Microtune Readies Demodulator/Silicon Replacement for Can TV Tuners

The MT3141 demodulator/silicon tuner is in the “evaluation stage” with CE companies, which are evaluating its standalone performance and how it integrates with their TV systems, Chapman said. The IC also features IF filters and amplifiers. The CE companies’ tests “have been what we expected,” and the MT3141 is expected to go into prototype flat-panel TVs in the second half of the year, Chapman said. The MT3141 won’t produce “significant” revenue until 2011, Chapman said.

The ICs, which will be manufactured for Microtune by IBM and assembled by Amkor, will cost $2 each in high volume, Chapman said. The MT3141 will have a 35-cent bill-of-materials cost, 50 cents less than a separate pairing of an analog demodulator and a silicon tuner, Chapman said. Microtune hasn’t publicly discussed potential customers. Samsung uses its standalone silicon TV tuners in some of its sets. Sales to Samsung accounted for 10 percent of Microtune’s $74.5 million revenue in 2009. Besides seeking to take design wins from conventional can-tuner suppliers, Microtune competes with silicon tuner suppliers Silicon Labs and Xceive. “The MT3141 will have the right price performance to displace” can tuners, Chapman said. “It will make it compelling enough” for CE companies to switch to silicon tuners. “We are at the cusp of the transition."

To extend its reach in silicon TV tuners -- Microtune claims a 24 percent market share -- a digital demodulator will eventually be combined with a silicon tuner, Chapman said. Microtune got into digital demodulators by buying Auvitek last July for $7 million cash and 1 million shares of Microtune stock. Auvitek produced about $1 million revenue for Microtune in the second half of 2009 and is expected to “significantly increase” as a percentage of the company’s business this year, Chapman said.

Meanwhile, Microtune also is sampling its MicroDigitizer for the automotive infotainment systems, Chapman said. The MT3511 features a 16-bit analog to digital convertor that digitizes the IF signal and provides an interface for software defined radio architectures. A DSP can be used to demodulate supported radio standards, including HD Radio, AM/FM and Digital Radio Modiale. The MT3511 is be sampled and is $3.50 in volumes of 100,000 units a year.

Microtune is continuing discussions with an “activist stockholder group” that in December said it planned to put up four nominees to replace board members at the company’s annual meeting this year, company officials said. “We're still in discussions with them about their nominees to our board and hopefully we can get to a finish line pretty quick,” Chapman said. “They haven’t really expressed to us directly any sort of strategy. It’s been more the composition of the board and the belief that new blood is going to bring new ideas. We're listening to them just like we do other shareholders.”

A trial may be held this year in a lawsuit that the SEC filed against former Microtune CEO Douglas Bartek and CFO Nancy Richardson, Chapman said. Bartek and Richardson were sued for violating federal law governing stock option grants. Microtune said it voluntarily contacted the SEC in 2006 and settled two years later. The company said it wasn’t required to pay a civil penalty or damages. Microtune said its liability insurance covers Bartek’s and Richardson’s legal expenses, which through Dec. 31 were $7.4 million. The company said it has gone through about $9.4 million of a $20 million liability insurance plan. Microtune took on $900,000 in net charges in 2009 for legal fees that reimbursement is “doubtful” for, the company said.

Cisco was Microtune’s top customer in 2009, accounting for 29 percent of its $74.5 million in revenue, largely from cable modems, the company said. Sales to Asustek subsidiary Unihan, which supplies set-top boxes to Arris Group, were 14 percent of revenue, followed by Panasonic, 13 percent, it said. Microtune’s tuner sales slipped to $60.5 million in 2009 from $81.3 million a year earlier, while module sales dropped to $13.8 million from $26.5 million. Cable products represented 75 percent of sales, down from 77 percent a year earlier, while digital TV and automotive were 6 and 19 percent, down from 8 and 23 percent, Microtune said.

Microtune restructured late last year, cutting 10 percent of its work force to end the year with 276 employees, down from 302 in Q3. It has 280 employees, Chapman said. It took a $1.7 million restructuring charge in Q4, $900,000 of it first-half severance, the company said.

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The Mobile High-Definition Link spec is expected to be set by June, enabling Silicon Image to start shipping samples of its Sil922 MHL transmitter by September or October, Chief Accounting Officer Nolan Granberry said. Chip sampling typically takes three to six months, depending on the customers, timing that would allow the transmitter to start volume production in the first half of 2011, Carberry said. Cellphones with the MHL transmitter were originally expected to ship in late 2009. But the push was slowed when Silicon Image, along with Samsung, Sony, Toshiba and Nokia formed an MHL consortium last September. The Sil9222 is designed to sit between a DSP chip or media processor at the heart of a cellphone, digital camera and camcorder and portable media player and a microUSB connector. The Sil9222 is expected to be priced “slightly south” of Silicon Image’s $1.52 overall average selling price in 2009, Granberry said. Using a Sil9290 MHL bridge chip, MHL is converted to HDMI-compliant signals for connection to a DTV. Silicon Image’s Sil9389 HDMI 1.4 port processor, with five HDMI inputs, is expected to carry an ASP “slightly above” the company ASP, he said. Silicon Image’s ASP was $1.49 in Q4. The HDMI chip will generate increasing revenue during the next 18 to 24 months, CEO Camillo Martino said. Silicon Image will continue to develop LiquidHD technology, but with an eye toward combining it with other chips like the port processor, Granberry said. LiquidHD, which is expected to start producing revenue for Silicon Image until 2012, was originally positioned as a networking protocol that could potentially rival the Digital Living Network Alliance. It was expected to arrive in products in 2011 (CED Oct 8 p2). LiquidHD could be stored in a TV’s memory-based firmware or in a separate hard drive for detection by other products on a network and streaming H.264, VC-1 and other content. “We were trying to change the world, but now we're trying to” fit LiquidHD into existing products, Granberry told us. Silicon Image has further trimmed its work force to 400 from 405 at Dec. 31, company officials said. It cut 121 positions late last year in closing two R&D facilities in Germany that it inherited in buying SciWorx in early 2007. The company accrued $19 million to cover the cost of closing the Germany facilities and will pay the balance of it over the next six month, Granberry said. Silicon Image’s other R&D centers are in Sunnyvale, Calif. and Shanghai, China.

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Aaron Rents is slowing its expansion, but sees room for 2,500 to 3,000 franchised and company-owned stores in the U.S., CEO Robert Loudermilk said. The rental chain had almost 1,700 stores Dec. 31, including nearly 600 franchised locations, and sees room to open additional stores in California, he said. Aaron Rents used to expand at 15 to 20 percent annually, but it scaled back to 5 to 9 percent -- 85 to 152 stores -- this year, Chief Financial Officer Gilbert Danielson said. About 60 percent of stores that open are company-owned. The rest are franchised. Aaron Rents previously forecast having 2,000 stores by 2009 (CED Aug 4/06 p3). Aaron has about 100 franchisees. They typically spend $650,00 on a new store its first year, 70 percent to buy inventory, Danielson said. A standard Aaron Rents store produces $1.3 million in annual sales after five years in business, he said. Aaron has 25 stores in Canada and 17 Rimco tire rental stores, having opened 10 company-owned and 7 franchised locations since starting the business in 2005. Aaron Rents has no plans to further expand the format, Danielson said. CE accounted for 37 percent of Aaron’s $1.75 billion in 2009 revenue, while PCs were 14 percent, up from 2 percent eight years ago, Loudermilk said. Aaron typically rents notebook PCs on a 12-month contract carrying $100 monthly fees. Aaron’s dealer cost for a notebook PC is about $450, company officials said. Its top-selling TVs are 47-inch LCD sets rented on 24-month contracts with a $99 monthly fee, Loudermilk said. Aaron’s cost is about $1,000. About 45-50 percent of Aaron customers take their contracts to term and end up owning the product, Loudermilk said. The average monthly payment for Aaron customers is $135, down from $160 several years ago. Customers have 1.4 Aaron products on average, Danielson said.