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Entropic Files Notice That It May Issue Up to $100M in Common Stock

Entropic Communications, a maker of semiconductors used in connecting home entertainment systems, has been busy this year. It has already bought two companies. And things should get considerably busier for the 6-year old startup as it plans to go public.

In its S-1 securities filing made last month, Entropic said it may issue up to $100 million in common stock with the exact number of shares and price to be determined later.

In June, Entropic acquired RF Magic, another San Diego chip manufacturer in the telecommunications sector.

That followed its purchase of Arabella Software Ltd. of Israel in May.

The deals were done with Entropic’s privately held stock.

Though Entropic has never made a profit, the company has been on a rapid growth track as it sells more products to manufacturers of networking systems that integrate video and media content delivered to personal computers, high-definition digital televisions and digital video recorders.

The company cited an industry report that estimated the worldwide market for home networking equipment to grow to $3.1 billion in 2011 from $1.1 billion this year.

The company received $81 million in venture capital and corporate investments in three rounds since its founding in 2001.

The VCs, including San Diego-based Mission Ventures, own 40 percent of the business. The largest investor is CMEA Ventures Information Technology in San Francisco with a 12.7 percent stake.

Entropic increased annual revenues last year to $41.5 million from $3.7 million in 2005. Its new purchase, RF Magic reported revenue of $26.2 million last year, up from $14.5 million in 2005.

But Entropic’s filing also shows combined net losses for the two companies of $22.8 million last year. Had the companies been combined for the three months ended March 31, Entropic and RF would have had a net loss of $2.8 million on revenue of $29.2 million.

Entropic is a “fabless” manufacturer, meaning it contracts with other semiconductor manufacturers for fabrication of its chips.

Among the largest contractors are Taiwan Semiconductor Manufacturing Co. and Jazz Technologies Inc. in Newport Beach.

With the acquisition of RF, Entropic’s employment stands at 220 people.

Chairman and CEO Patrick Henry will be among the biggest beneficiaries when the public offering is completed, likely in about three to four months. Henry owns 6.8 million shares or about 3.5 percent of the total.

Henry, 44, received a compensation package last year of $476,464 including a salary of $250,000 and bonus of $135,000, according to the filing.

This has been a slower year for initial public offerings in San Diego. Only two have gone out this year, both in biotech , Optimer Pharmaceuticals in February and Orexigen Therapeutics in April. Both are trading above their IPO price.

In 2006, five local companies went public. The biggest by far was SAIC Inc., also called Science Applications International Corp., which issued more than $1.1 billion in common stock in October.

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Cohu Unit Receives Subpoena:

Cohu Inc., the San Diego maker of test handling equipment for the semiconductor industry, said in a securities filing in July that its Broadcast Microwave Services subsidiary received a subpoena from a federal grand jury in the Southern District of California requesting production of certain documents related to BMS’ export of microwave communications equipment.

Cohu said that BMS responded to the request, produced documents, and is fully cooperating with the grand jury. It also noted that BMS has not been told that it is a target of an investigation, and it’s premature to assess whether this matter will have any impact on the BMS business.

Of Cohu’s three business segments, the BMS unit is the second largest and did $5.3 million in sales for the quarter ended June 30.

Cohu’s total sales for the quarter were $66.4 million, with $57.2 million coming from the test handling equipment sales. The other $3.9 million came from the sales of television cameras.

For the six months ended June 30, Cohu reported net income of $3.7 million on revenue of $119.7 million. That compared to net income of $8.1 million on revenue of $118.1 million for the like period of 2006.

Traded under COHU on Nasdaq, shares closed July 30 at $19.87 and have ranged from $14.16 to $23.70 over the past 52 weeks.

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WFI Gets Extension:

WFI, formerly called Wireless Facilities Inc., a local provider of information technology services in the areas of defense, technology and security, said it received an extension on its request to allow to continue listing its shares on the Nasdaq stock exchange.

The company had been notified it would be delisted because it failed to file its 10K annual report for 2006 and its first quarter report for 2007.

The Nasdaq listing qualifications panel gave WFI until Sept. 10 to file the past due financial reports. If it doesn’t, the listing qualifications panel said the stock would be delisted unless the firm receives another stay.

The panel is likely taking into consideration WFI’s internal investigation into problems with the granting and backdating of stock options, and the company’s discovery of an options fraud scheme concocted by a former employee.

In U.S. District Court in San Diego on July 3, Vencent Donlan, the former employee, pleaded guilty to one count of wire fraud and one count of tax evasion. Donlan and his wife were involved in the issuing of options and the conversion and sale of 728,000 shares of WFI that netted the San Diego couple more than $6.3 million, according to federal prosecutors.

Donlan, 44, faces a maximum prison sentence of 20 years for the wire fraud charge and five years for single count of tax evasion when he is scheduled to be sentenced Sept. 17.

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Cymer Results Push Stock:

Cymer Inc., the San Diego maker of laser equipment used in the manufacturing of semiconductors, saw its stock rise by more than $6 following the release of its second quarter results July 26.

The company reported net income of $24.9 million on revenue of $122.9 million for the quarter. That compared to net income of $22.6 million on revenue of $135.4 million for the like period of 2006.

Traded under CYMI on the Nasdaq, shares were averaging $40 for much of the year, and dropped below $38 on the day financial news was released but bounced up more than $6 to close July 27 at $43.30.

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ViaSat Buys Antenna Firm:

Via Sat, the Carlsbad maker of satellite communications products, acquired JAST Antenna Systems for $2 million and an additional compensation of up to $4.5 million if JAST meets certain financial performance targets.

JAST is based in Lausanne, Switzerland and develops microwave circuits and antennas for land and satellite applications.

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Ticker Takes:

Lone Star Fund, the Texas hedge fund buying Accredited Home Lenders Holding Co., the San Diego subprime lender, extended its tender offer of $15.10 per share to midnight Aug. 14 from an earlier deadline of July 27. Lone Star said as of July 27 it has received preliminary tender offers from 32.7 percent of Accredited’s outstanding shares. It needs s majority of shares respond to complete the transaction DexCom reported a net loss of $11.3 million on sales of $863,000 for its second quarter, compared to a net loss of $11.2 million on sales of $479,000 for the like quarter in 2006 Nascent Wine Co. opened a full service warehouse in Culiacan, Mexico Holders of Viper Networks preferred stock agreed to waive rights to convert the stock into shares of common stock until Jan. 1, 2008.


Send any news of locally traded public companies to Mike Allen via email at

mallen@sdbj.com

. He can be reached at (858) 277-6359.

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