Entropic Communications, a set-top and MoCA chipmaker that’s already undergoing a major restructuring, said its board has authorized the company to pursue “a wide range of alternatives” aimed at boosting shareholder value.
Entropic, which hired Barclays for the exercise, did not outline any specific alternatives it will pursue and whether that might include a potential sale of Entropic, but the announcement caused Entropic shares to jump almost 7% in mid-day trading Tuesday.
Entropic said it has not set a timetable on that effort, and won’t disclose more until after its board approves a specific action or otherwise concludes its review.
On Monday, Entropic announced that it and with rival company ViXS Systems settled their litigation and have entered a cross-licensing agreement, a move that seemingly removes any legal-facing hang-ups that might trouble Entropic's pursuit of a sale or another strategic alternative.
Entropic is considering alternatives amid a plan to streamline its R&D and speed up its return to profitability. In June, Entropic announced it would lay off 23% of its global workforce as part of its reorg. It ended the first quarter of 2014 with about 650 employees and expects to reduce that to fewer than 500 in the fourth quarter of 2014. That will follow smaller restructuring last summer that included a 10% layoff.
Entropic, which also competes with Broadcom, announced revised third quarter guidance on Tuesday, and now expects revenues to be $43 million alongside a GAAP loss per share of 28 cents, versus original third quarter guidance of a loss of 24 cents on revenues of $49 million to $51 million. Entropic said the revisions were primarily due to sales softness for its satellite TV outdoor unit (ODU) business, but said it has won some key designs recently to help it take steps toward break-even.
At the end of the second quarter, Entropic had four customers driving more than 10% of revenues: WNC, a supplier into DirecTV (25%); CyberTAN, a subcontractor for Cisco Systems (14%); Actiontec, a supplier to Verizon Communications (14%); and MTI, a supplier of ODU gear to satellite TV companies (11%).
“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 advisors, is in the best interests of the Company and all of our shareholders," Patrick Henry, president and CEO of Entropic, said in a statement. "The entire Entropic team is fully committed to meeting the needs of our OEM customers and service provider partners and we will continue to provide them with industry-leading solutions for connected home entertainment throughout this process."