Fabless semiconductor developer Entropic has hired Barclays to evaluate strategic alternatives for the company, including a potential sale.
Commenting on the move, Patrick Henry, Entropic’s president and CEO, said: “Our board of directors and…
Fabless semiconductor developer Entropic has hired Barclays to evaluate strategic alternatives for the company, including a potential sale.
Commenting on the move, Patrick Henry, Entropic’s president and CEO, said: “Our board of directors and management are committed to taking the appropriate steps to enhance value for Entropic shareholders and we have determined that undertaking a thorough and deliberative evaluation of strategic alternatives, with the assistance of financial advisers, is in the best interests of the company and all of our shareholders.”
Entropic has suffered declining revenues and substantial losses over the past couple of years and, in June 2014, announced a comprehensive restructuring strategy to reduce costs and move towards profitability.
The company is closing major engineering sites in Texas, Israel, India and Taiwan, and reducing its global headcount by around 23%.
In its second quarter 2014 results, Entropic reported net revenues of US$50.2m, down 29% year-on-year. Its GAAP net loss for the quarter was US$21.8m, although this was a slight improvement on the previous quarter and significantly less than the US$39.9m loss of Q2 2013. In addition, management has twice revised its financial guidance down.
The reason for Entropic’s financial woes stems from its bet on the future importance of the connected home. The company has been developing system-on-a-chip networking solutions for pay-TV broadcasters. For DTH providers, that has meant developing a series of Sat-IP products, where satellite signals are converted to internet protocol and distributed over an IP network.
However, its customers have been slower to take up this technology than management hoped. David Lyle, Entropic’s chief financial officer, pointed out that “delays in service provider product launches and shifts in service provider deployment architectures continue to affect our financial results”.
Despite its financial travails, analysts believe that Entropic should not struggle to find a potential buyer. The semiconductor market has seen a great deal of consolidation over the past year and even troubled companies such as Mindspeed were bought at a premium.
Entropic has not set a timeframe for Barclays’ strategic review.
