Gigamedia (GIGM) updates guidance; but did it really?

| About: GigaMedia Limited (GIGM)

GigaMedia (ticker: GIGM), a Taiwan-based provider of broadband and entertainment services, announced updated guidance. The company expects to report a
consolidated net profit for Q4 and FY2004. The stock is up 7%. What are investors reacting to? And what is GIGM's new product offering?

Here is what we know about the company's previous guidance:

From GIGM's Q3 2004 Earnings Release:

....The general business environment remains challenging, with continuing weakness in the music distribution market and strong competition in the  broadband ISP market. Despite these challenges, we remain highly confident in our ability to deliver continued profitability and improved operating efficiencies.

From GIGM's Q3 2004 Conference Call:

....We are very pleased to announce that for the third quarter of 2004, GigaMedia recorded its second consecutive quarter of profitability, with a quarter on quarter increase in consolidated net profit of 23% over the  second quarter of 2004. The Q3 numbers are a clear demonstration that our plans to restructure, to revitalize GigaMedia are beginning to deliver results. 

....We have now delivered, ahead of schedule, two consecutive quarters of growing profitability. 

....In conclusion, strong execution of our internal restructuring plan is  continuing to yield results in our financial performance. We are on track, ahead of schedule, and see room for additional improvements in our operating efficiencies. We are still in the early stages of transforming GigaMedia, and there remains a lot of work to be done. But we remain excited about our prospects going forward.

....I feel it is important, however, to emphasize that the reshaping of a company culture is not an overnight process.  We have taken important first steps but much hard work remains. As a management team, we are committed to building a world-class organization focused on delivering strong results to our shareholders.  But we are going to need a bit more time. 

.... The seasonality if we go business by business -- the music distribution business, first of all, the peak season traditionally is around the Chinese new year period which is going to be first quarter for us. And that traditionally has a 20 or 30 percent more sales comparing to other quarters. So after the fourth quarter the first quarter we are expecting a pickup in terms of sales volume just because of the seasonality effect of the music business. The ISP business is not seasonal at all. And lastly on the online entertainment business the winter months are the strong months where people tend to stay indoors and they play games online. And we do expect fourth quarter being the strongest season again, the magnitude is probably about a 20 to 30 percent pickup in terms of sales.

Quick thought: It is hard to pinpoint any specific guidance that the company is updating. The company acknowledged that it is in the restructuring phase. But it has already produced two consecutive profitable quarters. And it said nothing about major concerns for Q4. If anything, it seemed like management was reasonably confident. So today's announcement that the company will be profitable for Q4 and FY 2004 is not all that surprising.

But notice what else the company said in its Q3 2004 conference call:

....Our entertainment software business continued to make positive contributions to the Company’s financial results. In the third quarter, we increased our investment level in product development and marketing. We launched our first multi-player poker product and will soon follow with another. We believe we are the only major provider currently offering an online poker product supported in eight different languages. We also launched two new slot games for online casinos as  part of a new marketing campaign that guarantees a new game every month.

Online poker!! In case you missed the excitement over online poker companies of late, take a look at this from Business Week.

(Note: Q3 2004 conference call transcript from Gigamedia's Investor Relations web site.)

GIGM's stock market performance: