Actions Semiconductor (ACTS) Reports Q2 Loss of $0.05; Guides Q3; Announces Common Tender; Updates on Trajectory

Actions Semiconductor Co., Ltd. (NASDAQ: ACTS) reported Q2 EPS of ($0.05), versus $0.01 reported last year. Revenue for the quarter came in at $12 million, versus $11.3 million reported last year.

Guidance

Based on current market trends, the Company expects revenue in the third quarter of 2014 to be in the range of $13.0 to $15.0 million. The Company expects shipments to improve in the second half of 2014, although persistent, fierce competition in the tablet market will cause revenue in the second half of the year to be slightly below year ago levels.

Tender Offer

Actions also that it expects to commence a "Dutch auction" tender offer in August 2014 to purchase for cash up to 60,000,000 of its issued and outstanding ordinary shares, which represents, as of August 10, 2014, approximately 14.6% of Actions Semiconductor's outstanding ordinary shares, $0.000001 par value per share (the "Shares") (including Shares represented by American Depositary Shares (the "ADSs")), at a purchase price not greater than $7/15 per Share (or $2.80 per ADS) nor less than $5/12 per Share (or $2.50 per ADS). Under the proposed terms of the tender offer, the Company will invite holders of Shares and ADSs (together, the "Securities") to tender their Securities at prices specified by such holders within such range of prices that will be described further in the offer materials. The Company will select the lowest single per Share purchase price or per ADS purchase price, as applicable, that will allow it to buy up to 60,000,000 issued and outstanding Shares (including Shares represented by ADSs) at completion of the tender offer. The Company has indicated, however, that there is no guarantee that it will proceed with the tender offer or that Shares or ADSs tendered will be purchased. The tender offer will be subject to the terms and conditions described in the offer to purchase and the related materials that will be distributed to holders of the Securities and filed with the Securities and Exchange Commission (the "SEC") on or around August 20, 2014.

Mr. David Lee, Chairman of the Company, noted that, "After reviewing our cash position, business operations, future outlook, acquisition strategy, existing and anticipated capital structure and a variety of alternatives for using our available financial resources, our board of directors has determined that a tender offer is a prudent use of our available cash and an effective means of providing value to the holders of our Securities. By conducting the tender offer, we believe we can provide all the holders of our Securities with the opportunity to tender all or a portion of their Securities and to receive a return of some or all of their investment."

Neither Actions Semiconductor, its board of directors, dealer managers nor the information agent is making any recommendation to holders of the Securities as to whether to tender or refrain from tendering their Securities or as to the purchase price on any tender. Actions Semiconductor has been advised that none of its directors or executive officers intends to tender any Securities pursuant to the offer. The information agent for the tender offer will be Laurel Hill Advisory Group, LLC and the depositary for the tender offer will be Laurel Hill Advisory Group Company. Laurel Hill Securities, LLC and Imperial Capital, LLC will act as the dealer managers for this tender offer.

Open Letter to Shareholders

Finally, Actions is providing an operational update and details of initiatives approved by its board of directors.

Dear Shareholders,

I am pleased to provide an update on certain initiatives we are taking. Some have needed and received approval by our board of directors. In the interest of providing further transparency, we are furnishing this letter to our shareholders as a press release and on Form 6-K with the SEC and have made it available on our website.

Our Headway from PMP to the Tablet Business

Actions has had significant success in the portable media player (PMP) market, where we established ourselves as the major provider of an integrated system-on-a-chip (SoC) solution platform. That platform became the foundation of an ecosystem that encompasses over one thousand third-party application developers, value-added distributors, system integrators and brand name manufacturers in China. We succeeded by utilizing a low margin sales strategy that rapidly established a significant market share and attracted a growing number of developers to our ecosystem. Like many of the markets we target, success breeds success. If you have the leading system in the field, then third party developers find the highest return on their time from developing applications for your system rather than rival systems. Our dominant position also allowed us to better tailor our R&D efforts to meet the evolving needs of our customers. In this way, as our existing products began to experience lower selling prices, we launched newer, more advanced products at higher initial prices and margin to offset the decline in selling prices from the previous generation products brought about by the intense competition that exists in this and many of the world's chip markets.

After seeing strong potential in the rapidly growing tablet market, we entered the tablet business by employing a similar low margin sales strategy to the one we employed in the PMP market. Once again this strategy has brought meaningful success in establishing our platform. Today, the tablet business accounts for the significant portion of our total revenues. However, due to intense competition and newly announced entrants in this market, we have not been able to increase our margins as quickly as we would like. Although the tablet market experienced rapid growth in 2012 and 2013, competition among industry players along the supply chain has kept prices low. To put this in perspective, we are seeing locally-branded 7-inch tablets in China retailing below US$50. Just as with the PMP market, in order for us to maintain or increase our market share, we have to call on all of our internal R&D resources and potentially enter into strategic alliances to expand our sales channels, gain additional technical know-how and license our technologies to more developers in order to foster the continuing adoption of our platform. Accordingly, we are undertaking a number of initiatives that we expect to keep us in the leading group of tablet chip developers.

Restructuring Our Subsidiaries

During the past few years, we have established several sales and research centers throughout greater China. Our primary concern was to locate our manufacturing and research centers in close proximity to engineering talent and our sales centers near our customers. As our business expanded from PMPs into tablets, this group structure has become increasingly complicated. As a result, we have decided to streamline our corporate structure both in terms of reporting lines and re-designated several sales and research entities under our principal operating entity, Actions (Zhuhai) Technology Co., Limited ("Actions Technology").

The real results we hope for are more clarity of structure among our legal entities and success in the constant competition for engineering and management talent. We believe a more streamlined reporting line will provide our engineers with greater clarity of their goals and responsibilities as well as foster a more collaborative environment for engineers in different departments. As competition for talent increases, our engineers have also requested that their equity incentive plans reflect the performance of their individual departments and projects that they have worked on. Our new corporate structure will allow our management to keep better track of team and individual performance and issue incentives accordingly.

To view a diagram of our group structure after the restructuring, please refer to the Form 6-K furnished to the SEC today.

Potential Strategic Alliances

We expect an additional effect of our unified corporate structure to be better management access to our product development and intellectual property portfolio assets, which, in turn, could also allow us to explore opportunities in packaged license deals, joint ventures and various forms of strategic alliances with other industry players. We note that joint research and development programs, cross holding of shares and board appointments have always been a development strategy among high-tech companies, including the recent collaboration between Intel and our competitor, Rockchip. While we are not entertaining a horizontal merger with a direct competitor at this time, our management has been tasked to seek potential strategic alliance partners along the supply chain that will help us expand our sales channels, enhance our technology base and create a larger ecosystem around our platform. Earlier today, we formally established a special committee, comprising solely of independent directors, to monitor and evaluate such options and proposals. Our new group structure that better reflects the purposes and functions of each subsidiary can also facilitate the formation of strategic alliances in the future.

Corporate Structure Options

We take our duty to maximize shareholder value seriously and are exploring a number of options to accomplish our strategic goals. One option involves dual listing on an Asian stock exchange, where the investors are more familiar with our market power in the PMP and tablet sectors and could give us a better valuation. Another option involves the listing of our subsidiaries, such as Actions Technology, in Asia, which could in turn increase the valuation of our ADSs listed in the US. We believe an equity incentive plan for Actions Technology will be necessary, as our employees will see their equity incentives tied to a subsidiary whose performance can more closely track their contributions and whose value is determined in an equity market with which they are familiar. While our management and directors have no current plan for a dual listing or to list any of our subsidiaries, and there are substantial legal obstacles to overcome, our special committee will actively evaluate listing options for us and our subsidiaries. Earlier today, our compensation committee approved the establishment of an option plan based on awarding the shares of Actions Technology to our employees. This option plan envisions awarding our employees up to 15% of the equity of Actions Technology over the next five years.

Capital Structure Options

As many of you know, optimizing our capital structure is an ongoing task of management and something about which I wrote in a recent comment letter. We always have the option to repurchase additional shares if we consider our cash position exceeds our foreseeable needs. At our 2014 annual general meeting, our shareholders approved a future repurchase program. On May 6, 2014, we increased our stock repurchase program from 30 million ADSs to 50 million ADSs. As of June 30, 2014, approximately 23.2 million ADSs have been repurchased under our current share buyback program. Concurrent with this press announcement, we are also formally announcing a self tender program. Please see our press release titled "Actions Semiconductor Announces Intention to Conduct Dutch Auction Tender Offer for Its Ordinary Shares (including Ordinary Shares represented by American Depositary Shares)" for the conditions and details of the self tender.

In closing, I along with the rest of the board and management continue to be mindful of the business challenges we face and are determined to enhance our competitive position, improve our financial performance and maximize value for our shareholders. We remain confident in China's future, and expect continued, rapid economic growth. Our management team, along with our highly talented staff in China, will continue to create next generation products to meet the ever changing needs of the domestic and global markets.

Sincerely,

Mr. Hsiang-Wei Lee

Chairman of the Board

Actions Semiconductor Co., Ltd.

For earnings history and earnings-related data on Actions Semiconductor Co., Ltd. (ACTS) click here.

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