Trident Looking Beyond Near Term

Trident Microsystems, Inc. (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.

With continuing declines in ASPs [average selling prices] and lack of wins with Tier-1 OEMs, the company has guided for another sequentially weak Q3. Trident's top-line growth is also negatively affected by the recent change in production strategy by its top customers, Sony Corp. (SNE - Analyst Report) and Samsung, who have decided to move
production in-house. All of these will significantly impact Trident's 2009 revenue forecast.

But with the recent DLNA certification received by Trident's HiDTV segment, the company is expected to provide its customers with a cost-effective solution. Another positive for the company is its cash per share of $3.44, which is well above its stock price. Also, cash flows from operation are neutral to positive. As such, we reiterate our Hold rating and our target price of $3.00.

Nayan Mukherjee contributed to this report.