be well positioned to address a larger market, accelerate our time to breakeven and achieve our long-term financial objectives.”

For its part, NXP said it believes the consumer IC business is a large, high-growth opportunity, best served by a company dedicated to the market. “This proposed combination is the ideal structure to position the considerable technology and market assets of our digital TV and set-top box lines for growth and financial success," Rick Clemmer, president and CEO of NXP, said in the statement. "As the single largest shareholder in the expanded Trident, NXP can continue to take part in the significant upside opportunity for this business while achieving another major milestone in NXP’s plans to focus and lead in high-performance mixed signal.”

Upon closing, Summers will remain the CEO of Trident and Christos Lagomichos, executive VP of NXP’s home business unit, will become president. Pete Mangan will remain senior VP and CFO of Trident.

Trident separately today revised its fiscal Q1 2010 guidance upward. The company now expects to report revenue of approximately $31 million for the September quarter, up from prior guidance of $22 million to $25 million, primarily on increased sales of discrete products. The company also bettered its loss expectations, now expecting to report non-GAAP operating loss in the range of approximately $10 million, as compared with earlier guidance of $12 million to $14 million. Trident is slated to report on the quarter the week of October 26.