ViXS Systems Inc.

ViXS is another abnormal fit for the portfolio because it is not currently profitable and their balance sheet is not robust so it is more of a speculative investment but that reflects in the conservative weight.  They recently sold a non-core business which improves their balance sheet a bit and they are currently experiencing strong revenue growth.  The company designs semiconductors for advanced video processing which also reduces required bandwidth; they could see strong results from if their technology is widely adopted in 4K equipment (they do sell to broadcast equipment manufacturers like Evertz).  The company has been restructuring and hired a new CEO to improve results and then likely sell the company.  It is believed among investors and analysts that they have significant value in the Intellectual Property.  Last year they raised some cash by selling some equity and convertible debentures to some strategic investors.     

At the end of the day on May 18, 2017, ViXS announced it was being acquired by Pixelworks in an all stock transaction.  While it resulted in a 57% gain for me since I started this newsletter, it's far from where it was when we started investing in it when I was at my previous firm.  That said, I could have chosen to not be invested when I left the firm however I felt there was some compelling value at these low levels.  This is probably less of a gain than management was hoping for but they appear to be pragmatic.  I took my gain as I do not know Pixelworks but I'll be doing more work on it.