Entropic has been diligent at broadening its product offerings in a very smart way. Historically, the stock has not performed well because short sellers have kept the pressure high since learning Broadcom would be a competitor. Their thinking is that with Broadcom's scale, they would eventually price out Entropic and be the leader in the space. Since Entropic boasts the largest market share, Broadcom would suck out its customers and thus sink Entropic or force a merger. But, today, it is now clear that Entropic's innovation lead on Broadcom is excellerating by the cleverness in how Entropic brought new products to market.
Entropic is doing very well at DTV. And DTV is doing well because of aggressive pricing. DTV is able to offer aggressive pricing as a result of Entropic's innovation. You see, Entropic designed products to smartly lower DTV's installations costs. And if your Entropic, is there a better way to get customers? I don't think so.
Entropic designed a new DBS Outdoor Unit (a dish) Solutions consist of our Band Translation Switch (BTS) and Channel Stacking Switch (CSS) products. What this does is this. A new customer signs up for DTV, a truck with a man comes and bolts it on the house, runs a coax cable to a splitter that connects to a super set top box with entropics MOCA 2.0 chips inside. The other TV's in the house which want boxes are installed, but NOT hooked up to wires!!! It is wireless. Suppose, originally, only 1 TV wants DVR and the rest are just standard. Then suppose that the customer wants dvr capabilities on all the tv's. Guess what, DTV sends the codes to the Main Box in the house that enables the other boxes DVR capabilities.
This means Entropic has multiple chips in the outdoor unit and multiple chips in the Set Top Boxes!!!
This innovations is an improvement in that one installer spends a few minutes on the roof, goes inside and hooks up one Box to the cable, sets up the other boxes quickly. This free's him up to upsell the customer by talking about features and benefits of the MOCA network. No wonder DTV is kicking everyone's butt.
This is why Entropic has "won the living room" and soon they will be offering their proprietary boxes (before they only offered chips)! Broadcom, while an outstanding company, is simply too big to innovate as quickly as Entropic.
There should be a plethora of upgrades and price target changes in the coming days. And still 11m shares are short!! This will have some strong legs this summer!!!
