May 1, 2006 – Alliance Semiconductor Corp. has agreed to sell its analog and mixed-signal business unit to a group of investors led by private equity firm Shah Capital Partners LP for $9.25 million in cash, carving out nearly two-thirds of its remaining business after declaring it will end “years of losses” from its semiconductor operations.
The new deal comes just two weeks after the company sold its systems solution business unit to Tundra Semiconductor Corp. for $5.8 million in cash, including facilities and employees in Santa Clara, CA and Hyderabad, India. The analog/mixed-signal business was Alliance’s largest unit, making up about 48% of total sales in fiscal 3Q06; the systems and solutions unit accounted for 24% of sales in 3Q06. The company said it is still exploring a possible sale of its remaining memory chip operations, which accounted for about 27% of total revenues.
“In addition to the cash being generated by these sales, we will be ending the years of losses generated by the semiconductor manufacturing operations that occurred under the prior management,” stated Mel Keating, president and CEO of Alliance. Keating took over from N. Damodar Reddy, formerly president, CEO, and interim CFO, who resigned in December. Alliance also is significantly reducing its overhead — from 238 employees worldwide in Oct. 2005 now down to just 30, with a planned relocation of corporate headquarters expected to save $150,000/month.
In its most recent financial statements, covering fiscal 3Q06 (ended in December), Alliance posted a 25% year-on-year increase in revenues to $6.6 million, and a net income of $3.1 million vs. a $9.9 million loss a year ago. For fiscal 1Q06-3Q06, Alliance losses were $15.9 million vs. $26.7 million during the same period a year ago, on 1% higher sales of $18.1 million.
“This agreement is a significant step in our plan to return value for Alliance stockholders,” added Bryant Riley, chairman. “Now that we have taken steps to stop the operating losses, we can focus on realizing value from the Alliance venture capital investments.”
In 3Q06, Alliance Ventures V invested approximately $3.2 million in six companies through its Alliance Ventures VC unit. Total equity in net losses of Alliance Ventures investee companies was approximately $3.4 million in fiscal 3Q06. Alliance also holds a 73.3% interest in Solar Venture Partners LP, a VC partnership that generated a small writedown in fiscal 3Q06.