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Sirf Tech Digs Its Own Grave

SAN FRANCISCO -- Investors had two reasons to stick with Sirf Technology (SIRF) as the chipmaker floundered: a takeover or a turnaround.

Both of those hopes evaporated with last week's legal ruling against Sirf.

The preliminary finding by a U.S. International Trade Commission judge that Sirf is infringing on six of Broadcom's (BRCM) patents represents more than the latest in a string of bad news for Sirf -- it marks the end of any reason to care about a company that once seemed poised to be a central player in a new world of iPhone-like gadgets.

Shares of Sirf plunged 24% to $2.44 Monday as news of the ITC ruling spread.

Sirf developed -- and once ruled -- the market for GPS chips that communicate with overhead satellites to provide an electronic device with its precise geographic location.

But a rush of competitors has eroded the price of Sirf's GPS chips and its market share.

According to iSuppli, an industry research firm, Sirf had more than a 90% share of the market for GPS chips in cell phones in 2006. In the first quarter of 2008, Sirf's share had dwindled to 36%, while Texas Instruments (TXN) had grabbed 35% and Infineon (IFX) had 21%.

In the market for portable navigation devices -- a larger market for Sirf than cell phones -- competition has also been fierce with chipmakers Broadcom and ST Microelectronics (STM)stealing significant share from Sirf at customers like Garmin (GRMN) and TomTom, according to RBC Capital Markets analyst Mahesh Sanganeria.

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