Trident Microsystems slides on lowered outlook despite strong Q2
Trident Microsystems, Inc. (Nasdaq: TRID), a semiconductor company focused on multimedia and digital television markets, reported fiscal second-quarter 2008 results above the consensus on Wall Street, but cautioned investors about the remainder of its fiscal year.
Going forward, Trident said it will be in a period of “product transition,” as it moves to develop more system on-a-chip (SoC) solutions. The company also said it anticipates a more competitive environment, which it expects will impact results in calendar year 2008.
For the second half of fiscal 2008, Trident is projecting gross margins to decline to the 45% to 47% range, and further forewarned that as its SoC products ramp up and the market matures, gross margins will trickle down closer to the 40% level.
“That’s a tough business model,” said Roth Capital analyst Jay Srivatsa. “You’re fighting on price and trading off on margins — it’s simply not sustainable.” Srivatsa downgraded Trident this morning to a “sell” primarily on the company’s projected decline in gross margins, but also due to its discouraging guidance. His price target now stands at $3.50, down from $7.50.
For the third quarter of fiscal 2008, the analyst lowered his EPS estimate to $0.12 from $0.14 and for fiscal 2009 lowered his EPS estimate to $0.35 from $0.64. The analyst left his fiscal 2008 EPS projection unchanged at $0.88. The consensus of 16 analysts surveyed by Thomson Financial is EPS of $0.16 for the third quarter and $0.93 for fiscal 2008. The mean EPS estimate for 2009 is $0.77.
Due to the company’s bleak outlook, investors’ attention deviated from Trident’s strong second-quarter results. For the three months ended Dec. 31, 2007, the Santa Clara, Calif.-based firm recorded net income of $19.4 million, or $0.30 per share, above the $0.23 that 16 analysts polled by Thomson Financial were on average forecasting. This compares with net income of $18.1 million, or $0.28 per share, in the second quarter of fiscal 2007.
The non-GAAP net income number excludes $2.9 million in legal and accounting fees related to the company's investigation into its historical stock option practices, $1.7 million relating to amortization of intangible assets and a $0.8 million gain from the firm’s sale of equity investments. Including these charges, along with $8.4 million in stock-based compensation expense, GAAP net income was $7.3 million, or $0.12 per share.
Revenues for the quarter were $75 million, above the consensus of 15 analysts polled by Thomson Financial of $70.68 million. The current quarter’s top line resented a 10% year-over-year increase from the $68 million reported in the same quarter last year.
Shares of Trident Microsystems are down 1.49%, or $0.08, to $4.95 during morning trading. TRID has been trading in the range of $4.62 to $23.59 for the past 52 weeks.
