Trident Microsystems, Inc. ( TRID)

Q3 2011 Earnings Call

November 3, 2011 5:00 pm ET

Executives

John Swenson – Director Investor Relations

Bami Bastani, Ph.D. – President, Chief Executive Officer & Director

Pete J. Mangan – Chief Financial Officer & Executive Vice President

Analysts

Zung Nguyen – Asset & Wealth Management

Raji Gill – Needham & Company

Presentation

Operator

Good day ladies and gentlemen and welcome to the third quarter 2011 Trident Microsystems Incorporated earnings conference call. At this time all participants are in listen only mode. We’ll be facilitating a question and answer session towards the end of today’s conference. (Operator Instructions). I will now turn the presentation over to your host for today’s conference Mr. John Swenson.

John Swenson

Welcome to Trident Microsystems conference call for the third quarter ended September 30, 2011. After the market closed today, Trident issued a press release discussing the results for the quarter. The press release is accessible online at www.TridentMicro.com. This call is being broadcast live over the web and is accessible using the link found in today’s earnings press release. A replay of the webcast will be available starting tomorrow by accessing the investor relations section of Trident’s website.

Before we begin, please note that during this call we will make forward-looking statements. These include statements regarding financial expectations for the fourth quarter fiscal year 2011, expected restructuring activity, and our evaluation of strategic alternatives to improve liquidity. We are not obligated to update these statements. Actual results may differ materially from the forward-looking statements made today and have in fact, done so in the past.

These projections or forward-looking statements are subject to certain risks and uncertainties. These risks include in particular, our success in pursuing strategic alternatives to improve our liquidity, our ability to reduce expenses, our ability to negotiate more favorable payment terms with certain vendors, our ability to obtain design wins among major OEMs for our products, the timing of mass production of new products, and competitive pressures including pricing and competitor’s new product introductions and our ability to retain key employees globally.

These and other factors are discussed in our press releases and in the company’s filings with the SEC. We encourage you to read these documents and to come to your own conclusions about the risks and uncertainties inherent in Trident’s business. Also, please note that we will present non-GAAP financial information in this call. For a reconciliation of our non-GAAP information to the most comparable information under GAAP. Please refer to our earnings press release.

On today’s call are Dr. Bami Bastani, Trident CEO and President and Pete Mangan, Executive VP and CFO. Bami will begin with an operational and market update and Pete will review the financial results for the quarter and our financial outlook. Then we will open the call for questions. Please note however, we will not be answering questions on strategic alternatives. Now, I’ll turn the call over to Bami Bastani.

Bami Bastani, Ph.D.

Thank you for joining the call today. I will provide some comments on the results and highlights for Q3 as well as color on our business activities in our core markets of TV and set-top box, but first I would like to address the subject of Trident’s near term liquidity and our decision to evaluate the strategic alternatives.

During the past several months we have moved the business forward in a meaningful way. We secured design wins for future production, began a substantial restructuring to reduce our breakeven level, and agreed to the sale and lease back of our Shanghai building which will contribute cash in the quarter. On the downside, we recently lost a significant expected IT licensing and an [RE] deal which we had anticipated would bring $10 to $15 million to the company.

We also have seen delays in the production of certain new programs and continuing weakness across consumer electronics. As a result, we anticipate that the quarterly loss in Q4 will be at least as large as what we have seen quarterly over the past year further eroding our cash position. We therefore are evaluating a strategic alternatives including additional sales and licensing of IT, sales of certain assets, and other measures that would potentially improve liquidity and preserve our design wins, and customer relationships. This effort has begun and is ongoing which is why we will not discuss these matters further in the question and answer session.

Now, let me shift to a discussion of Q3 and additional color on our business. Revenues of $80 million slightly exceeded the high end of the guidance. We achieved a sequential increase in both set-top box and TV driven in part by seasonal demand improvement as realized initial new programs ramps of SXL and TV 550 in the TV market. Margins in the quarter were at the lower end of the revenue as we wrote of certain inventory in light of this softening of the near term outlook.

Expenses were at the high end of the range leading to a non-GAAP operating loss of approximately $20 million for the quarter. Compared with our guidance of $16 to $19 million. Cash at the end of quarter came in around the middle of guidance at $36 million. Pete will elaborate on our detailed financials later in the call.

Over the past several months we have been highly engaged with customers as design in activity for 2012 production. In Set-top boxes we’re continuing to drive our position as a technology leader. As an alternative the current market leader in the client segment of the North American cable market. We also are continuing to explore our first mover advantage with Android. We announced wins with LG CNS and Cowen Media for Android based hybrid boxes. We worked closely with those customers to develop differentiated set-top box solutions that leverage the open platform and fast time to market characteristics of Android to handle traditional broadcast content, video on demand, and IT based content.

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