SiRF Technology Holdings, the chipmaker that supplies GPS chips to the likes of Garmin and TomTom, continues to be a bag of hurt. Despite managing to cut operating expenses by 22% in the 3rd quarter, SiRF still posted a Q3 loss of $0.11 per share. The loss did beat Wall Street expectations, but a forecast of weak Q4 results still knocked the company’s stock price down 4% on Wednesday.
While Garmin and TomTom have been hit hard by competitive pressures resulting in dropping PND prices, and a generally weak economy, SiRF has been further hampered by ongoing patent litigation with rival chipmaker Broadcom. Earlier this month, the United States International Trade Commission decided to review the initial findings of one of its judges that found SiRF infringed upon six of Broadcom’s patents.
While SiRF does expect litigation costs to decrease in the fourth quarter, should the review panel decide to uphold the original infringement findings, it may mean that SiRF will not be able to export the questioned chips into the US without licensing them from Broadcom. This will of course devastate the company’s margins and with a share price currently sitting at $0.91, could mean huge problems for SiRF.
Maybe it’s not a good time to buy SiRF stock after all.