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*Extra* Hidden Assets at S3 and Alliance Semi Finally Get Valued

Investors may be surprised at what they see.

What good are stakes in companies if you can't put a value on them? That's been the story for more than three years with

S3

(SIII)

and

Alliance Semiconductor

(ALSC)

, which partnered with Taiwan's

United Microelectronics

to create

United Semiconductor

, a separate Taiwanese company that builds and manages a semiconductor fab in Taiwan. The deal gave S3 and Alliance stakes in United Semi of 15.8% and 15.5%, respectively. To investors, it was little more than a wild card.

Today that wild card was revealed when United Micro announced that it was acquiring the outstanding shares of several fabs, including United Semi. (No valuation was given for the deal.) Using United Micro's stock as a guide, several money managers who have done the math believe S3 and Alliance are currently trading for less than the cash on their books combined with their stake in United Semi. Officials of S3 and Alliance couldn't be reached, but here's how some investors, who have good credibility with this column and who are long either one or both of the stocks, broke it down:

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For Alliance, which currently trades for around 6 13/16, the stake in United Semi alone is worth as much as $7.44. Alliance also owns a small piece of

United Silicon

, which is also being merged into United Micro and isn't part of that calculation. What's more, through a recent acquisition, Alliance acquired a stake of 538,961 shares of

Broadcom

undefined

, which is valued at around $1.31 per share. "That's $8.75 for their nonoperating stuff," says one Alliance fan. Alliance's core SRAM business, meanwhile, is booming. SRAMs are so hot that rival

Cypress Semiconductor

(CY) - Get Cypress Semiconductor Corporation Report

has been telling Wall Street that it is "capacity constrained." Translation: It can't make enough to meet supply.

S3, meanwhile, currently trades at 7 7/8. A money manager long S3 puts the value of its United Semi stock at between $6.50 and $8. The company has another $2 in net cash. "So, basically, the stock is trading below the net value of its cash and securities and what they're supposed to earn this year," the S3 investor says.

Consider that, according to these money managers, value unlocked.

Herb Greenberg writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, though he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

herb@thestreet.com. Greenberg also writes a monthly column for Fortune.