Sirf Tech Digs Its Own Grave
08/11/08 - 04:40 PM EDT
Alexei Oreskovic
SAN FRANCISCO -- Investors had two reasons to stick with Sirf Technology(SIRF Quote - Cramer on SIRF - Stock Picks) 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 Quote - Cramer on BRCM - Stock Picks) 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 Quote - Cramer on TXN - Stock Picks) had grabbed 35% and Infineon(IFX Quote - Cramer on IFX - Stock Picks) 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 Quote - Cramer on STM - Stock Picks)stealing significant share from Sirf at customers like Garmin(GRMN Quote - Cramer on GRMN - Stock Picks) and TomTom, according to RBC Capital Markets analyst Mahesh Sanganeria.
RSS
