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Trident Microsystems Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Trident Microsystems (Nasdaq: TRID  ) took a long, slow dive Tuesday, sliding as far as 11% below the previous closing price before the closing bell rang.

So what: Rival home entertainment chip designer Zoran (Nasdaq: ZRAN  ) started Trident's slide with a bad earnings report Monday night, sparking fears of an industrywide slowdown. Sure enough, Trident reported its own third quarter after Tuesday's closing to confirm that the investors who sold earlier mostly got it right.

Now what: Trident's management explained that "industry softness and share loss from supply constraints earlier in the year" will keep sales down in the coming quarter, which is almost exactly what Zoran said the day before. Unlike Zoran, which is thinking about a wholesale change of direction to overcome its troubles, Trident has a strong pipeline of new products coming up in 2011. Fellow Fool Rich Duprey thinks Trident is a good way to ride the coattails of Netflix (Nasdaq: NFLX  ) as it rides into the all-digital era, and I can't say that he's wrong.

Interested in more info on Trident? Add it to your watchlist by clicking here.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Netflix is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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