Trident Leads a Slowing Group

Trident Microsystems (TRID - Analyst Report) is a leader in integrated circuits for Digital Television. While its products are used in all kinds of displays, LCD television is its most important growth market as LCD televisions take share from plasma in the market for larger screens as well as traditional CRT television sets of all sizes. Trident has design wins with major television manufacturers, including Sony (SNE - Analyst Report), Toshiba, and Sharp and has added Philips (PHG - Analyst Report) to the list.

While there have been concerns of late that the market is slowing, we feel very confident that the market will grow very rapidly over the next few years. Trident expects to have greater than a 60% share at Sony and claims that its share at Samsung could reach 80%.

The LCD TV market continues to grow, but the poor economic environment and the normal price declines has reduced the near term growth rate in revenue to less than 5% per year. At this rate, most companies in this industry will not be profitable until late 2009.

Despite the fact that the stock is selling at less than cash value the uncertainties of Trident's near-term revenue stream and its high level of operating expenses in the near term we are keeping our recommendation to a hold with a price target of $3.00.

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