##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2009
 OR
 o
    
    TRANSITION REPORTING PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-20784
 TRIDENT MICROSYSTEMS, INC.
  Delaware
    
    77-0156584(State or other jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification Number)3408 Garrett Drive, Santa Clara, California
(Address of principal executive offices)
    
    95054-2803
(Zip Code)
 (408) 764-8808
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
Common Stock, $0.001 par value
    
    Name of each exchange on which registered
NASDAQ Global Market
 Securities registered pursuant to Section 12(g) of the Act: None
 Yes o No þ
 Yes o No þ
 þ o
 Yes o No o
 o
  LARGE ACCELERATED FILER o
    
    ACCELERATED FILER þ
    
    NON-ACCELERATED FILER o
    
    SMALL REPORTING COMPANY o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TRIDENT MICROSYSTEMS, INC.
TABLE OF CONTENTS
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    10Item 1B. Unresolved Staff Comments
    
    
    21Item 2. Properties
    
    
    22Item 3. Legal Proceedings
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    25Item 6. Selected Financial Data
    
    
    27Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    28Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    47Item 8. Financial Statements and Supplementary Data
    
    
    48Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    83Item 9A. Controls and Procedures
    
    
    83Item 9B. Other Information
    
    
    84PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    85Item 11. Executive Compensation
    
    
    87Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    87Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    88Item 14. Principal Accounting Fees and Services
    
    
    88PART IVItem 15. Exhibits, Financial Statement Schedules
    
    
    89Signatures
    
    
    93Power of Attorney
    
    
    93Exhibit 10.38Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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FORWARD-LOOKING STATEMENTS
 This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 which provides a safe harbor for statements
about future events, products and future financial performance that are based on the beliefs of,
estimates made by and information currently available to the management of Trident Microsystems,
Inc. (we, our, Trident or the Company). The outcome of the events described in these
forward-looking statements is subject to risks and uncertainties. Actual results and the outcome or
timing of certain events may differ significantly from those projected in these forward-looking
statements due to the factors listed under Risk Factors, and from time to time in our other
filings with the Securities and Exchange Commission, or SEC. For this purpose, statements
concerning industry or market segment outlook; market acceptance of or transition to new products;
revenues, earnings growth, other financial results and any statements using the terms believe,
expect, expectation, anticipate, can, should, would, could, estimate, appear,
based on, may, intended, potential, are emerging and possible or similar statements are
forward-looking statements that involve risks and uncertainties that could cause our actual results
and the outcome and timing of certain events to differ materially from those projected or
managements current expectations. By making forward-looking statements, we have not assumed any
obligation to, and you should not expect us to, update or revise those statements because of new
information, future events or otherwise, except as required by law.
 
 PART I
 
 ITEM 1. BUSINESS
 Overview
  www.tridentmicro.com
 Business structure
   3




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Business Combination
   Industry Environment and Our Business Strategy
    ®
   4




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Markets and Applications
       Digital Media Products:
  SVPTM
   5




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HiDTV
  TAFE
  FRC
  DRX
  Audio Decoder
 2
 Connected TV Solution
  Sales, Marketing and Distribution
     6




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##### Table of Contents



Competition
  
    
    product quality;
 
    
    product capabilities
 
    
    level of integration;
 
    
    engineering execution;
 
    
    reliability;
 
    
    price;
 
    
    time-to-market;
 
    
    market presence;
 
    
    standards compliance;
 
    
    system cost;
 
    
    intellectual property; and
 
    
    customer interface and support.
   Research and Development
   7




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Manufacturing
 Wafer Fabrication
  Assembly and Test
  Quality Assurance
  Backlog
    8




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Seasonality
  Intellectual Property
     Employees
   9




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ITEM 1A. RISK FACTORS
  We may be unable to successfully integrate the assets and operations that were acquired from
Micronas.
  
    
    retaining Micronas customers and strategic partners of products that we have acquired
with the Purchase;
 
    
    retaining key employees and retaining and integrating key employees acquired from
Micronas;
 
    
    coordinating research and development activities to enhance the introduction of new
products and technologies utilizing technology acquired in the Purchase, especially in
light of rapidly evolving markets for those products and technologies;
 
    
    managing effectively the diversion of managements attention from business matters to
integration issues;
 
    
    combining product offerings and incorporating acquired technology and rights into our
product offerings effectively and quickly;
 
    
    integrating sales efforts so that new customers acquired with the Purchase can easily do
business with us;
 
    
    transitioning all facilities to a common information technology environment;
 
    
    combining our business culture with the business culture previously operated by
Micronas;
 
    
    anticipating the market needs and achieving market acceptance of our products and
services utilizing the technology acquired in the Purchase; and
 
    
    complying with local laws as we take steps to integrate and rationalize operations in
diverse geographic locations.
 The Purchase may fail to achieve beneficial synergies.
  
    
    we may be unable to increase sales of our products following the Purchase;
 
    
    the Purchase may not be accretive;
 
    
    we may be unable to expand the markets and customers we serve, upgrade our intellectual
property, and reduce our cash burn rate;
 
    
    we may have difficulty in manufacturing Micronas acquired products in the future and
utilizing Micronas as a foundry or sub-contract manufacturer;
  10




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
    
    potential disruption of our existing business could distract our management;
 
    
    we may be unable to secure design wins at tier one customers following integration of
the technology acquired as part of the Purchase;
 
    
    we may be unable to retain needed intellectual property rights from Micronas, including
rights to third party licenses held by Micronas needed for us to successfully deploy the
assets acquired in the Purchase;
 
    
    it may be more difficult to retain key employees, marketing, and technical personnel
after the completion of the Purchase, or that any former employees of Micronas will file
claims against Trident for pre-closing labor obligations; and
 
    
    the costs and expenditures for retaining personnel, eliminating unnecessary resources
and integrating the businesses may be greater than anticipated.
  Our success depends to a significant degree on the continued employment of key personnel, some of
whom have only worked together for a short period of time, as well as upon our ability to retain
and motivate key employees joining us from Micronas, and failure to do so could seriously harm our
financial results and operations.
   As a result of the Purchase, we are a larger and more geographically diverse organization, and if
we are unable to manage this larger organization efficiently, our operating results will suffer.
  We have incurred significant costs associated with the Purchase.
   11




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The issuance of shares of Trident common stock to Micronas in the Purchase has reduced the
percentage interests of current Trident stockholders.
  As a result of the difficult global macroeconomic and industry conditions, we have implemented a
restructuring and workforce reductions, and may be required to make additional such reductions,
which may adversely affect the morale and performance of our personnel and our ability to hire new
personnel.
  We depend on a small number of large customers for a significant portion of our sales. The loss of,
a significant reduction in or cancellation of sales to any key customer would significantly reduce
our revenues.
    
    
    substantially all of our sales are made on a purchase order basis, which permits our
customers to cancel, change or delay product purchase commitments with little or no notice
to us and without penalty;
 
    
    our customers may purchase integrated circuits from our competitors;
 
    
    our customers may develop and manufacture their own solutions; or
 
    
    our customers may discontinue sales or lose market share in the markets for which they
purchase our products.
  12




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If we engage in further cost-cutting or workforce reductions, we may be unable to successfully
implement new products or enhancements or upgrades to our products.
  A decline in revenues may have a disproportionate impact on operating results and require further
reductions in our operating expense levels.
  The impact of changes in global economic conditions on our current and potential customers may
adversely affect our revenues and results of operations.
  As a result of our investigation into our historical stock option granting practices and the
restatement of our previously filed financial statements, we are subject to civil litigation claims
and regulatory investigations that could have a material adverse effect on our business, customer
relationships, results of operations and financial condition .
   We face risks related to SEC, DOJ, and other investigations into our historical stock option grant
practices and related accounting, which could require significant management time and attention,
and could require us to pay fines or other penalties.
   13




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We have been named as a party to derivative action lawsuits, and we may be named in additional
litigation, all of which will require significant management time and attention and result in
significant legal expenses and may result in an unfavorable outcome which could have a material
adverse effect on our business, financial condition, results of operations and cash flows.
 In re Trident
Microsystems Inc. Derivative Litigation Limke v. Lin et al
 We are subject to the risks of additional lawsuits in connection with our historical stock option
grant practices and related issues, the resulting restatements, and the remedial measures we have
taken.
  The operation of our business could be adversely affected by the transition of key personnel as we
rebuild our executive leadership team and make additional organizational changes.
  Intense competition exists in the market for digital media products.
   14




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Our success depends upon the digital media market and we must continue to develop new products and
to enhance our existing products.
  If we do not achieve additional design wins in the future, our ability to sell additional products
could be adversely affected.
   15




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The average selling prices of our products may decline over relatively short periods.
  We may be required to record future charges to earnings if our intangible assets become impaired.
  We may face risks resulting from the failure to allow former employees to exercise stock options.
   16




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We do not have long-term commitments from our customers, and plan purchases based upon our
estimates of customer demand, which may require us to contract for the manufacture of our products
based on inaccurate estimates.
  Our dependence on sales to distributors increases the risks of managing our supply chain and may
result in excess inventory or inventory shortages.
  Product supply and demand in the semiconductor industry is subject to cyclical variations.
  We have had fluctuations in quarterly results in the past and may continue to experience such
fluctuations in the future.
  
    
    our ability to obtain the anticipated benefits of the acquisition from Micronas;
 
    
    our ability to develop, introduce, ship and support new products and product
enhancements, especially our newer SoC products, and to manage product transitions;
 
    
    new product introductions by our competitors;
 
    
    delayed new product introductions;
 
    
    uncertain demand in the digital media markets in which we have limited experience;
 
    
    our ability to achieve required product cost reductions;
 
    
    the mix of products sold and the mix of distribution channels through which they are
sold;
 
    
    fluctuations in demand for our products, including seasonality;
  17




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
    
    unexpected product returns or the cancellation or rescheduling of significant orders;
 
    
    our ability to attain and maintain production volumes and quality levels for our
products;
 
    
    unfavorable responses to new products;
 
    
    adverse economic conditions, particularly in the United States and Asia; and
 
    
    unexpected costs associated with our investigation of our historical stock option grant
practices and related issues, and any related litigation or regulatory actions.
  We are vulnerable to undetected product problems.
  Our reliance upon a very small number of foundries could make it difficult to maintain product flow
and affect our sales.
     18




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If we have to qualify new contract manufacturers or foundries for any of our products, we may
experience delays that result in lost revenues and damaged customer relationships.
  Our success depends in part on our ability to protect our intellectual property rights, which may
be difficult.
  We have been involved in intellectual property infringement claims, and may be involved in others
in the future, which can be costly.
   19




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If necessary licenses of third-party technology are not available to us or are very expensive, our
products could become obsolete.
  Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax
rates.
  Changes in our business and product strategy could affect our operations.
  The market price of our common stock has been, and may continue to be, volatile.
   20




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We currently rely on certain international customers for a substantial portion of our revenue and
are subject to risks inherent in conducting business outside of the United States.
  
    
    exchange rate variations, tariffs, import/export restrictions and other trade barriers;
 
    
    potential adverse tax consequences;
 
    
    challenges in effectively managing distributors or representatives to maximize sales;
 
    
    difficulties in collecting accounts receivable;
 
    
    political and economic instability, civil unrest, war or terrorist activities that
impact international commerce;
 
    
    difficulties in protecting intellectual property rights, particularly in countries where
the laws and practices do not protect proprietary rights to as great an extent as do the
laws and practices of the United States; and
 
    
    unexpected changes in regulatory requirements.
  Our operations are vulnerable to interruption or loss due to natural disasters, power loss, strikes
and other events beyond our control, which would adversely affect our business.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
   21




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ITEM 2. PROPERTIES
  SquareLocation
    
    Type
    
    Principal Use
    
    Footage
    
    
    Ownership
    
    ExpriationSanta Clara, CA (Headquarters)
    
    Office
    
    Principal Executive Offices, Research, Engineering, Marketing, and Sales and General Administration
    
    
    30,500
    
    
    Lease
    
    
    7/1/2011Chicago, IL
    
    Office
    
    Research and  Engineering
    
    
    6,126
    
    
    Lease
    
    
    10/31/2013Taipei, Taiwan
    
    Office
    
    General and Administration, Operation, Sales Administration, Research, and Engineering,
    
    
    20,436
    
    
    Lease
    
    
    8/31/2011Tokyo, Japan
    
    Office
    
    Sales Administration
    
    
    2,296
    
    
    Lease
    
    
    7/31/2010Seoul, Korea
    
    Office
    
    Sales Administration
    
    
    7,401
    
    
    Lease
    
    
    6/30/2010Signapore
    
    Office
    
    Sales Administration
    
    
    300
    
    
    Lease
    
    
    11/15/2009Beijing, China
    
    Office
    
    Research and  Engineering
    
    
    3,765
    
    
    Lease
    
    
    10/9/2009Hong Kong, China
    
    Office and warehouse
    
    General and Administration, Sales Administration, and Warehouse
    
    
    6,833
    
    
    Lease
    
    
    6/30/2010Shanghai, China
    
    Office
    
    General and Administration, Research, Engineering, and Sales Administration
    
    
    115,000
    
    
    Own
    
    
    Shenzhen, China
    
    Office
    
    Sales Administration
    
    
    6,510
    
    
    Lease
    
    
    12/15/2010Munich, Germany
    
    Office
    
    General and Administration, Research, and Engineering
    
    
    17,000
    
    
    Lease
    
    
    5/31/2012Freiburg, Germany
    
    Office
    
    Research, and Engineering
    
    
    9,429
    
    
    Lease
    
    month-to-monthNijmegen, The Netherlands
    
    Office
    
    Research and Engineering
    
    
    10,370
    
    
    Lease
    
    
    12/31/2009
   22




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ITEM 3. LEGAL PROCEEDINGS
 Shareholder Derivative Litigation
 In re Trident
Microsystems Inc. Derivative Litigation Limke v. Lin et al
 Regulatory Actions
  Special Litigation Committee
   23




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Accounting for Contingencies
 Indemnification Obligations
  Prior Software Usage
  General
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
   24




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Part II
 
 ITEM 5. MARKET FOR THE REGISTRANTS COMMON STOCK, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
 Market Information and Holders
  High
    
    
    LowFiscal Year 2009First Quarter
    
    $
    4.31
    
    
    $
    2.26Second Quarter
    
    $
    2.34
    
    
    $
    1.30Third Quarter
    
    $
    2.24
    
    
    $
    1.24Fourth Quarter
    
    $
    2.11
    
    
    $
    1.34Fiscal Year 2008First Quarter
    
    $
    19.49
    
    
    $
    13.52Second Quarter
    
    $
    17.05
    
    
    $
    5.35Third Quarter
    
    $
    6.57
    
    
    $
    4.62Fourth Quarter
    
    $
    5.37
    
    
    $
    3.63
 Approximate Number of Stockholders
  Dividends
  Equity Securities Issued by Trident
  Issuer Repurchases of Equity Securities
   25




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Stock Performance Graphs and Cumulative Total Return
  COMPARISON OF 5 YEARS CUMULATIVE RETURN
Among Trident Microsystems, Inc., The NASDAQ Composite Index and
The Philadelphia Semiconductor Sector Index
 
 *
    
    Assumes $100 invested on June 30, 2004 in stock or index-including reinvestment of dividends. 6/04
    
    
    6/05
    
    
    6/06
    
    
    6/07
    
    
    6/08
    
    
    6/09Trident Microsystems, Inc. (TRID)
    
    
    100.00
    
    
    
    199.82
    
    
    
    334.15
    
    
    
    323.06
    
    
    
    64.26
    
    
    
    30.63Philadelphia Semiconductor Sector Index
    
    
    100.00
    
    
    
    86.39
    
    
    
    91.06
    
    
    
    103.31
    
    
    
    75.90
    
    
    
    54.25NASDAQ Composite Index
    
    
    100.00
    
    
    
    100.45
    
    
    
    106.07
    
    
    
    127.12
    
    
    
    111.97
    
    
    
    89.61
  26




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ITEM 6. SELECTED FINANCIAL DATA
  TRIDENT MICROSYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
 Fiscal Years(In millions, except per share amounts)
    
    2009
    
    
    2008
    
    
    2007 (1)
    
    
    2006 (1)
    
    
    2005Summary of Operations:Net revenues
    
    $
    75.8
    
    
    $
    257.9
    
    
    $
    270.8
    
    
    $
    171.4
    
    
    $
    69.0Income (loss) from operations
    
    
    (62.2
    )
    
    
    18.8
    
    
    
    40.1
    
    
    
    28.4
    
    
    
    (29.9
    )Net income (loss)
    
    
    (70.2
    )
    
    
    10.2
    
    
    
    30.1
    
    
    
    26.2
    
    
    
    (30.2
    )Net income (loss) per share  Basic
    
    
    (1.12
    )
    
    
    0.17
    
    
    
    0.52
    
    
    
    0.48
    
    
    
    (0.64
    )Net income (loss) per share  Diluted
    
    
    (1.12
    )
    
    
    0.16
    
    
    
    0.48
    
    
    
    0.42
    
    
    
    (0.64
    )Financial Position at Fiscal Year End:Cash, cash equivalents and short-term investments
    
    $
    187.9
    
    
    $
    240.0
    
    
    $
    199.3
    
    
    $
    152.7
    
    
    $
    92.2Working capital
    
    
    164.9
    
    
    
    215.9
    
    
    
    158.3
    
    
    
    125.3
    
    
    
    81.6Total assets
    
    
    263.3
    
    
    
    309.3
    
    
    
    283.9
    
    
    
    207.2
    
    
    
    135.0Stockholders equity
    
    
    192.9
    
    
    
    237.3
    
    
    
    201.8
    
    
    
    153.7
    
    
    
    109.3
 (1)
    
    We have revised the classification of certain amounts from Research and development to
Cost of revenues. See Note 1, Description of Business and Summary of Significant
Accounting Policies, of Notes to Consolidated Financial Statements, included in Part II, Item
8 of this Report.  27




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Forward-Looking Statements
 This section and other parts of this Annual Report on Form 10-K contain forward-looking statements
that involve risks and uncertainties. Forward-looking statements can also be identified by words
such as anticipates, expects, believes, plans, predicts, and similar terms.
Forward-looking statements are not guarantees of future performance and the Companys actual
results may differ significantly from the results discussed in the forward-looking statements.
Factors that might cause such differences include, but are not limited to, those discussed in Item
1ARisk Factors above. The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 8 of this report. The Company
assumes no obligation to revise or update any forward-looking statements for any reason, except as
required by law.
 Overview
  Business structure
      28




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Business Combination
  Net Revenues
   
    
    the qualification, availability and pricing of competing products and technologies and
the resulting effects on the design wins of our products;
    
    our ability to specify, develop or acquire, complete, introduce, market and transition
to volume production new products and technologies in a cost effective and timely manner;
    
    general economic and political conditions and specific conditions in the markets we
address, including the continuing volatility in the technology sector and semiconductor
industry, current general economic volatility, conditions in the semiconductor industry,
including seasonality in sales of consumer products into which our products are
incorporated; and
    
    the timing, rescheduling or cancellation of significant customer orders and our ability,
as well as the ability of our customers, to manage inventory.
    2009
    
    
    2008
    
    
    2007Revenue:Midoriya (supplier to Sony)
    
    
    38
    %
    
    
    28
    %
    
    
    25
    %Sharp
    
    
    11
    %
    
    
    *
    
    
    
    *Philips
    
    
    10
    %
    
    
    19
    %
    
    
    *Samsung
    
    
    *
    
    
    
    29
    %
    
    
    41
    %
 *
    
    Less than 10% revenue.    29




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Gross Margin
  
    
    our product mix and volume of product sales;
    
    the effects of competitive pricing programs and rebates;
    
    manufacturing cost efficiencies and inefficiencies;
    
    fluctuations in direct product costs such as wafer pricing and assembly, packaging and
testing costs and overhead costs;
    
    product warranty costs; and
    
    provisions for excess and obsolete inventories
 Acquisition Strategy
   
    
    In fiscal year ended June 30, 2009, we acquired the selected assets of the FRC, DRX and
audio decoder product lines of the Consumer Division of Micronas, a competitor of Trident,
which enables us to increase our market shares in the DTV market.
    
    In fiscal year ended June 30, 2008, we acquired a 100% ownership interest in Tiside, a
privately held software company located in China, which designs cross-platform software
that allows multimedia applications to run on devices in the digital living room such as
set top boxes or DTV sets.
 Segments
 Disclosures about Segments of an Enterprise and Related Information
 Critical Accounting Estimates
   30




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Revenue Recognition
 Revenue Recognition
  Allowance for Sales Returns
  Stock-based Compensation Expense
 Share-Based Payment
     31




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Goodwill and Purchased Intangible Assets .
 Goodwill impairment assessment
 Goodwill and other Intangibles,
   Long-lived assets impairment assessment
 Accounting for the Impairment or Disposal of Long-lived
Assets,
 Valuation of Equity Investments in Privately Held Companies and Funds
  Inventories
   32




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Fair Value Measurements
 Fair Value Measurements
 Product Warranty
  Income Taxes
 Accounting for Income Taxes
  Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Litigation and Other Loss Contingencies
 Accounting
for Contingencies,
 Business Combinations
   33




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Results of Operations
 Financial Data for Fiscal Years Ended June 30, 2009, 2008, and 2007
 Net Revenues
  Net revenues comparison by dollars
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    
    
    
    
    
    
    
    
    Dollar
    
    
    Percent
    
    
    
    
    
    
    
    
    
    
    Dollar
    
    
    PercentRevenues by region (1)
    
    2009
    
    
    2008
    
    
    variance
    
    
    variance
    
    
    2008
    
    
    2007
    
    
    variance
    
    
    varianceJapan
    
    $
    41,615
    
    
    $
    91,306
    
    
    $
    (49,691
    )
    
    
    (54
    %)
    
    $
    91,306
    
    
    $
    91,721
    
    
    $
    (415
    )
    
    
    (0
    %)Europe
    
    
    13,841
    
    
    
    53,801
    
    
    
    (39,960
    )
    
    
    (74
    %)
    
    
    53,801
    
    
    
    17,421
    
    
    
    36,380
    
    
    
    209
    %Asia Pacific (2)
    
    
    14,061
    
    
    
    32,618
    
    
    
    (18,557
    )
    
    
    (57
    %)
    
    
    32,618
    
    
    
    45,725
    
    
    
    (13,107
    )
    
    
    (29
    %)South Korea
    
    
    5,819
    
    
    
    79,608
    
    
    
    (73,789
    )
    
    
    (93
    %)
    
    
    79,608
    
    
    
    115,513
    
    
    
    (35,905
    )
    
    
    (31
    %)Americas
    
    
    425
    
    
    
    605
    
    
    
    (180
    )
    
    
    (30
    %)
    
    
    605
    
    
    
    415
    
    
    
    190
    
    
    
    46
    %Total net revenues
    
    $
    75,761
    
    
    $
    257,938
    
    
    $
    (182,177
    )
    
    
    (71
    %)
    
    $
    257,938
    
    
    $
    270,795
    
    
    $
    (12,857
    )
    
    
    (5
    %)
 Net revenues comparison by percentage of total net revenues
 Fiscal Years Ended June 30,Revenues by region (1)
    
    2009
    
    
    2008
    
    
    2007Japan
    
    
    54.9
    %
    
    
    35.4
    %
    
    
    33.9
    %Europe
    
    
    18.2
    %
    
    
    20.9
    %
    
    
    6.4
    %Asia Pacific (2)
    
    
    18.6
    %
    
    
    12.6
    %
    
    
    16.9
    %South Korea
    
    
    7.7
    %
    
    
    30.9
    %
    
    
    42.6
    %Americas
    
    
    0.6
    %
    
    
    0.2
    %
    
    
    0.2
    %Total net revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100.0
    %
 (1)
    
    Net revenues by region are classified based on the locations of the customers principal
offices even though our customers revenues may be attributable to end customers that are
located in a different location.(2)
    
    Net revenues from China, Taiwan and Singapore are included in the Asia Pacific region. Comparison of fiscal year ended June 30, 2009 to fiscal year ended June 30, 2008
   34




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Comparison of fiscal year ended June 30, 2008 to fiscal year ended June 30, 2007
   Gross Margin
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Gross profit
    
    $
    23,328
    
    
    
    (81
    %)
    
    $
    120,026
    
    
    
    (7
    %)
    
    $
    129,107Gross margin
    
    
    30.8
    %
    
    
    
    
    
    
    46.5
    %
    
    
    
    
    
    
    47.7
    %
   Comparison of fiscal year ended June 30, 2009 to fiscal year ended June 30, 2008
   35




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##### Table of Contents



Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Additions to inventory reserves
    
    $
    3,148
    
    
    $
    2,747
    
    
    $
    2,204Sales of previously reserved products
    
    
    (5,082
    )
    
    
    (4,676
    )
    
    
    (4,463
    )Net increase in gross profit
    
    $
    (1,934
    )
    
    $
    (1,929
    )
    
    $
    (2,259
    )
   Comparison of fiscal year ended June 30, 2008 to fiscal year ended June 30, 2007
  Research and Development
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Research and development
    
    $
    53,016
    
    
    
    1
    %
    
    $
    52,608
    
    
    
    28
    %
    
    $
    40,970As a percentage of net revenues
    
    
    70
    %
    
    
    
    
    
    
    20
    %
    
    
    
    
    
    
    15
    %
  Comparison of fiscal year ended June 30, 2009 to fiscal year ended June 30, 2008
   36




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##### Table of Contents



Comparison of fiscal year ended June 30, 2008 to fiscal year ended June 30, 2007
  Selling, General and Administrative
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Selling, general and administrative
    
    $
    29,617
    
    
    
    (39
    %)
    
    $
    48,598
    
    
    
    1
    %
    
    $
    47,993As a percentage of net revenues
    
    
    39
    %
    
    
    
    
    
    
    19
    %
    
    
    
    
    
    
    18
    %
  Comparison of fiscal year ended June 30, 2009 to fiscal year ended June 30, 2008
  Business Combination
 Comparison of fiscal year ended June 30, 2008 to fiscal year ended June 30, 2007
   37




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##### Table of Contents



Goodwill Impairment
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Goodwill impairment
    
    $
    1,432
    
    
    
    100
    %
    
    $
    
    
    
    
    0
    %
    
    $
    Percentage of net revenues
    
    
    2
    %
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %
  In Process Research and Development
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007In-process research and development
    
    $
    697
    
    
    
    100
    %
    
    $
    
    
    
    
    0
    %
    
    $
    Percentage of net revenues
    
    
    1
    %
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %
  Restructuring Charges
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Restructuring charges
    
    $
    810
    
    
    
    100
    %
    
    $
    
    
    
    
    0
    %
    
    $
    Percentage of net revenues
    
    
    1
    %
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %
  Loss on Sale of Short-term Investments
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Loss on sale of short-term investments
    
    $
    (8,940
    )
    
    
    100
    %
    
    $
    
    
    
    
    0
    %
    
    $
    Percentage of net revenues
    
    
    (12
    %)
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    0
    %
   38




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##### Table of Contents



Impairment Loss on UMC Investment
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Impairment loss on UMC investment
    
    $
    (556
    )
    
    
    (91
    %)
    
    $
    (6,480
    )
    
    
    (100
    %)
    
    $
    0As a percentage of net revenues
    
    
    (1
    %)
    
    
    
    
    
    
    (3
    %)
    
    
    
    
    
    
    0
    %
 Accounting for Certain Investments in Debt and Equity Securities Other-Than-Temporary Impairment of Certain Investments in Debt and
Equity Securities The Meaning of Other-Than-Temporary Impairment and
Its Application to Certain Investments.
 Interest Income, Net
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Interest income, net
    
    $
    2,968
    
    
    
    (52
    %)
    
    $
    6,166
    
    
    
    26
    %
    
    $
    4,890As a percentage of net revenues
    
    
    4
    %
    
    
    
    
    
    
    2
    %
    
    
    
    
    
    
    2
    %
   Other Income, Net
 Fiscal Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    % Change
    
    
    2008
    
    
    % Change
    
    
    2007Other income, net
    
    $
    4,053
    
    
    
    811
    %
    
    $
    445
    
    
    
    (77
    %)
    
    $
    1,947As a percentage of net revenues
    
    
    5
    %
    
    
    
    
    
    
    0
    %
    
    
    
    
    
    
    1
    %
    39




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##### Table of Contents



Provision for Income Taxes
 Fiscal Years Ended June 30,2009
    
    
    Change
    
    
    2008
    
    
    Change
    
    
    2007Income tax provision
    
    
    5,513
    
    
    
    (37
    %)
    
    
    8,799
    
    
    
    (47
    %)
    
    
    16,673Effective tax rate
    
    
    (9
    %)
    
    
    (55
    %)
    
    
    46
    %
    
    
    11
    %
    
    
    35
    %
  Liquidity and Capital Resources
  Increase/(Dollars in millions)
    
    June 30, 2009
    
    
    June 30, 2008
    
    
    (Decrease)Cash, cash equivalents and
short-term investmentsCash and cash equivalents
    
    $
    187.9
    
    
    $
    213.3
    
    
    $
    (25.4
    )Short-term investments
    
    
    
    
    
    
    26.7
    
    
    
    (26.7
    )Total
    
    $
    187.9
    
    
    $
    240.0
    
    
    $
    (52.1
    )
   Fiscal Years(Dollars In millions)
    
    2009
    
    
    2008
    
    
    2007Net cash flow provided by (used in):Operating activities
    
    $
    (31.9
    )
    
    $
    57.9
    
    
    $
    62.1Investing activities
    
    
    5.3
    
    
    
    1.7
    
    
    
    (17.7
    )Financing activities
    
    
    1.2
    
    
    
    6.1
    
    
    
    0.1Net increase (decrease) in
cash and cash equivalents
    
    $
    (25.4
    )
    
    $
    65.7
    
    
    $
    44.5
 Operating Activities
   40




---



##### Table of Contents



Investing Activities
   Financing Activities
    41




---



##### Table of Contents



Liquidity
  Days Sales Outstanding
  Contractual Obligations
  Payments Due By PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5(Dollars in millions)
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    years
    
    
    TotalContractual ObligationsOperating Leases (1)
    
    $
    1.9
    
    
    $
    2.2
    
    
    $
    
    
    
    $
    
    
    
    $
    4.1Purchase Obligations (2)
    
    
    19.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.9Total
    
    $
    21.8
    
    
    $
    2.2
    
    
    $
    
    
    
    $
    
    
    
    $
    24.0
 (1)
    
    We lease office space and have entered into other lease commitments in North America as well
as various locations in Japan, Hong Kong, China, Taiwan, South Korea, Singapore, Germany, and
The Netherlands. Operating leases include future minimum lease payments under all our
noncancelable operating leases as of June 30, 2009.(2)
    
    Purchase obligations primarily represent unconditional purchase order commitments with
contract manufacturers and suppliers for wafers and software licensing.   42




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##### Table of Contents



Contingencies
 Shareholder Derivative Litigation
 In re
Trident Microsystems Inc. Derivative Litigation Limke v. Lin et al
 Regulatory Actions
  Special Litigation Committee
  Accounting for Contingencies
  43




---



##### Table of Contents



Indemnification Obligations
  Prior Software Usage
  General
  Recent Accounting Pronouncements
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162.
 Subsequent Events
 Interim Disclosures about Fair Value of
Financial Instruments
  44




---



##### Table of Contents



Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly Fair Value Measurements
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies Business Combinations Business Combinations Accounting for Contingencies
 Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active
  Determination of the Useful Life of
Intangible Assets
  45




---



##### Table of Contents



Effective Date of FASB Statement 157
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51
  46




---



##### Table of Contents



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Foreign currency exchange rate risk
   Interest rate risk
   Investment risk
 Investment in Privately Held Companies and Funds
   47




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 TRIDENT MICROSYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Years Ended June 30,(In thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007Net revenues
    
    $
    75,761
    
    
    $
    257,938
    
    
    $
    270,795Cost of revenues
    
    
    52,433
    
    
    
    137,912
    
    
    
    141,688Gross profit
    
    
    23,328
    
    
    
    120,026
    
    
    
    129,107Operating expenses:Research and development
    
    
    53,016
    
    
    
    52,608
    
    
    
    40,970Selling, general and administrative
    
    
    29,617
    
    
    
    48,598
    
    
    
    47,993Goodwill impairment
    
    
    1,432
    
    
    
    
    
    
    
    In-process research and development
    
    
    697
    
    
    
    
    
    
    
    Restructuring charges
    
    
    810
    
    
    
    
    
    
    
    Total operating expenses
    
    
    85,572
    
    
    
    101,206
    
    
    
    88,963Income (loss) from operations
    
    
    (62,244
    )
    
    
    18,820
    
    
    
    40,144Loss on sale of short-term investments
    
    
    (8,940
    )
    
    
    
    
    
    
    Impairment loss on short-term investments
    
    
    (556
    )
    
    
    (6,480
    )
    
    
    Interest income
    
    
    2,968
    
    
    
    6,166
    
    
    
    4,890Other income, net
    
    
    4,053
    
    
    
    445
    
    
    
    1,947Income (loss) before provision for income taxes and
cumulative effect of change in accounting principle
    
    
    (64,719
    )
    
    
    18,951
    
    
    
    46,981Provision for income taxes
    
    
    5,513
    
    
    
    8,799
    
    
    
    16,673Income (loss) before cumulative
effect of change in accounting principle
    
    
    (70,232
    )
    
    
    10,152
    
    
    
    30,308Cumulative effect of change in accounting principle, net of tax
    
    
    
    
    
    
    
    
    
    
    (190
    )Net income (loss)
    
    $
    (70,232
    )
    
    $
    10,152
    
    
    $
    30,118Net income (loss) per share  Basic:Income (loss) before change in accounting principle
    
    $
    (1.12
    )
    
    $
    0.17
    
    
    $
    0.52Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (0.00
    )Net income (loss) per share  Basic
    
    $
    (1.12
    )
    
    $
    0.17
    
    
    $
    0.52Net income (loss) per share  Diluted:Income (loss) before change in accounting principle
    
    $
    (1.12
    )
    
    $
    0.16
    
    
    $
    0.48Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (0.00
    )Net income (loss) per share  Diluted
    
    $
    (1.12
    )
    
    $
    0.16
    
    
    $
    0.48Shares used in computing net income (loss) per share  Basic
    
    
    62,535
    
    
    
    59,367
    
    
    
    57,637Shares used in computing net income (loss) per share  Diluted
    
    
    62,535
    
    
    
    62,751
    
    
    
    63,380
 The accompanying notes are an integral part of these consolidated financial statements.
  48




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TRIDENT MICROSYSTEMS, INC.
 
 CONSOLIDATED BALANCE SHEETS
 As of June 30,(In thousands, except par values)
    
    2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    187,937
    
    
    $
    213,296Short-term investments
    
    
    
    
    
    
    26,704Accounts receivable, net of allowances for sales returns of $56 and $300 at
June 30, 2009 and 2008, respectively
    
    
    9,375
    
    
    
    4,510Accounts receivable from related party
    
    
    5,289
    
    
    
    Inventories
    
    
    6,828
    
    
    
    8,680Prepaid expenses and other current assets
    
    
    4,136
    
    
    
    12,863Total current assets
    
    
    213,565
    
    
    
    266,053Property and equipment, net
    
    
    27,587
    
    
    
    23,425Goodwill
    
    
    7,708
    
    
    
    1,432Intangible assets, net
    
    
    7,685
    
    
    
    8,428Other assets
    
    
    6,767
    
    
    
    9,977Total assets
    
    $
    263,312
    
    
    $
    309,315LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    10,485
    
    
    $
    10,889Accounts payable to related party
    
    
    5,513
    
    
    
    Accrued expenses and other current liabilities
    
    
    19,546
    
    
    
    22,910Income taxes payable
    
    
    13,107
    
    
    
    16,309Total current liabilities
    
    
    48,651
    
    
    
    50,108Long-term income taxes payable
    
    
    21,658
    
    
    
    21,579Deferred income tax liabilities
    
    
    81
    
    
    
    370Total liabilities
    
    
    70,390
    
    
    
    72,057Commitments and contingencies (Notes 6 and 8)Stockholders equity:Preferred stock, $0.001 par value; 500 shares authorized;
none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 95,000 shares authorized; 69,920 and
61,238 shares issued and outstanding at June 30, 2009 and 2008, respectively
    
    
    70
    
    
    
    61Additional paid-in capital
    
    
    234,134
    
    
    
    208,299Retained earnings (accumulated deficit)
    
    
    (41,282
    )
    
    
    28,950Accumulated other comprehensive loss
    
    
    
    
    
    
    (52
    )Total stockholders equity
    
    
    192,922
    
    
    
    237,258Total liabilities and stockholders equity
    
    $
    263,312
    
    
    $
    309,315
 The accompanying notes are an integral part of these consolidated financial statements.
  49




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TRIDENT MICROSYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended June 30,(In thousands)
    
    2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (70,232
    )
    
    $
    10,152
    
    
    $
    30,118Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating activities:Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    190Stock-based compensation expense
    
    
    12,673
    
    
    
    24,270
    
    
    
    15,607Excess tax benefit from stock-based compensation
    
    
    (96
    )
    
    
    (561
    )
    
    
    (855
    )Depreciation and amortization
    
    
    9,544
    
    
    
    5,354
    
    
    
    1,501In-process research and development
    
    
    697
    
    
    
    
    
    
    
    Amortization of acquisition-related intangible assets
    
    
    3,985
    
    
    
    5,725
    
    
    
    6,345Loss on disposal of property and equipment
    
    
    83
    
    
    
    52
    
    
    
    59Impairment loss on investment in UMC
    
    
    556
    
    
    
    6,480
    
    
    
    Impairment of goodwill
    
    
    1,432
    
    
    
    
    
    
    
    Impairment of intangible assets
    
    
    2,689
    
    
    
    
    
    
    
    Loss (gain) on sales of investments
    
    
    8,966
    
    
    
    (969
    )
    
    
    (216
    )Deferred income taxes
    
    
    63
    
    
    
    (722
    )
    
    
    1,179Changes in assets and liabilities, net of effect of acquisitions:Accounts receivable
    
    
    (4,677
    )
    
    
    4,665
    
    
    
    (4,883
    )Inventories
    
    
    1,852
    
    
    
    7,583
    
    
    
    (1,622
    )Prepaid expenses and other current assets
    
    
    5,885
    
    
    
    6,088
    
    
    
    5,742Accounts payable
    
    
    (577
    )
    
    
    (8,902
    )
    
    
    384Accrued expenses and other liabilities
    
    
    (1,796
    )
    
    
    (3,574
    )
    
    
    2,398Income taxes payable
    
    
    (2,897
    )
    
    
    2,273
    
    
    
    6,145Net cash provided by (used in) operating activities
    
    
    (31,850
    )
    
    
    57,914
    
    
    
    62,092Cash flows from investing activities:Purchases of property and equipment
    
    
    (3,189
    )
    
    
    (6,246
    )
    
    
    (17,690
    )Purchases of stock of privately held companies
    
    
    
    
    
    
    
    
    
    
    (500
    )Proceeds from the capital reduction of UMC investment
    
    
    
    
    
    
    7,829
    
    
    
    Proceeds from sale of available-for-sale investments
    
    
    17,234
    
    
    
    6,079
    
    
    
    Proceeds from sale of investments in private companies
    
    
    
    
    
    
    1,056
    
    
    
    1,228Acquisition of businesses, net of cash acquired
    
    
    (2,531
    )
    
    
    (1,960
    )
    
    
    Other assets
    
    
    (6,471
    )
    
    
    (5,070
    )
    
    
    (748
    )Proceeds from sale of property, plant and equipment
    
    
    294
    
    
    
    48
    
    
    
    Net cash provided by (used in) investing activities
    
    
    5,337
    
    
    
    1,736
    
    
    
    (17,710
    )Cash flows from financing activities:Proceeds from issuance of common stock to employees
    
    
    1,058
    
    
    
    5,523
    
    
    
    805Excess tax benefit from stock-based compensation
    
    
    96
    
    
    
    561
    
    
    
    855Net cash settlements of stock options in connection with IRC Section 409A
    
    
    
    
    
    
    
    
    
    
    (1,526
    )Net cash provided by financing activities
    
    
    1,154
    
    
    
    6,084
    
    
    
    134Net (decrease) increase in cash and cash equivalents
    
    
    (25,359
    )
    
    
    65,734
    
    
    
    44,516Cash and cash equivalents at beginning of year
    
    
    213,296
    
    
    
    147,562
    
    
    
    103,046Cash and cash equivalents at end of year
    
    $
    187,937
    
    
    $
    213,296
    
    
    $
    147,562Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    1,588
    
    
    $
    1,219
    
    
    $
    2,080Supplemental schedule of non-cash investing and financing activities:Issuance of common stock warrants and common stock for Micronas acquisition
    
    $
    (12,087
    )
    
    $
    
    
    
    $
    Accrued expense for building
    
    $
    
    
    
    $
    (208
    )
    
    $
    Prepaid taxes in connection with intercompany profit on assets remaining within consolidated group
    
    $
    
    
    
    $
    
    
    
    $
    20,583
 The accompanying notes are an integral part of these consolidated financial statements.
  50




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TRIDENT MICROSYSTEMS, INC.
 
 CONSOLIDATED STATEMENTS STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS)
 Additional
    
    
    Retained
    
    
    AccumulatedPaid-in
    
    
    Earnings
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Capital
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    Stockholders(In thousands)
    
    Shares
    
    
    Amount
    
    
    (Common Stock)
    
    
    Deficit)
    
    
    Income (Loss)
    
    
    EquityBalance at June 30, 2006
    
    
    57,206
    
    
    $
    57
    
    
    $
    162,801
    
    
    $
    (11,320
    )
    
    $
    2,119
    
    
    $
    153,657Income before cumulative effect of change
in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,308
    
    
    
    
    
    
    
    30,308Cumulative effect of change in accounting
principle, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    
    
    
    
    (190
    )Unrealized gains on investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    1,483Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,601Shares issued pursuant to stock awards, net
    
    
    542
    
    
    
    1
    
    
    
    804
    
    
    
    
    
    
    
    
    
    
    
    805Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    15,607
    
    
    
    
    
    
    
    
    
    
    
    15,607Tax benefit from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,704
    
    
    
    
    
    
    
    
    
    
    
    1,704Net cash settlement of stock options in
connection with IRC Section 409A
    
    
    
    
    
    
    
    
    
    
    (1,526
    )
    
    
    
    
    
    
    
    
    
    
    (1,526
    )Balance at June 30, 2007
    
    
    57,748
    
    
    
    58
    
    
    
    179,390
    
    
    
    18,798
    
    
    
    3,602
    
    
    
    201,848Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,152
    
    
    
    
    
    
    
    10,152Unrealized losses on investments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,654
    )
    
    
    (3,654
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,498Shares issued pursuant to stock awards, net
    
    
    3,490
    
    
    
    3
    
    
    
    5,520
    
    
    
    
    
    
    
    
    
    
    
    5,523Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    24,270
    
    
    
    
    
    
    
    
    
    
    
    24,270Net cash settlement of stock options
    
    
    
    
    
    
    
    
    
    
    (1,274
    )
    
    
    
    
    
    
    
    
    
    
    (1,274
    )Tax benefit from stock-based compensation
    
    
    
    
    
    
    
    
    
    
    393
    
    
    
    
    
    
    
    
    
    
    
    393Balance at June 30, 2008
    
    
    61,238
    
    
    
    61
    
    
    
    208,299
    
    
    
    28,950
    
    
    
    (52
    )
    
    
    237,258Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70,232
    )
    
    
    
    
    
    
    (70,232
    )Unrealized gain on short-term investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52
    
    
    
    52Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (70,180
    )Shares issued pursuant to stock awards, net
    
    
    1,682
    
    
    
    2
    
    
    
    1,056
    
    
    
    
    
    
    
    
    
    
    
    1,058Shares and warrant issued in connection
with the aquistion of Micronas assets
    
    
    7,000
    
    
    
    7
    
    
    
    12,080
    
    
    
    
    
    
    
    
    
    
    
    12,087Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    12,673
    
    
    
    
    
    
    
    
    
    
    
    12,673Net cash settlement for TMTs stock options
    
    
    
    
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    
    
    
    
    26Balance at June 30, 2009
    
    
    69,920
    
    
    $
    70
    
    
    $
    234,134
    
    
    $
    (41,282
    )
    
    $
    
    
    
    $
    192,922
 The accompanying notes are an integral part of these consolidated financial statements.
  51




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Business and Business Combination
 Business
    Business Combination
  Basis of Consolidation and Presentation
  Use of Estimates
  Foreign Currency Remeasurement
   52




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Cash and Cash Equivalents
  Investments
   Fair Value of Financial Instruments
 Fair Value
Measurements (
 Concentrations of Credit Risk and Other Risk
      53




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Inventories
  Long-lived Assets
 Property and Equipment
  Amortizable Intangible Assets
  Accounting for the Impairment or Disposal of Long-lived Assets
  54




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Goodwill
 Goodwill and Other Intangible
Assets
 
    
    significant underperformance relative to historical or projected future operating results;
    
    significant adverse change in the extent or manner in which a long-lived asset is being
used or in its physical condition;
    
    significant negative industry or economic trends; and
    
    significant decline in the Companys market capitalization.
  Revenue Recognition
 Revenue
Recognition (SAB 104),
  Accounting for Consideration Given by a Vendor
to a Customer (Including a Reseller of the Vendors Products)
   55




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Stock-based Compensation
 Share-Based Payment
  Shipping and Handling Costs
  Research and Development
  Income Taxes
 Accounting for Income Taxes
  Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
  56




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Net Income (loss) per Share
 Earnings per
Share.
 Comprehensive Income
  Reclassifications
  Product Warranty
  Advertising Expense
  Recent Accounting Pronouncements
 The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting The FASB Accounting Standards Codification.
 Subsequent Events
 Interim Disclosures about Fair Value of
Financial Instruments
  57




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly Fair Value Measurements
 Recognition and Presentation of
Other-Than-Temporary Impairments
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies Business Combinations Business Combinations Accounting for Contingencies
 Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active
  Determination of the Useful Life of
Intangible Assets
 Effective Date of FASB Statement 157
  58




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statementsan amendment of ARB No. 51
 2. INVESTMENTS
  Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    Estimated Fair(Dollars in thousands)
    
    Historical cost
    
    
    Gains
    
    
    Losses
    
    
    ValueShort-term investments:Marketable equity securities  as of June 30, 2009
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Marketable equity securities  as of June 30, 2008
    
    $
    26,756
    
    
    $
    
    
    
    $
    (52
    )
    
    $
    26,704
 Short-term investments
 United Microelectronics Corporation
  Miscellaneous Accounting, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments
  59




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  3. BALANCE SHEET COMPONENTS
 June 30,(Dollars in thousands)
    
    2009
    
    
    2008Cash and cash equivalents:Cash
    
    $
    48,712
    
    
    $
    37,295U.S. Treasuries
    
    
    111,773
    
    
    
    Certificates of deposit
    
    
    27,452
    
    
    
    43,582Money market funds
    
    
    
    
    
    
    132,419Total cash and cash equivalents
    
    $
    187,937
    
    
    $
    213,296Inventories:Work in process
    
    $
    4,935
    
    
    $
    4,170Finished goods
    
    
    1,893
    
    
    
    4,510Total inventories
    
    $
    6,828
    
    
    $
    8,680Property and equipment, net:Building and leasehold improvements
    
    $
    19,467
    
    
    $
    18,738Machinery and equipment
    
    
    15,454
    
    
    
    8,773Software
    
    
    3,925
    
    
    
    3,319Furniture and fixtures
    
    
    2,277
    
    
    
    1,465Construction in progress
    
    
    
    
    
    
    10341,123
    
    
    
    32,398Accumulated depreciation and amortization
    
    
    (13,536
    )
    
    
    (8,973
    )Total property and equipment, net
    
    $
    27,587
    
    
    $
    23,425Accrued expenses and current liabilities:Compensation and benefits
    
    $
    4,449
    
    
    $
    5,927Contingent liabilities on certain option modifications (1)
    
    
    4,336
    
    
    
    4,336Professional fees
    
    
    2,687
    
    
    
    1,572Royalties
    
    
    796
    
    
    
    1,014Deferred revenues less cost of revenues
    
    
    344
    
    
    
    1,274Others
    
    
    6,934
    
    
    
    7,400Prior software usage (2)
    
    
    
    
    
    
    1,387Total accrued expenses
    
    $
    19,546
    
    
    $
    22,910
 (1)
    
    See Note 8, Employee Stock Plans, of Notes to Consolidated Financial Statements(2)
    
    See Note 6, Commitments and Contingencies, of Notes to Consolidated Financial Statements  60




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 4. GOODWILL AND INTANGIBLE ASSETS
 Goodwill and impairment
  (In thousands)Balance as of June 30, 2007
    
    $
    Goodwill acquired
    
    
    1,432Balance as of June 30, 2008
    
    $
    1,432Goodwill acquired
    
    
    7,708Impairment charge
    
    
    (1,432
    )Balance as of June 30, 2009
    
    $
    7,708
    Intangible assets and impairment
   61




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Acquisition-related intangible assets
   Third-party purchased intangible assets
   June 30, 2009
    
    
    June 30, 2008Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedAmortization and
    
    
    
    
    
    
    
    
    
    
    Amortization and(Dollars in thousands)
    
    Gross
    
    
    Write-off
    
    
    Net
    
    
    Gross
    
    
    Write-off
    
    
    NetCore and developed technologies
    
    $
    28,646
    
    
    $
    (21,382
    )
    
    $
    7,264
    
    
    $
    24,587
    
    
    $
    (17,129
    )
    
    $
    7,458Customer relationships
    
    
    2,521
    
    
    
    (2,247
    )
    
    
    274
    
    
    
    2,521
    
    
    
    (1,561
    )
    
    
    960Backlog
    
    
    166
    
    
    
    (19
    )
    
    
    147
    
    
    
    
    
    
    
    
    
    
    
    Tradename
    
    
    14
    
    
    
    (14
    )
    
    
    
    
    
    
    14
    
    
    
    (4
    )
    
    
    10Total
    
    $
    31,347
    
    
    $
    (23,662
    )
    
    $
    7,685
    
    
    $
    27,122
    
    
    $
    (18,694
    )
    
    $
    8,428
  (Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Reported as:Cost of revenues
    
    $
    4,254
    
    
    $
    5,138
    
    
    $
    5,742Selling, general and administrative
    
    
    696
    
    
    
    587
    
    
    
    603Net revenues
    
    
    18
    
    
    
    
    
    
    
    Total
    
    $
    4,968
    
    
    $
    5,725
    
    
    $
    6,345
  62




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  5. GUARANTEES
 Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others,
 (Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Accrued product warranty, beginning
of fiscal year
    
    $
    256
    
    
    $
    800
    
    
    $
    1,082Charged to (reversal of) cost of revenues
    
    
    (256
    )
    
    
    (372
    )
    
    
    1,171Actual product warranty expenses
    
    
    
    
    
    
    (172
    )
    
    
    (1,453
    )Accrued product warranty, end of fiscal
year
    
    $
    
    
    
    $
    256
    
    
    $
    800
 6. COMMITMENTS AND CONTINGENCIES
 Commitments
 Lease Commitments
  Purchase Commitments
  Contingencies
 Shareholder Derivative Litigation
 In re
Trident Microsystems Inc. Derivative Litigation Limke v. Lin et al
  63




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Regulatory Actions
  Indemnification Obligations
  Prior Software Usage
  General
   64




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 7. STOCKHOLDERS EQUITY
 Preferred Shares Rights
   Comprehensive Income (Loss)
 Reporting Comprehensive Income
 8. EMPLOYEE BENEFIT PLANS
 Equity Incentive Plans
    65




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Share-Based Payment Accounting for Stock Based Compensation
 Valuation Assumptions
    Equity Incentive Plans for Years EndedJune 30,2009
    
    
    2008
    
    
    2007Expected terms (in years)
    
    
    3.94
    
    
    
    4.20
    
    
    
    4.25Volatility
    
    
    62.68
    %
    
    
    52.25
    %
    
    
    61.92
    %Risk-free interest rate
    
    
    2.83
    %
    
    
    3.97
    %
    
    
    4.77
    %Expected dividend rate
    
    
    
    
    
    
    
    
    
    
    Weighted average fair value
    
    $
    1.27
    
    
    $
    5.04
    
    
    $
    10.65
   66




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Stock-Based Compensation Expense
  Year Ended June 30,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Cost of revenues
    
    $
    587
    
    
    $
    763
    
    
    $
    896Research and development
    
    
    7,539
    
    
    
    12,418
    
    
    
    8,901Selling, general and administrative
    
    
    4,547
    
    
    
    15,424
    
    
    
    5,810Total stock-based compensation expense
    
    $
    12,673
    
    
    $
    28,605
    
    
    $
    15,607
 Accounting for Contingencies
  67




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Options OutstandingShares Available for
    
    
    
    
    
    
    Weighted Average(Shares in thousands, except per share amounts)
    
    Grant
    
    
    Number of Shares
    
    
    Exercise PriceBalance at June 30, 2006
    
    
    5,335
    
    
    
    9,594
    
    
    $
    4.49Plan shares expired
    
    
    (622
    )
    
    
    
    
    
    
    Restricted stock granted (1)
    
    
    (380
    )
    
    
    
    
    
    
    Options granted
    
    
    (1,553
    )
    
    
    1,553
    
    
    
    20.17Options exercised
    
    
    
    
    
    
    (541
    )
    
    
    1.49Options canceled
    
    
    804
    
    
    
    (804
    )
    
    
    8.34Balance at June 30, 2007
    
    
    3,584
    
    
    
    9,802
    
    
    $
    6.82Options increase under 2006 Plan
    
    
    4,000Plan shares expired
    
    
    (594
    )
    
    
    
    
    
    
    Restricted stock granted (1)
    
    
    (1,273
    )
    
    
    
    
    
    
    Restricted stock cancellation (1)
    
    
    192
    
    
    
    
    
    
    
    Options granted
    
    
    (1,870
    )
    
    
    1,870
    
    
    
    10.60Options exercised
    
    
    
    
    
    
    (2,778
    )
    
    
    2.01Options cancelled, forfeited or expired
    
    
    1,369
    
    
    
    (1,369
    )
    
    
    10.58Balance at June 30, 2008
    
    
    5,408
    
    
    
    7,525
    
    
    $
    8.94Plan shares expired
    
    
    (594
    )
    
    
    
    
    
    
    Restricted stock granted (1)
    
    
    (1,512
    )
    
    
    
    
    
    
    Restricted stock cancellation (1)
    
    
    424
    
    
    
    
    
    
    
    Options granted
    
    
    (1,859
    )
    
    
    1,859
    
    
    
    2.57Options exercised
    
    
    
    
    
    
    (1,062
    )
    
    
    1.23Options cancelled, forfeited or expired
    
    
    1,454
    
    
    
    (1,454
    )
    
    
    9.90Balance at June 30, 2009
    
    
    3,321
    
    
    
    6,868
    
    
    $
    8.21Vested and expected to vest at June 30, 2009
    
    
    
    
    
    
    6,628
    
    
    $
    8.28
 (1)
    
    Restricted stock is deducted from shares available for grant under the 2006 Plan at a 1 to 1.38
ratio.   68




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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Options Outstanding
    
    
    Options ExercisableWeighted Average
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    WeightedNumber of
    
    
    Contractual Term
    
    
    Exercise
    
    
    Number of
    
    
    AverageRange of Exercise Prices
    
    Shares
    
    
    (in Years)
    
    
    Price
    
    
    Shares
    
    
    Exercise Price$0.78    $1.69
    
    
    1,840
    
    
    
    5.3
    
    
    $
    1.16
    
    
    
    1,515
    
    
    $
    1.12$1.70    $5.22
    
    
    1,830
    
    
    
    8.6
    
    
    $
    3.18
    
    
    
    270
    
    
    $
    4.55$5.34    $15.23
    
    
    1,834
    
    
    
    7.1
    
    
    $
    11.45
    
    
    
    894
    
    
    $
    11.56$15.34    $28.15
    
    
    1,364
    
    
    
    7.5
    
    
    $
    20.15
    
    
    
    733
    
    
    $
    20.15Total
    
    
    6,868
    
    
    
    7.1
    
    
    $
    8.21
    
    
    
    3,412
    
    
    $
    8.22
    Restricted Stock Awards and Restricted Stock Units
  Weighted AverageGrant-Date Fair(Shares in thousands, except per share amounts)
    
    Shares
    
    
    Value per ShareNonvested balance at June 30, 2006
    
    
    
    
    
    $
    Granted
    
    
    275
    
    
    
    19.98Vested
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Nonvested balance at June 30, 2007
    
    
    275
    
    
    $
    19.98Granted
    
    
    923
    
    
    
    12.20Vested
    
    
    (50
    )
    
    
    19.64Forfeited
    
    
    (140
    )
    
    
    13.92Nonvested balance at June 30, 2008
    
    
    1,008
    
    
    $
    13.71Granted
    
    
    1,096
    
    
    
    3.33Vested
    
    
    (247
    )
    
    
    3.85Forfeited
    
    
    (307
    )
    
    
    10.86Nonvested balance at June 30, 2009
    
    
    1,551
    
    
    $
    7.02
  69




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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Employee 401(k) Plan
   Employee Stock Purchase Plan
  Modification of Certain Options
 Extended Exercise
   70




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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Contingent Liabilities
  Changing Employment Status from Employee to Consultant
   71




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 9. INCOME TAXES
  Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    2008Balance at beginning of year
    
    $
    42,987
    
    
    $
    40,708Increases related to current year tax positions
    
    
    4,486
    
    
    
    3,093(Decreases) increases related to prior year tax positions
    
    
    (4,767
    )
    
    
    1,515Expiration of the statute of limitations for the assessment of taxes
    
    
    (340
    )
    
    
    (2,329
    )Balance at end of year
    
    $
    42,366
    
    
    $
    42,987
     Year Ended June 30,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007United States
    
    $
    (20,374
    )
    
    $
    (34,419
    )
    
    $
    (20,358
    )Foreign
    
    
    (44,345
    )
    
    
    53,370
    
    
    
    67,339$
    (64,719
    )
    
    $
    18,951
    
    
    $
    46,981
  Year Ended June 30,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Current:Federal
    
    $
    181
    
    
    $
    311
    
    
    $
    180State
    
    
    1
    
    
    
    1
    
    
    
    2Foreign
    
    
    5,268
    
    
    
    9,209
    
    
    
    15,312$
    5,450
    
    
    $
    9,521
    
    
    $
    15,494Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    63
    
    
    
    (722
    )
    
    
    1,17963
    
    
    
    (722
    )
    
    
    1,179$
    5,513
    
    
    $
    8,799
    
    
    $
    16,673
  72




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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  June 30,(Dollars in thousands)
    
    2009
    
    
    2008Deferred income tax assets:Research and development credits
    
    $
    13,557
    
    
    $
    12,709Net operating loss carryforwards
    
    
    5,665
    
    
    
    2,743Capital loss
    
    
    9,424
    
    
    
    Reserves and accruals
    
    
    733
    
    
    
    2,945Other
    
    
    5,091
    
    
    
    5,435Deferred income tax assets
    
    
    34,470
    
    
    
    23,832Valuation allowance
    
    
    (30,010
    )
    
    
    (20,820
    )Deferred income tax assets, net
    
    
    4,460
    
    
    
    3,012Total deferred income tax liabilities:Amortization
    
    
    
    
    
    
    (198
    )Unremitted earnings of foreign subsidiaries
    
    
    (3,981
    )
    
    
    (2,220
    )Total deferred income tax liabilities
    
    
    (3,981
    )
    
    
    (2,418
    )Net deferred income tax assets
    
    $
    479
    
    
    $
    594
    Year Ended June 30,2009
    
    
    2008
    
    
    2007Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State taxes, net of federal tax benefit
    
    
    7.0
    
    
    
    11.7
    
    
    
    5.8Research and development credit
    
    
    1.2
    
    
    
    (3.5
    )
    
    
    1.4Foreign rate differential
    
    
    (32.2
    )
    
    
    (53.8
    )
    
    
    (15.1
    )Valuation allowance
    
    
    (28.7
    )
    
    
    19.7
    
    
    
    8.0Permanent differences
    
    
    7.4
    
    
    
    35.7
    
    
    
    0.2Other
    
    
    1.8
    
    
    
    1.6
    
    
    
    0.2Effective income tax rate
    
    
    (8.5
    )%
    
    
    46.4
    %
    
    
    35.5
    %
  73




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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  10. NET INCOME (LOSS) PER SHARE
  Year Ended June 30,(Dollars in thousands, except per share data)
    
    2009
    
    
    2008
    
    
    2007Net income (loss)
    
    $
    (70,232
    )
    
    $
    10,152
    
    
    $
    30,118Shares used in computing basic per share amounts
    
    
    62,535
    
    
    
    59,367
    
    
    
    57,637Dilutive potential common shares
    
    
    
    
    
    
    3,384
    
    
    
    5,743Shares used in computing diluted per share amounts
    
    
    62,535
    
    
    
    62,751
    
    
    
    63,380Net income (loss) per share:Basic
    
    $
    (1.12
    )
    
    $
    0.17
    
    
    $
    0.52Diluted
    
    $
    (1.12
    )
    
    $
    0.16
    
    
    $
    0.48Potentially dilutive securities (1)
    
    
    6,868
    
    
    
    4,916
    
    
    
    751
 (1)
    
    Dilutive potential common shares consist of stock options, restricted stock awards and
restricted stock units. The potentially dilutive common shares are excluded from the computation
of diluted net income (loss) per share for the above periods because their effect would have been
anti-dilutive. 11. BUSINESS COMBINATIONS
 Frame Rate Converter, Demodulator and Audio Decoder product lines of the Consumer Division of
Micronas Semiconductor Holding AG
  Fair value of common stock
    
    $
    10,668Estimated acquisition-related costs
    
    
    4,136Fair value of common stock warrants
    
    
    1,419In-process research and development
    
    
    697Value added taxes
    
    
    336Cash paid in exchange for outstanding shares of Micronas Netherlands B.V.
    
    
    10Total estimated purchase price
    
    $
    17,266
  74




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Preliminary Estimated Purchase Price Allocation
  Tangible assets acquired:Cash and cash equivalents
    
    
    
    
    
    $
    142Accounts receivable
    
    
    
    
    
    
    259Other current assets
    
    
    
    
    
    
    97Property and equipment, net
    
    
    
    
    
    
    4,818Deferred tax assets
    
    
    
    
    
    
    175Liabilities assumed:Accounts payable
    
    
    
    
    
    
    (133
    )Accrued liabilities
    
    
    
    
    
    
    (366
    )Above market lease liability
    
    
    
    
    
    
    (356
    )Net tangible assets acquired
    
    
    
    
    
    
    4,636Amortizable intangible assets acquired:
    
    Estimated useful lifeCore technology
    
    3 years
    
    
    4,059Backlog
    
    13 months
    
    
    166Goodwill
    
    Indefinite
    
    
    7,708In-process research and development
    
    
    
    
    
    
    697Total estimated purchase price allocation
    
    
    
    
    
    $
    17,266
    75




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Years Ended June 30,
    
    Amount2010
    
    $
    1,5012011
    
    
    1,3532012
    
    
    1,184
 Unaudited Pro Forma Financial Information
  Year Ended June 30,2009
    
    
    2008Pro forma net revnues
    
    $
    197,604
    
    
    $
    430,998Pro forma net income (loss)
    
    
    (91,928
    )
    
    
    (12,402
    )Pro forma net income (loss) per share- basic
    
    
    (1.32
    )
    
    
    (0.19
    )- diluted
    
    
    (1.32
    )
    
    
    (0.19
    )
 Beijing Tiside Electronics Design Co., Ltd.,
    76




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 12. FAIR VALUE REMEASUREMENTS
    Level 1
 Level 2
 Level 3
 Assets Measured at Fair Value on a Recurring Basis
  (Dollars in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3U.S. Treasury (1)
    
    $
    111,773
    
    
    $
    111,773
    
    
    
    
    
    
    
    Certificates of deposit (1)
    
    
    27,452
    
    
    
    27,452
    
    
    
    
    
    
    
    Total cash equivalents as of June 30, 2009
    
    $
    139,225
    
    
    $
    139,225
    
    
    $
    
    
    
    $
    
 (1)
    
    Included in Cash and cash equivalents on the Companys Consolidated Balance Sheet. (Dollars in thousands)
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Money market funds (1)
    
    $
    132,419
    
    
    
    132,419
    
    
    
    
    
    
    
    Certificates of deposit (1)
    
    
    43,582
    
    
    
    43,582
    
    
    
    
    
    
    
    Total cash equivalents as of June 30, 2008
    
    $
    176,001
    
    
    $
    176,001
    
    
    $
    
    
    
    $
    
 (1)
    
    Included in Cash and cash equivalents on the Companys Consolidated Balance Sheet. 13. RESTRUCTURING
   77




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 14. SEGMENT AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
 Segment and Geographic Information
   Years Ended June 30,(Dollars in thousands)
    
    2009
    
    
    2008
    
    
    2007Revenues:Japan
    
    $
    41,615
    
    
    $
    91,306
    
    
    $
    91,721Europe
    
    
    13,841
    
    
    
    53,801
    
    
    
    17,421Asia Pacific
    
    
    14,061
    
    
    
    32,618
    
    
    
    45,725South Korea
    
    
    5,819
    
    
    
    79,608
    
    
    
    115,513Americas
    
    
    425
    
    
    
    605
    
    
    
    415Total revenues
    
    $
    75,761
    
    
    $
    257,938
    
    
    $
    270,795
  June 30,(Dollars in thousands)
    
    2009
    
    
    2008Long-lived assets:China
    
    $
    21,733
    
    
    $
    21,265Europe
    
    
    3,881
    
    
    
    Americas
    
    
    1,399
    
    
    
    1,749Taiwan
    
    
    519
    
    
    
    411Asia Pacific
    
    
    55
    
    
    
    Total
    
    $
    27,587
    
    
    $
    23,425
 Major Customers
  2009
    
    
    2008
    
    
    2007Revenue:Midoriya
    
    
    38
    %
    
    
    28
    %
    
    
    25
    %Sharp
    
    
    11
    %
    
    
    *
    
    
    
    *Philips
    
    
    10
    %
    
    
    19
    %
    
    
    *Samsung
    
    
    *
    
    
    
    29
    %
    
    
    41
    %
 *
    
    Less than 10% of net revenues.   78




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##### Table of Contents



TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 15. RELATED PARTY TRANSACTIONS
  
    
    On May 14, 2009, the Company entered into a Service Level Agreement or (SLA) with
Micronas. Under the SLA, Micronas agreed to provide to the Company specified transition
services and support, including intellectual property transitional services for a limited
period of time to assist the Company in achieving a smooth transition of the acquired products
and product lines. The transition services include certain manufacturing design, maintenance
and support services, sales of inventory and newly-manufactured products and certain finance
and administration, IT, infrastructure, warehousing and similar services, to be provided
pursuant to specified service level agreements. Moreover, on May 14, 2009, the Company
entered into an exclusive Distributor Agreement with Micronas. Under the Distributor
Agreement, Micronas served as the exclusive supplier and OEM to the Company on the FRC, DRX,
and Audio Decoder product lines from May 15, 2009 to June 15, 2009. As of June 30, 2009, the
outstanding accounts payable to Micronas was $5.5 million, and the outstanding accounts
receivable from Micronas was $5.3 million.
 
    
    On May 14, 2009, the Company entered into a Cross License Agreement (the Cross
License) with Micronas, pursuant to which Micronas has granted to the Company a
royalty-free, perpetual, irrevocable, fully assignable and transferable worldwide license,
including the right to sublicense, to patents that are relevant to, but not exclusive to,
the FRC line of frame rate converters, the DRX line of demodulators and all of the audio
processing product lines acquired in the acquisition. Ownership of these patents remains
with Micronas following completion of the acquisition. The license is exclusive for the
first three years, subject to certain exceptions, and is non-exclusive thereafter. The
Company has granted to Micronas a royalty-free, perpetual, irrevocable, non-exclusive,
fully assignable and transferable worldwide license, including the right to sublicense, to
patents exclusively relevant to the FRC line of frame rate converters, the DRX line of
demodulators and all of the audio processing product lines acquired in the acquisition.
During the first three years, the license granted by the Company to Micronas is limited to
use for products that are not a DRX, Audio or FRC Product. Following this three year
period, Micronas may use the licensed rights on any product.
 
    
    On May 14, 2009, the Company entered into a Stockholder Agreement (the Stockholder
Agreement) with Micronas, setting forth specified registration rights associated with the
 shares, including demand and piggyback registration rights, restrictions on transfer of the
Shares and provides Micronas certain pre-emptive rights to acquire additional shares of its
Common Stock. Under the Stockholders Agreement, Micronas has agreed to vote the Shares in
support of acquisition proposals approved by the disinterested members of its Board of
Directors, and together with the recommendation of the disinterested members of the Board
of Directors on other stockholder proposals, and Micronas ability to engage in certain
solicitations and activities encouraging support for or against proposals inconsistent with
its voting agreements is restricted.
 
    
    On May 14, 2009, the Company and Micronas entered into a lease agreement. Micronas
agreed to sublease 17,000 square footage of the office spaces located in Munich, Germany to
the Company. The Company is currently using the office spaces for general and
administration, research and engineering services. The lease expires on May 31, 2012. For
detail, please refer to Item 2 Properties of this Annual Report on Form 10-K.
 16. SUBSEQUENT EVENT
     79




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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
  Fiscal 2009First
    
    
    Second
    
    
    Third
    
    
    Fourth(Dollars in thousands, except per share amounts)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Total(1)
    
    
    
    
    
    
    
    (2)
    
    
    
    (3)Net revenues
    
    $
    34,782
    
    
    $
    19,215
    
    
    $
    6,852
    
    
    $
    14,912
    
    
    $
    75,761Gross profit
    
    $
    12,075
    
    
    $
    6,170
    
    
    $
    461
    
    
    $
    4,622
    
    
    $
    23,328Net loss
    
    $
    (17,969
    )
    
    $
    (14,584
    )
    
    $
    (16,604
    )
    
    $
    (21,075
    )
    
    $
    (70,232
    )Net loss per share  Basic:
    
    $
    (0.29
    )
    
    $
    (0.24
    )
    
    $
    (0.27
    )
    
    $
    (0.32
    )
    
    $
    (1.12
    )Net loss per share  Diluted:
    
    $
    (0.29
    )
    
    $
    (0.24
    )
    
    $
    (0.27
    )
    
    $
    (0.32
    )
    
    $
    (1.12
    )Shares used in computing net loss per share  Basic
    
    
    61,152
    
    
    
    61,612
    
    
    
    61,829
    
    
    
    65,565
    
    
    
    62,535Shares used in computing net loss per share  Diluted
    
    
    61,152
    
    
    
    61,612
    
    
    
    61,829
    
    
    
    65,565
    
    
    
    62,535
 (1)
    
    Includes $9.0 million loss on sale of UMC investment that was recorded in the quarter ended
September 30, 2008. See United Microelectronics Corporation under Note 2, Investments, of
Notes to Consolidated Financial Statements.(2)
    
    Includes $1.4 million goodwill impairment that was recorded in the quarter ended March 31,
2009. See Goodwill and impairment under Note 4, Goodwill and Intangible Assets,
of Notes to Consolidated Financial Statements.(3)
    
    Includes $1.7 million third-party purchased intangible assets that were recorded in the
quarter ended June 30, 2009. See Third-party purchased intangible assets under Note 4,
Goodwill and Intangible Assets, of Notes to Consolidated Financial Statements.  80




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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Fiscal 2008First
    
    
    Second
    
    
    Third
    
    
    Fourth(Dollars in thousands, except per share amounts)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Total(1)
    
    

    (2)
    
    
    
    
    
    

    (3)Net revenues
    
    $
    88,174
    
    
    $
    74,984
    
    
    $
    55,284
    
    
    $
    39,496
    
    
    $
    257,938Gross profit
    
    $
    42,166
    
    
    $
    35,788
    
    
    $
    25,312
    
    
    $
    16,760
    
    
    $
    120,026Net income (loss)
    
    $
    10,059
    
    
    $
    7,250
    
    
    $
    (227
    )
    
    $
    (6,930
    )
    
    $
    10,152Net income (loss) per share  Basic:
    
    $
    0.17
    
    
    $
    0.12
    
    
    $
    (0.00
    )
    
    $
    (0.11
    )
    
    $
    0.17Net income (loss) per share  Diluted:
    
    $
    0.16
    
    
    $
    0.12
    
    
    $
    (0.00
    )
    
    $
    (0.11
    )
    
    $
    0.16Shares used in computing net income (loss) per share  Basic
    
    
    58,851
    
    
    
    59,269
    
    
    
    59,369
    
    
    
    60,390
    
    
    
    59,367Shares used in computing net income (loss) per share  Diluted
    
    
    63,605
    
    
    
    62,747
    
    
    
    59,369
    
    
    
    60,390
    
    
    
    62,751
 (1)
    
    Includes $4.9 million of stock-based compensation expense recorded in
the quarter ended September 30, 2007 related to certain stock option
modifications. See Modification of Certain Options under Note 8,
Employee Benefit Plans, of Notes to Consolidated Financial
Statements.(2)
    
    Includes $3.7 million of stock-based compensation expense recorded in
the quarter ended December 31, 2007 related to the decision of the
Companys Special Litigation Committee not to allow the Companys
former CEO and two former non-employee directors to exercise their
vested options until March 31, 2008. See Modification of Certain
Options under Note 8, Employee Benefit Plans, of Notes to
Consolidated Financial Statements.(3)
    
    Includes a $6.5 million impairment charge for loss on UMC investment
that was recorded in the quarter ended June 30, 2008. See United
Microelectronics Corporation under Note 2, Investments and Related
Party Transactions, of Notes to Consolidated Financial Statements.  81




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Internal Control  Integrated Framework
     
  82




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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    Managements Report on Internal Control over Financial Reporting
 Internal ControlIntegrated Framework
  83




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  Inherent Limitations on Effectiveness of Controls
  
 ITEM 9B. OTHER INFORMATION
   84




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##### Table of Contents



PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Information about the Members of the Board of Directors
  Information about the Executive Officers
  Name
    
    Age
    
    PositionSylvia Summers Couder
    
    
    56
    
    
    Chief Executive Officer and PresidentPete J. Mangan
    
    
    49
    
    
    Senior Vice President and Chief Financial OfficerDr. Hungwen Li
    
    
    58
    
    
    Senior Vice President and Chief Marketing OfficerDavid L. Teichmann
    
    
    53
    
    
    Senior Vice President, General Counsel and Corporate SecretaryChristophe Chene (1)
    
    
    43
    
    
    Senior Vice President of Worldwide SalesDr. Donna M. Hamlin
    
    
    55
    
    
    Vice President, Human Resources and AdministrationUri Kreisman (2)
    
    
    43
    
    
    Vice President of Worldwide OperationsRichard H. Janney (3)
    
    
    51
    
    
    Vice President and Corporate Controller
 
 (1)
    
    Mr. Chene joined effective January 20, 2009.(2)
    
    Mr. Kreisman joined effective November 12, 2008.(3)
    
    Mr. Janney joined effective July 31, 2009. Sylvia Summers Couder
 Pete J. Mangan
 Dr. Hungwen Li
  85




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##### Table of Contents



David L. Teichmann
 Christophe Chene
 Dr. Donna M. Hamlin
 Uri Kreisman
 Richard H. Janney
 Independence of the Board of Directors
  Section 16(a) Beneficial Ownership Reporting Compliance
   86




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##### Table of Contents



Code of Conduct and Committee Charters
 http://www.tridentmicro.com.
 
 ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation
  Director Compensation
  Compensation Committee Interlocks and Insider Participation in Compensation Decisions
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Equity Compensation Plan Information
   87




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##### Table of Contents



A
    
    
    B
    
    
    BNumber of
    
    
    
    
    
    
    Number of securitiessecurities to be
    
    
    Weighted
    
    
    remaining available forissued upon
    
    
    average exercise
    
    
    future issuance underexercise of
    
    
    price of
    
    
    equity compensationoutstanding
    
    
    outstanding
    
    
    plans (excludingoptions, warrants
    
    
    options, warrants
    
    
    securities reflected inPlan Category
    
    and rights
    
    
    and rights
    
    
    column A)Equity compensation plans approved by security holders
    
    
    5,416,058
    (1)
    
    $
    8.43
    
    
    
    3,321,035
    (2)Equity compensation plans not approved by security holders
    
    
    1,451,803
    (3)
    
    $
    7.42
    
    
    
    Total
    
    
    6,867,861
    
    
    $
    8.21
    
    
    
    3,321,035
 (1)
    
    Includes 40,000 shares that are reserved and issuable upon exercise of
options outstanding under the 1994 Plan, which expired on January 13,
2004, 1,045,400 shares that are reserved and issuable upon exercise of
options outstanding under the 2002 Plan and 988,655 shares that are
reserved and issuable upon exercise of options outstanding under the
TT1 Plan, and 3,342,003 shares that are reserved and issuable upon
exercise of options outstanding under the 2006 Plan.(2)
    
    Includes 861,266 shares reserved for future issuance under the 2002
Stock Option Plan, and 2,459,769 shares reserved for future issuance
under the 2006 Stock Option Plan, which has already included the 1.38
ratio for restricted stock.(3)
    
    Consists of shares subject to options that are outstanding pursuant to
the 1996 Plan, which plan was terminated on June 19, 2007. Material Features of the 1996 Nonstatutory Stock Option Plan
  
 ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
   88




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PART IV
 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
  Page Number1. Financial Statements:Report of Independent Registered Public Accounting Firm
    
    
    82Consolidated Statements of Operations  For the Years Ended June 30, 2009, 2008 and 2007
    
    
    48Consolidated Balance Sheets  As of June 30, 2009 and 2008
    
    
    49Consolidated Statements of Cash Flows For the Years Ended June 30, 2009, 2008 and 2007
    
    
    50Consolidated Statements of Changes in Stockholders Equity For the Years Ended June 30, 2009, 2008 and 2007
    
    
    51Notes to Consolidated Financial Statements
    
    
    522. Financial Statement Schedules:II  Valuation and Qualifying Accounts for each of the Years Ended June 30, 2009, 2008 and 2007
    
    
    94
  89




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##### Table of Contents



3. Exhibits:
 Exhibit
    
    Description2.1
    
    
    Purchase Agreement dated March 31, 2009 among Micronas Semiconductor Holding AG,
Trident Microsystems, Inc. and Trident Microsystems (Far East) Ltd.(1)3.1
    
    
    Restated Certificate of Incorporation.(2)3.2
    
    
    Certificate of Amendment of Restated Certificate of Incorporation.(3)3.3
    
    
    Amended and Restated Bylaws.(4)3.4
    
    
    Amendment to Article VIII of the Bylaws.(5)3.5
    
    
    Amendments to Article I, Section 2 and Article I, Section 7 of the bylaws.(6)4.1
    
    
    Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4.2
    
    
    Specimen Common Stock Certificate.(7)4.3
    
    
    Amended and Restated Rights Agreement between the Company and Mellon Investor
Services, LLC, as Rights Agent dated as of July 23, 2008 (including as Exhibit A
the Form of Certificate of Amendment of Certificate of Designation, Preferences
and Rights of the Terms of the Series A Preferred Stock, as Exhibit B the Form
of Right Certificate, and as Exhibit C the Summary of Terms of Rights
Agreement).(8)4.4
    
    
    First Amendment to Amended and Restated Rights Agreement, dated May 14, 2009.(22)10.5
    (*)
    
    1990 Stock Option Plan, together with forms of Incentive Stock Option Agreement
and Non-statutory Stock Option Agreement.(9)10.6
    (*)
    
    Form of the Companys Employee Stock Purchase Plan.(9)10.9
    (*)
    
    Summary description of the Companys 401(k) plan.(9)10.10
    (*)
    
    Form of Indemnity Agreement for officers, directors and agents.(9)10.13
    (*)
    
    Form of 1992 Stock Option Plan amending and restating the 1990 Stock Option Plan
included as Exhibit 10.5.(9)10.16
    
    
    Foundry Venture Agreement dated August 18, 1995 by and between the Company and
United Microelectronics Corporation.(10)10.18
    (*)
    
    Form of Nonstatutory Stock Option Agreement for non-plan grants to directors.(11)10.19
    (+)
    
    Form of 1996 Nonstatutory Stock Option Plan.(11)10.20
    
    
    Lease agreement dated April 11, 2006 between the Company and Cooperage Rose
Properties for the Companys principal offices located at 3408-3410 Garrett
Drive., Santa Clara, CA (12)10.21
    (*)
    
    2006 Executive Bonus Plan (13)10.22
    (*)
    
    2006 Equity Incentive Plan.(14)10.23
    (*)
    
    Form of Agreements under the 2006 Equity Incentive Plan.(15)10.24
    (*)
    
    Offer Letter of Sylvia D. Summers,
Chief Executive Officer.(16)10.25
    (*)
    
    Offer Letter of Peter J. Mangan, Vice President, Finance.(17)10.26
    (*)
    
    Offer Letter of Donna Hamlin, Vice President, Human Resources(17)10.28
    (*)
    
    First Amendment to Trident Microsystems, Inc. 2006 Equity Incentive Plan.(18)10.29
    
    
    Resignation and Consulting Agreement and General Release of Claims dated
February 28, 2008 between Jung-Herng Chang and Trident Microsystems, Inc.(19)10.30
    (*)
    
    2009 Executive Bonus Plan(20)10.31
    (*)
    
    Amended Form of Indemnity Agreement for officers and directors(20)10.32
    (*)
    
    Offer Letter of Uri Kreisman, Vice President of Worldwide Operations.(21)
  90




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Exhibit
    
    Description10.33
    (*)
    
    Offer Letter of Christophe Chene, Senior Vice President, Worldwide Sales.(21)10.34
    
    
    Form of Warrant for the Purchase of Shares of Common Stock of Trident
Microsystems, Inc. to Micronas Semiconductor Holding AG.(22)10.35
    
    
    Cross License Agreement dated May 14, 2009, between Trident Microsystems (Far
East) Ltd. and Micronas Semiconductor Holding AG.(22)**10.36
    
    
    Stockholder Agreement dated May 14, 2009, between Trident Microsystems, Inc. and
Micronas Semiconductor Holding AG.(22)10.37
    
    
    Services Agreement dated May 15, 2009, between Trident Microsystems (Far East)
Ltd. and Micronas Semiconductor Holding AG.(22)10.38
    (*)
    
    Trident Microsystems, Inc. Executive Retention and Severance Plan.21.1
    
    
    List of Subsidiaries.(23)23.1
    
    
    Consent of Independent Registered Public Accounting Firm (23)24.1
    
    
    Power of Attorney (Included on signature page)31.1
    
    
    Rule 13a  14(a) Certification of Chief Executive Officer. (23)31.2
    
    
    Rule 13a  14(a) Certification of Chief Financial Officer. (23)32.1
    
    
    Section 1350 Certification of Chief Executive Officer. (23)32.2
    
    
    Section 1350 Certification of Chief Financial Officer. (23)
 (1)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed on April 1, 2009.(2)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K for the year ended June 30, 1993.(3)
    
    Incorporated by reference to exhibit of the same number to the
Companys Form 10-Q dated March 31, 2004.(4)
    
    Incorporated by reference to exhibit of the same number to the
Companys Form 10-Q dated December 31, 2003, and as further amended by
exhibit of the same number to the Companys Current Report on Form 8-K
filed with the Securities and Exchange Commission on March 6, 2009,
incorporated by reference hereto.(5)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on July 30, 2007.(6)
    
    Incorporated by reference to Exhibit 3.3 to the Companys Current
Report on Form 8-K filed on March 6, 2009.(7)
    
    Incorporated by reference to exhibit of the same number to the
Companys Registration Statement on Form S-1 (File No. 33-53768).(8)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on July 28, 2008.(9)
    
    Incorporated by reference to exhibit of the same number to the
Companys Registration Statement on Form S-1 (File No. 33-53768).(10)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K for the year ended June 30, 1995.
Confidential treatment has been requested for a portion of this
document.(11)
    
    Incorporated by reference to exhibit of same number to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
2002.(12)
    
    Incorporated by reference to exhibit of same number to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.(13)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on August 1, 2005.(14)
    
    Incorporated by reference to the Companys Proxy Statement filed with
the Securities and Exchange Commission on April 26, 2006.(15)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K/A filed with the Securities and
Exchange Commission on August 22, 2007.(16)
    
    Incorporated by reference to Exhibit 99.2 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on October 1, 2007.  91




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##### Table of Contents



(17)
    
    Incorporated by reference to exhibit of the same number to the
Companys Quarterly Report on Form 10-Q for the quarter ended
December 31, 2007.(18)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 19, 2008.(19)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 5, 2008.(20)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K for the fiscal year ended June
30, 2008.(21)
    
    Incorporated by reference to exhibit of the same number to the
Companys Quarterly Report on Form 10-Q for the quarter ended December
31, 2008.(22)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 15, 2009.(23)
    
    Filed herewith.(*)
    
    Management contracts or compensatory plans or arrangements covering
executive officers or directors of the Company.(+)
    
    Compensatory plans, contracts or arrangements adopted without the approval of security holders pursuant to which equity may be awarded.(**)
    
    Confidential treatment has been granted for portions of this agreement.  92




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##### Table of Contents



SIGNATURES
   TRIDENT MICROSYSTEMS, INC.By:
    /s/ Sylvia Summers CouderSylvia Summers CouderChief Executive Officer and President 
 POWER OF ATTORNEY
   Signature
    
    Capacity
    
    Date/s/ Glen M. Antle

Glen M. Antle
    
    Chairman
of the Board of Directors
    
    September 11, 2009/s/ Sylvia Summers Couder

Sylvia Summers Couder
    
    Chief Executive Officer, President and Director
(Principal Executive Officer)
    
    September 11, 2009/s/ Pete J. Mangan

Pete J. Mangan
    
    Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
    
    September 11, 2009/s/ Richard H. Janney

Richard H. Janney
    
    Vice President and Corporate Controller
(Principal Accounting Officer)
    
    September 11, 2009/s/ Brian R. Bachman

Brian R. Bachman
    
    Director
    
    September 11, 2009/s/ David H. Courtney

David H. Courtney
    
    Director
    
    September 11, 2009/s/ Hans Geyer

Hans Geyer
    
    Director
    
    September 11, 2009/s/ J. Carl Hsu

J. Carl Hsu
    
    Director
    
    September 11, 2009/s/ Raymond K. Ostby

Raymond K. Ostby
    
    Director
    
    September 11, 2009
  93




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Schedule II
 TRIDENT MICROSYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
 Write-offs orBalance at
    
    
    Charged as a
    
    
    AdjustmentsFiscal
    
    
    
    
    
    Beginning of
    
    
    Reduction (Credit) to
    
    
    Charged to
    
    
    Balance atYear
    
    Description
    
    
    Period
    
    
    Revenue
    
    
    Allowance
    
    
    End of Period(In thousands)2009
    
    Allowance for sales returns
    
    
    $
    300
    
    
    $
    (244
    )
    
    $
    
    
    
    $
    562008
    
    Allowance for sales returns
    
    
    $
    1,101
    
    
    $
    (801
    )
    
    $
    
    
    
    $
    3002007
    
    Allowance for sales returns
    
    
    $
    1,475
    
    
    $
    (374
    )
    
    $
    
    
    
    $
    1,101
 Balance atFiscal
    
    
    
    
    
    Beginning of
    
    
    Increase
    
    
    Balance at EndYear
    
    Description
    
    
    Period
    
    
    (decrease)
    
    
    of Period(In thousands)2009
    
    Valuation allowance for deferred tax assets
    
    
    $
    20,820
    
    
    $
    9,190
    
    
    $
    30,0102008
    
    Valuation allowance for deferred tax assets
    
    
    $
    23,641
    
    
    $
    (2,821
    )
    
    $
    20,8202007
    
    Valuation allowance for deferred tax assets
    
    
    $
    24,151
    
    
    $
    (510
    )
    
    $
    23,641
  94




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##### Table of Contents



INDEX TO EXHIBITS FILED TOGETHER WITH THIS ANNUAL REPORT
 Exhibit
    
    Description2.1
    
    
    Purchase Agreement dated March 31, 2009 among Micronas Semiconductor Holding AG,
Trident Microsystems, Inc. and Trident Microsystems (Far East) Ltd.(1)3.1
    
    
    Restated Certificate of Incorporation.(2)3.2
    
    
    Certificate of Amendment of Restated Certificate of Incorporation.(3)3.3
    
    
    Amended and Restated Bylaws.(4)3.4
    
    
    Amendment to Article VIII of the Bylaws.(5)3.5
    
    
    Amendments to Article I, Section 2 and Article I, Section 7 of the bylaws.(6)4.1
    
    
    Reference is made to Exhibits 3.1, 3.2, 3.3 and 3.4.4.2
    
    
    Specimen Common Stock Certificate.(7)4.3
    
    
    Amended and Restated Rights Agreement between the Company and Mellon Investor
Services, LLC, as Rights Agent dated as of July 23, 2008 (including as Exhibit A
the Form of Certificate of Amendment of Certificate of Designation, Preferences
and Rights of the Terms of the Series A Preferred Stock, as Exhibit B the Form
of Right Certificate, and as Exhibit C the Summary of Terms of Rights
Agreement).(8)4.4
    
    
    First Amendment to Amended and Restated Rights Agreement, dated May 14, 2009.(22)10.5
    (*)
    
    1990 Stock Option Plan, together with forms of Incentive Stock Option Agreement
and Non-statutory Stock Option Agreement.(9)10.6
    (*)
    
    Form of the Companys Employee Stock Purchase Plan.(9)10.9
    (*)
    
    Summary description of the Companys 401(k) plan.(9)10.10
    (*)
    
    Form of Indemnity Agreement for officers, directors and agents.(9)10.13
    (*)
    
    Form of 1992 Stock Option Plan amending and restating the 1990 Stock Option Plan
included as Exhibit 10.5.(9)10.16
    
    
    Foundry Venture Agreement dated August 18, 1995 by and between the Company and
United Microelectronics Corporation.(10)10.18
    (*)
    
    Form of Nonstatutory Stock Option Agreement for non-plan grants to directors.(11)10.19
    (+)
    
    Form of 1996 Nonstatutory Stock Option Plan.(11)10.20
    
    
    Lease agreement dated April 11, 2006 between the Company and Cooperage Rose
Properties for the Companys principal offices located at 3408-3410 Garrett
Drive., Santa Clara, CA (12)10.21
    (*)
    
    2006 Executive Bonus Plan (13)10.22
    (*)
    
    2006 Equity Incentive Plan.(14)10.23
    (*)
    
    Form of Agreements under the 2006 Equity Incentive Plan.(15)10.24
    (*)
    
    Offer Letter of Sylvia D. Summers,
Chief Executive Officer.(16)10.25
    (*)
    
    Offer Letter of Peter J. Mangan, Vice President, Finance.(17)10.26
    (*)
    
    Offer Letter of Donna Hamlin, Vice President, Human Resources(17)10.28
    (*)
    
    First Amendment to Trident Microsystems, Inc. 2006 Equity Incentive Plan.(18)10.29
    
    
    Resignation and Consulting Agreement and General Release of Claims dated
February 28, 2008 between Jung-Herng Chang and Trident Microsystems, Inc.(19)10.30
    (*)
    
    2009 Executive Bonus Plan(20)10.31
    (*)
    
    Amended Form of Indemnity Agreement for officers and directors(20)10.32
    (*)
    
    Offer Letter of Uri Kreisman, Vice President of Worldwide Operations.(21)10.33
    (*)
    
    Offer Letter of Christophe Chene, Senior Vice President, Worldwide Sales.(21)
  95




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Exhibit
    
    Description10.34
    
    
    Form of Warrant for the Purchase of Shares of Common Stock of Trident
Microsystems, Inc. to Micronas Semiconductor Holding AG.(22)10.35
    
    
    Cross License Agreement dated May 14, 2009, between Trident Microsystems (Far
East) Ltd. and Micronas Semiconductor Holding AG.(22)**10.36
    
    
    Stockholder Agreement dated May 14, 2009, between Trident Microsystems, Inc. and
Micronas Semiconductor Holding AG.(22)10.37
    
    
    Services Agreement dated May 15, 2009, between Trident Microsystems (Far East)
Ltd. and Micronas Semiconductor Holding AG.(22)10.38
    (*)
    
    Trident Microsystems, Inc. Executive Retention and Severance Plan.21.1
    
    
    List of Subsidiaries.(23)23.1
    
    
    Consent of Independent Registered Public Accounting Firm (23)24.1
    
    
    Power of Attorney (Included on signature page)31.1
    
    
    Rule 13a  14(a) Certification of Chief Executive Officer. (23)31.2
    
    
    Rule 13a  14(a) Certification of Chief Financial Officer. (23)32.1
    
    
    Section 1350 Certification of Chief Executive Officer. (23)32.2
    
    
    Section 1350 Certification of Chief Financial Officer. (23)
 (1)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed on April 1, 2009.(2)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K for the year ended June 30, 1993.(3)
    
    Incorporated by reference to exhibit of the same number to the
Companys Form 10-Q dated March 31, 2004.(4)
    
    Incorporated by reference to exhibit of the same number to the
Companys Form 10-Q dated December 31, 2003, and as further amended by
exhibit of the same number to the Companys Current Report on Form 8-K
filed with the Securities and Exchange Commission on March 6, 2009,
incorporated by reference hereto.(5)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on July 30, 2007.(6)
    
    Incorporated by reference to Exhibit 3.3 to the Companys Current
Report on Form 8-K filed on March 6, 2009.(7)
    
    Incorporated by reference to exhibit of the same number to the
Companys Registration Statement on Form S-1 (File No. 33-53768).(8)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on July 28, 2008.(9)
    
    Incorporated by reference to exhibit of the same number to the
Companys Registration Statement on Form S-1 (File No. 33-53768).(10)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K for the year ended June 30, 1995.
Confidential treatment has been requested for a portion of this
document.(11)
    
    Incorporated by reference to exhibit of same number to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30,
2002.(12)
    
    Incorporated by reference to exhibit of same number to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.(13)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on August 1, 2005.(14)
    
    Incorporated by reference to the Companys Proxy Statement filed with
the Securities and Exchange Commission on April 26, 2006.(15)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K/A filed with the Securities and
Exchange Commission on August 22, 2007.(16)
    
    Incorporated by reference to Exhibit 99.2 to the Companys Current
Report on Form 8-K filed with the Securities and Exchange Commission
on October 1, 2007.(17)
    
    Incorporated by reference to exhibit of the same number to the
Companys Quarterly Report on Form 10-Q for the quarter ended
December 31, 2007.  96




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##### Table of Contents



(18)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 19, 2008.(19)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 5, 2008.(20)
    
    Incorporated by reference to exhibit of the same number to the
Companys Annual Report on Form 10-K for the fiscal year ended June
30, 2008.(21)
    
    Incorporated by reference to exhibit of the same number to the
Companys Quarterly Report on Form 10-Q for the quarter ended December
31, 2008.(22)
    
    Incorporated by reference to exhibit of the same number to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on May 15, 2009.(23)
    
    Filed herewith.(*)
    
    Management contracts or compensatory plans or arrangements covering
executive officers or directors of the Company.(+)
    
    Compensatory plans, contracts or arrangements adopted without the
approval of security holders pursuant to which equity may be awarded.(**)
    
    Confidential treatment has been granted for portions of this agreement.  97