Thursday, March 08, 2007

Calls of Note Part 3

- Thomas Weisel Partners notes that while they are more positive on Trident Micro's (NASDAQ:TRID) 2007 growth prospects, they continue to believe significant upside to the stock will be dictated by the success of Trident's 2008 design-win activity and limited by ongoing competitive pricing and share risk, particularly at Sony and Samsung. Based on recent checks with multiple industry contacts, they see incremental share risk at Sony in 2008, which is likely to prove management's $450mn revenue target more challenging to achieve, in firm's view. They are maintaining their CY08 revenue and EPS estimates of $377mn and $1.40. TWP believes shares are relatively fairly valued, trading at 18x and 15x CY07 and CY08 EPS estimates, respectively.

Recent checks with multiple TV industry contacts indicate that Sony has recently developed a new single-chip (MPEG decode + back-end) TV solution in conjunction with NEC that is much more cost competitive relative to its prior multi-chip solution, which is currently being utilized in its high-end X-series LCD-TVs. Checks suggest Sony is working aggressively to leverage this technology across its high-end and mainstream 2008 product lines-Sony's mainstream TVs are currently predominantly supplied by Trident. While firm's checks indicate that 2008 designs will not be decided for several months, they believe there is potential significant incremental risk to Trident's share position at Sony (which was north of 80% in 2006 and is likely closer to 60-65% in 2007, by TWP estimates).

Notablecalls: Nice catch by TWP's Jason Pflaum! I think the comments regarding Sony will create a big overhang on TRID stock over the next couple of days or even weeks. I've always considered TRID a difficult stock to short but sitting at my old trading desk I would have put out a short line in it. One to watch!

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