8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 23, 2007

TRIDENT MICROSYSTEMS, INC.

(Exact name of registrant as specified in its charter)

0-20784
(Commission File Number)

Delaware	77-0156584
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

3408 Garrett Drive
Santa Clara, California 95054-2803
(Address of principal executive offices, with zip code)

(408) 764-8808
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 99.1

Item 2.02 Results of Operations and Financial Condition.

     On October 25, 2007, Trident Microsystems, Inc. (the “Company”) issued a press release announcing its operating and financial results for the three months ended September 30, 2007, and intends to present additional financial information during a related conference call to be held on October 25, 2007. The press release and conference call contain forward-looking statements regarding the Company and include cautionary statements identifying factors that could cause actual results to differ materially from those anticipated. A copy of the press release is being furnished as Exhibit 99.1 and is incorporated herein in its entirety by reference.

     The information in this Current Report on Form 8-K, including the exhibits, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including the exhibits, shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

     Included in the press release is financial information prepared on a Generally Accepted Accounting Principles (“GAAP”) basis, as well as certain non-GAAP information. As required by Regulation G, the press release contains a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures as well as a discussion of management’s uses of, and rationale for presenting, the non-GAAP financial measures. To supplement the consolidated financial results prepared under GAAP, the Company uses a non-GAAP conforming measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Non-GAAP net income gives an indication of the Company’s baseline performance before gains, losses or other charges that are considered by management to be outside the company’s core operating results. In addition, non-GAAP net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are neither in accordance with, nor an alternative for, GAAP and may be materially different from non-GAAP measures used by other companies. The Company computes non-GAAP net income by adjusting GAAP net income for the impact of certain investment gains (or losses) and excluding various items, including stock-based compensation expense, expenses related to the stock option investigation and related matters and those related to the acquisition of the Company’s minority interest held in its Taiwanese subsidiary, including, amortization of intangible assets and charges for in—process research and development costs. A reconciliation between net income/loss on a GAAP basis and non-GAAP net income is provided in a table following non-GAAP consolidated financial statements.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

     (e)

     On October 23, 2007, the Compensation Committee of the Board of Directors of the Company approved a one-time payment to Glen M. Antle for his services as Acting Chief Executive Officer. Mr. Antle served as Acting Chief Executive Officer from November 15, 1007, the date of termination of employment of our former Chief Executive Officer, through October 17, 2007, the date of commencement of employment of Sylvia D. Summers as our current Chief Executive Officer. Mr. Antle is being paid $125,000 for these services and was granted a restricted stock award of 9,000 shares of the Company’s common stock, which shares will vest one year from the grant date.

Item 8.01 Other Events.

     On October 23, 2007, the Board of Directors of the Company approved a one-time payment to each of Mr. Raymond K. Ostby and Mr. Millard Phelps for their service on the Special Committee, formed in June 2006 to investigate our historical stock option granting practices and related accounting. Mr. Ostby and Mr. Phelps were previously paid a fee of $20,000 for their service on the Special Committee; accordingly, the total fee paid to each of them for their services on the Special Committee is $60,000. The Special Committee has now completed its work; any further matters relating to the investigation will be considered by the Special Litigation Committee, as disclosed in previous filings with the Securities and Exchange Commission.

2

     In addition, the Board of Directors approved payment of a cash retainer of $25,000 per annum to the Company’s non-employee Chairman of the Board, in addition to all other cash and equity compensation payable to our non-employee directors, as described in our proxy statement filed with the Securities and Exchange Commission on October 17, 2007. Payment of this fee will be prorated for Mr. Glen M. Antle from October 17, 2007, the effective date that he ceased to serve as our Acting Chief Executive Officer and began serving exclusively as our non-employee Chairman of the Board.

Item 9.01 Financial Statements and Exhibits.

     (c)  Exhibits.

Exhibit No.	Description
Exhibit 99.1	Press release dated October 25, 2007, announcing financial information for the quarter ended September 30, 2007.

3

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 25, 2007

TRIDENT MICROSYSTEMS, INC.
 

/s/ JOHN S. EDMUNDS  

John S. Edmunds 

Chief Financial Officer 

4

EXHIBIT INDEX

Exhibit No.	Description
Exhibit 99.1	Press release dated October 25, 2007, announcing financial information for the quarter ended September 30, 2007.

EX-99.1

Exhibit 99.1

Press Release

TRIDENT MICROSYSTEMS REPORTS FINANCIAL RESULTS FOR
FIRST QUARTER OF FISCAL YEAR 2008

Record Non-GAAP Operating Income in September Quarter

Santa Clara, Calif., — October 25, 2007: Trident Microsystems, Inc. (NASDAQ: TRID) a leading provider of digital TV technology for the consumer digital video marketplace today announced for the first fiscal quarter of 2008, ended September 30, 2007, the Company achieved net revenues of $88,174,000, a sequential increase of 25% from the $70,593,000 reported in the quarter ended June 30, 2007 and a 24% year-over-year increase from the $71,363,000 reported in the quarter ended September 30, 2006.

Net income of $10,059,000 was recorded in the first quarter ended September 30, 2007, on a generally accepted accounting principles (“GAAP”) basis, or $0.16 per share on a diluted basis, which included $10,443,000 in stock-based compensation expense as recognized under FASB 123R, $3,761,000 in legal and accounting fees related to our investigation into our historical stock option practices, $1,653,000 charged to cost of revenues relating to amortization of intangible assets and a $1,783,000 gain from a cash dividend received as a shareholder of United Microelectronics Corporation (“UMC”). This compares to net income of $10,513,000 in the quarter ended September 30, 2006, on a GAAP basis, or $0.17 per share on a diluted basis, which included $3,599,000 in stock-based compensation expense, $4,227,000 in legal and accounting fees related to our investigation into our historical stock option practices, $1,519,000 charged to cost of revenues relating to amortization of intangible assets and $190,000 in expense from the cumulative effect of a change in accounting principle.

Non-GAAP net income in the quarter ended September 30, 2007, was $24,133,000, or $0.38 per share on a diluted basis, and excludes the items noted above. This compares to non-GAAP net income of $16,637,000, or $0.26 per share on a diluted basis, in the fourth quarter of fiscal 2007 and to non-GAAP net income of $20,048,000 in the quarter ended September 30, 2006, or $0.32 per share on a diluted basis. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following the non-GAAP Consolidated Statements of Income.

“We were able to generate record non-GAAP operating income of $27,783,000 ($11,926,000 on a GAAP basis), representing 31.5 % of revenues, despite the fact that revenues came in at the low end of our expectations,” said Sylvia D. Summers, Trident’s new Chief Executive Officer.

“We believe the market is clearly segmenting between high quality Full HD (“1080P”) capable large screen TV’s found in prevailing specialty retailers and smaller, more cost sensitive, WXGA-driven TV’s found in prevailing club channels and discount chains. We are very strong in the former - branded 1080P MEMC-enabled TV’s, but our share in the latter category has begun to face challenges from new entrants and off brands who have begun to challenge branded TV’s. Our primary focus remains on converting our customer base to use our single chip SOC – our HiDTV Pro series, however, we expect that we may face challenges and competition in the less profitable WXGA markets. For this reason, we are forecasting our December quarter revenues in the range of $70- $72 million and planning to resume revenue growth in the second half of calendar 2008, expecting our HiDTV Pro UX/WX/QX to begin shipping in high volume at that time. Expecting a growing portion of the market for calendar 2008 to continue shifting toward 1080P on both 120hz and 60hz panels, we believe we are particularly well positioned with the HiDTV Pro UX/WX/QX – which is the only SOC offering in the market that supports 1080P with MEMC on both 120hz and 60hz panels from a single device,” continued Ms. Summers.

Use of Non-GAAP Financial Information

To supplement the consolidated financial results prepared under generally accepted accounting principles (“GAAP”), Trident uses a non-GAAP conforming, or non-GAAP, measure of net income that is GAAP net income adjusted to exclude certain costs, expenses and gains. Non-GAAP net income gives an indication of Trident’s baseline performance before gains, losses or other charges that are considered by management to be outside the company’s core operating results. In addition, non-GAAP net income is among the primary indicators management uses as a basis for planning and forecasting future periods. These measures are not in accordance with, or an alternative for, GAAP and may be materially different from non-GAAP measures used by other companies. Trident computes non-GAAP net income by adjusting GAAP net income for the impact of certain investment gains (or losses) and excluding various items including stock-based compensation expense, expenses related to the stock option investigation and related matters and those related to the acquisition of Trident’s minority interest held in its Taiwanese subsidiary (“TTI”), including amortization of intangible assets. A reconciliation between net income on a GAAP basis and non-GAAP net income is provided in a table following non-GAAP consolidated financial statements.

Investor Conference Call

Trident also announced that it will hold a conference call to discuss the earnings, which will be held on Thursday, October 25, 2007 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). Shareholders may participate in the call by calling 617-614-3449 passcode 49790618. The conference call will also be webcast by Thomson/CCBN and can be accessed at Trident’s web site at: http://www.tridentmicro.com. A replay of the conference call will be available from 5:00 p.m. Pacific Time October 25, 2007 until midnight Pacific Time August 1, 2007, and can be accessed by calling 617-801-6888 using passcode 51508606.

Forward-Looking Information

This press release contains forward-looking statements, including statements regarding the status of the market, Trident’s market share, challenges and competition that Trident faces in its markets, financial expectations for the next quarter, volume shipments of Trident’s products in 2008 and Trident’s expectations regarding the market for its products and product introductions. The forward-looking statements above are subject to certain risks and uncertainties, and actual results could vary materially depending on a number of factors. These risks include, in particular, changes in trends in the DPTV industries, whether Trident is able to achieve timely product introductions, the failure to obtain design wins among major OEMs for Trident’s products, and competitive pressures, including pricing and competitors’ new product introductions. Additional factors that may affect Trident’s business are described in detail in Trident’s filings with the Securities and Exchange Commission.

About Trident Microsystems, Inc.

Trident Microsystems, Inc., with headquarter in Santa Clara, California, designs, develops and markets digital media for the masses in the form of integrated circuits (ICs) for HDTV, LCD TV, PDP TV, DLP TV, and DCRT. Trident’s products are sold to a network of OEMs, original design manufacturers and system integrators worldwide. For further information about Trident and its products, please consult the company’s web site: http://www.tridentmicro.com.

NOTE: Trident is a registered trademark of Trident Microsystems, Inc., HiDTV^TM, DPTV^TM, SVP^TM WX, SVP^TM UX, SVP^TM PXP and SVP^TM CX are trademarks of Trident Microsystems, Inc. All other company and product names are trademarks and/or registered trademarks of their respective owners. Features, pricing, availability and specifications are subject to change without notice.

For Press Releases:
Trident Microsystems, Inc.
Investor Relations
Tel: (408) 764-8808
Email: Investor@tridentmicro.com

Web site: http://www.tridentmicro.com

Trident Microsystems, Inc.

Condensed Consolidated Statements of Income (Unaudited)

	Three Months Ended
	September 30,			June 30,			September 30,
(In thousands, except per share data)	2007			2007			2006
Net revenues	$	88,174		$	70,593		$	71,363
Cost of revenues		43,549			35,985			34,646
Cost of revenues — amortization of intangibles		1,486			1,486			1,385
Gross profit		43,139			33,122			35,332
% of net revenues		48.9	%		46.9	%		49.5	%
Research and development expenses		13,912			12,856			9,403
% of net revenues		15.8	%		18.2	%		13.2	%
Selling, general and administrative expenses		17,301			11,605			12,659
% of net revenues		19.6	%		16.4	%		17.7	%
Income from operations		11,926			8,661			13,270
% of net revenues		13.5	%		12.3	%		18.6	%
Interest and other income, net		3,692			1,586			2,292
Income before income taxes		15,618			10,247			15,562
% of net revenues		17.7	%		14.5	%		21.8	%
Provision for income taxes		5,559			3,486			4,859
% of net revenues		6.3	%		4.9	%		6.8	%
Income before cumulative effect of change in accounting principle		10,059			6,761			10,703
% of net revenues		11.4	%		9.6	%		15.0	%
Cumulative effect of change in accounting principle		—			—			(190	)
% of net revenues		0.0	%		0.0	%		(0.3	)%
Net income	$	10,059		$	6,761		$	10,513
% of net revenues		11.4	%		9.6	%		14.7	%
Basic net income per share
Prior to cumulative effect of change in accounting principle	$	0.17		$	0.12		$	0.18
Cumulative effect of change in accounting principle		—			—			—
Basic net income per share	$	0.17		$	0.12		$	0.18
Common shares used in computing basic per share amounts		58,851			57,748			57,303
Diluted net income per share
Prior to cumulative effect of change in accounting principle	$	0.16		$	0.11		$	0.17
Cumulative effect of change in accounting principle		—			—			—
Diluted net income per share	$	0.16		$	0.11		$	0.17
Common and common equivalent shares used in computing diluted per share amounts		63,605			63,571			63,116

Trident Microsystems, Inc.

Non-GAAP Condensed Consolidated Statements of Income (Unaudited)

	Three Months Ended
	September 30,			June 30,			September 30,
(In thousands, except per share data)	2007			2007			2006
Net revenues	$	88,174		$	70,593		$	71,363
Cost of revenues		43,398			35,826			34,545
Gross profit		44,776			34,767			36,818
% of net revenues		50.8	%		49.2	%		51.6	%
Research and development expenses		9,858			10,288			7,226
% of net revenues		11.2	%		14.6	%		10.1	%
Selling, general and administrative expenses		7,135			5,942			6,977
% of net revenues		8.1	%		8.4	%		9.8	%
Income from operations		27,783			18,537			22,615
% of net revenues		31.5	%		26.3	%		31.7	%
Interest and other income, net		1,909			1,586			2,292
Income before income taxes		29,692			20,123			24,907
% of net revenues		33.7	%		28.5	%		34.9	%
Provision for income taxes		5,559			3,486			4,859
% of net revenues		6.3	%		4.9	%		6.8	%
Net income		24,133			16,637			20,048
% of net revenues		27.4	%		23.6	%		28.1	%
Basic net income per share	$	0.41		$	0.29		$	0.35
Common shares used in computing basic per share amounts		58,851			57,748			57,303
Diluted net income per share	$	0.38		$	0.26		$	0.32
Common and common equivalent shares used in computing diluted per share amounts		63,605			63,571			63,116

Reconciliation between net income on a GAAP basis and non-GAAP net income is as follows:

	Three Months Ended
	September 30,			June 30,		September 30,
(In thousands, except per share data, unaudited)	2007			2007		2006
GAAP net income	$	10,059		$	6,761	$	10,513
Amortization of intangibles
Cost of revenues		1,486			1,486		1,385
Selling, general and administrative expenses		167			167		134
Total amortization of intangibles (1)		1,653			1,653		1,519
Stock-based compensation expense
Cost of revenues		151			159		101
Research and development		4,054			2,568		2,177
Selling, general and administrative expenses		6,238			1,740		1,321
Total stock-based compensation expense (2)		10,443			4,467		3,599
Interest and other income, net (3)		(1,783	)		—		—
Stock options related professional fees		3,761			3,756		4,227
Cumulative effect of change in accounting principle (4)		—			—		190
Non-GAAP net income	$	24,133		$	16,637	$	20,048
Basic net income per share	$	0.41		$	0.29	$	0.35
Common shares used in computing basic per share amounts		58,851			57,748		57,303
Diluted net income per share	$	0.38		$	0.26	$	0.32
Common and common equivalent shares used in computing diluted per share amounts		63,605			63,571		63,116

(1)	Amortization of intangibles represents the amortization of identifiable intangible assets, acquired from the purchase of the minority interests of the Company’s TTI subsidiary during a 12 month period ended June 30, 2005.
(2)	On July 1, 2005, the Company adopted SFAS 123(R), Share-Based Payment, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values. Stock-based compensation expense is recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation expense is recognized for equity instruments for which employees do not render the requisite service.
(3)	The dividend income received from UMC is excluded from the Non-GAAP net income calculation.
(4)	The adoption of EITF 06-2, Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43, Accounting for Compensated Absences, resulted in a cumulative effect from an accounting change of $0.2 million on sabbatical expenses for which expenses had already been recorded.

Trident Microsystems, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

	September 30,		June 30,
(In thousands)	2007		2007
ASSETS
Current assets
Cash and cash equivalents	$	160,261	$	147,562
Short-term investment — UMC		41,960		50,667
Short-term investment — Others		1,435		1,077
Accounts receivable, net		29,131		9,161
Inventories		19,150		16,263
Prepaid expenses and other current assets		22,790		13,585
Deferred income taxes		83		83
Total current assets		274,810		238,398
Property and equipment, net		22,441		19,581
Intangible assets, net		11,192		12,845
Investments — other		2,597		3,089
Deferred income taxes		338		338
Other assets		8,573		9,628
Total assets	$	319,951	$	283,879
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	27,474	$	20,683
Accrued expenses		28,383		23,235
Income taxes payable		17,516		36,171
Total current liabilities		73,373		80,089
Long-term income taxes payable (1)		21,404		—
Deferred income tax liabilities		1,557		1,942
Total liabilities		96,334		82,031
Stockholders’ equity
Capital stock		191,851		179,448
Retained earnings (accumulated deficit)		28,857		18,798
Accumulated other comprehensive income		2,909		3,602
Total stockholders’ equity		223,617		201,848
Total liabilities and stockholders’ equity	$	319,951	$	283,879

(1) On July 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). Implementation of FIN 48 resulted in the reclassification of $21.4 million to “Long-term income taxes payable”.