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Telegent's curtain call: The three-way spin off

Posted: 29 Aug 2011 ?? ?Print Version ?Bookmark and Share

Keywords:mobile TV? analog TV? TV chips?

In a move that industry observers describe as a disappointing ending, Telegent Systems Inc., an analog mobile TV chip startup, which Spreadtrum Communications Inc. acquired in China, has quietly exited and managed to find the "right home" for its technology and team.

Nothing could be further from the truth in the minds of former Telegent CEO Ford Tamer, former CTO Samuel Sheng, and Reed Hundt, a former FCC chairman who served as a board member for Telegent from the company's inception. They all stressed that Telegent did not crash and burn.

If anything, "this was a success story," claimed Tamer. After its sale to Spreadtrum, it distributed $100 million among shareholders and employees, he added.

Any investment that doubles its returns is "pretty good these days, especially in the chip world, for employees, investors and private equity fund guys," said Hundt in an interview with EE Times.

The full story behind Telegents exit as told by Tamer and Sheng?although some details remained undisclosed?reveals that the former Telegent team is now spun out in three ways: an engineering team in Shanghai who went to Spreadtrum; 40-plus people based in the United States now working at a "well-known U.S. company" on a new project; and a dozen people, including Tamer and Sheng, now a part of a spin-off, whose name and plans remain undisclosed. Tamer is the executive chairman and Sheng is the president of the spinoff.

Tamer is keeping mum on who that "well-known U.S. company" is. But speculation on the street points to Broadcom.

Telegent had "a great team, plenty of cash and a supportive board," said Tamer. "'Closing shop was never an option we even considered," he added.

Fighting against the changing market
If Telegent had all the elements that should keep a good startup going, why did it seek an exit plan? "In the end, we couldnt change the market dynamics," said Tamer.

Spreadtrum acquires mobile TV firm
Spreadtrum Communications has agreed to buy software and silicon developer for live broadcast television signals Telegent. Under the terms of the agreement, approximately twenty hardware and software engineers from Telegent's Shanghai office will join Spreadtrum. Learn more about the details of Spreatdrum's acquisition.

Until right before the announcement of Spreadtrums Telegent acquisition, Telegent was still selling 4 to 5 million units of mobile TV chips per month. Considering that much volume and that Telegent maintained a leading market position with a "75 percent share" (according to Tamer), business didnt look so bad. But in reality, the average selling price of the chip was tanking, down to 60 cents. Worst of all, the total available market for mobile TV chips was topping off at $40 million to $50 million, said Tamer.

The market dynamic Telegent couldnt change was the unstoppable slippage of the price of their chips. "Consumer chips in China are a hugely competitive market," observed Sheng.

But more significantly, consumer behavior changed on Telegent (and many other mobile chip companies).

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