Entropic Wants to Stick a Fork in Trident -- It's Done!

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Every dark cloud has a silver lining. The bankruptcy thunderhead hanging over Trident Microsystems (NAS: TRID) could be pure silver for rival Entropic Communications (NAS: ENTR) . The latter could sure use some easily won precious metals right now.

After years of spotty sales and heavy losses, Trident appears close to calling it a day. The maker of media processors for set-top boxes and modern TV sets is filing for Chapter 11 reorganization in the U.S. and Cayman Islands, setting the stage for a quick bidding war.

Entropic kicks off the bidding as the appointed "stalking horse" bidder. For $55 million in cash, Entropic hopes to gain Trident's set-top product lines and a hefty chunk of technology patents. The Trident assets are supposed to report positive earnings for Entropic within a year.

It's not a slam-dunk win, though. Broadcom (NAS: BRCM) is a huge player in the set-top space with cash to spare, and may very well swoop in with a bigger bid. STMicroelectronics is another likely bidder, as the Trident assets would catapult STMicro into a whole new set of North American contracts.

Stalking horse biddersdon't always win these bankruptcy auctions. In this particular case, though, Entropic looks like a terrific fit for Trident's assets. The two companies ship very complementary products, often side-by-side in the same home entertainment systems. It's a logical expansion of existing businesses.

Moreover, Entropic is profitable and debt-free, which should make it look like a stable bidder when the bankruptcy judge bangs the gavel. STMicro could pose a challenge if it really wants a slice of American market pie; Broadcom's already huge footprint makes it a far less likely winner.

Trident shares may end up totally worthless. If you're looking for a stock in the space that Foolish analysts love, take a peek at a few semiconductor stocks with tremendous prospects in 2012 before it's too late.

At the time this article was published Fool contributor Anders Bylund holds no position in any of the companies mentioned. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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