Entropic Communications Inc. has a market cap of $721.9 million; its shares were traded at around $8.46 with a P/E ratio of 19.7 and P/S ratio of 3.4.
Highlight of Business Operations:In December 2004, we introduced and commenced commercial shipments of our home networking products. In the first quarter of 2006, we began commercially shipping our broadband access solutions. In May 2007, we acquired Arabella Software Ltd., or Arabella, a developer of embedded software. In June 2007, we acquired RF Magic, Inc., or RF Magic, a provider of digital broadcast satellite outdoor unit, or DBS ODU, and silicon tuner solutions. In 2008, we acquired certain specified assets of Vativ Technologies, Inc., or Vativ, a provider of high-bandwidth, advanced digital processing solutions for digital television and 10 gigabit Ethernet markets. Since inception, we have invested heavily in product development and have only recently achieved profitability on an annual basis, with a net income of $64.7 million for the year ended December 31, 2010 and a net income of $11.9 million for the three months ended March 31, 2011. In 2010, our net revenues increased to $210.2 million from $116.3 million in 2009. Our net revenues increased from $37.5 million for the three months ended March 31, 2010 compared to $71.5 million for the three months ended March 31, 2011. These revenue increases were primarily due to the increased demand for our home networking products and our DBS ODU products, which is directly related to the increased deployment of our products into consumer homes by satellite and cable operators. As of March 31, 2011, we had an accumulated deficit of $165.3 million.
due to increased personnel costs of $0.6 million (of which $0.1 million was due to stock-based compensation), attributable to an 11% increase in the number of employees engaged in sales and marketing activities to support our growth. General customer support and marketing and trade show related activities contributed to the remaining increase of $0.4 million.
line also limited the aggregate amount of assets and collateral that we were allowed to transfer to, and the amount of investments that we were allowed to make in, certain of our subsidiaries, to $600,000 per month. The amount available under the credit line could not exceed 80% of the value of our eligible accounts receivable and was decreased by certain commitments, such as the $1.2 million and $35,000 standby letters of credit that secured our performance under our San Diego, California, and San Jose, California, facility leases, respectively. As of March 31, 2011, the availability was reduced by the two standby letters of credit for our facility leases, and $3.8 million was available under the credit line. We are currently working with our landlords to replace these two standby letters of credit with either an unsecured letter of credit or a cash security deposit.
Net cash provided by operating activities was $11.7 million for the three months ended March 31, 2011. Sources of cash provided by operating activities included cash generated from net income of $11.9 million, which included non-cash charges of $5.2 million related to deferred income taxes, $3.0 million in stock compensation expenses, depreciation and amortization expense of $1.0 million and amortization of premiums on marketable securities of $0.7 million. Offsetting the non-cash charges were uses of cash of $10.2 million related to working capital changes. Cash used for working capital purposes included a decrease in our accounts payable balance of $8.4 million due to the timing of payments for inventory purchases, an increase in our accounts receivable balance of $5.5 million due to higher revenues and a more linear quarter and a reduction in accrued payroll and benefit expenses of approximately $1.7 million due to payments of fiscal year end incentive bonuses in the first quarter of 2011. These working capital uses of cash were partially offset by working capital sources of cash including a decrease in our inventory balances of $4.6 million as we reduced our inventory levels on our MoCA products during the quarter and an increase in accrued expenses and other liabilities of approximately $1.0 million primarily due to an increase in income taxes payable.
Net cash provided by operating activities was $3.5 million for the three months ended March 31, 2010, primarily resulting from net income of $1.8 million, $2.2 million in stock compensation expenses, depreciation and amortization of $1.3 million, a $0.9 million increase in accounts payable and other liabilities driven primarily by an increase in inventory and a $0.8 million decrease in prepaid expenses. These increases in net cash were offset by an increase in accounts receivable of $2.7 million due to an increase in sales during the three months ended March 31, 2010 and a $0.7 million increase in inventory primarily related to our silicon tuner products, new deployments of our home networking products and increased demand of our channel stacking switch products.
All of our fixed income investments are classified as available-for-sale and therefore reported on the balance sheet at market value. The fair value of our cash equivalents and investments are subject to change as a result of changes in market interest rates and investment risk related to the issuers credit worthiness. We do not utilize financial contracts to manage our exposure in our investment portfolio to changes in interest rates. We place our cash investments in instruments that meet credit quality standards, as specified in our investment policy guidelines. We have established guidelines relative to diversification and maturities that attempt to maintain safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of interest rate trends. We generally do not utilize derivatives to hedge against increases in interest rates which decrease market values. At March 31, 2011, we had $179.1 million in cash, cash equivalents and investments, all of which are stated at fair value. A 100 basis point increase or decrease in market interest rates over a three month period would not be expected to have a material impact on the fair value of the $35.4 million of cash and cash equivalents held as of March 31, 2011, as these consisted of securities with maturities of less than three months. A 100 basis point increase or decrease in interest rates would, however, decrease or increase, respectively, the fair value of the $143.7 million of our investments by approximately $1.0 million.
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