MP3 Player Chip Supplier SigmaTel Warns on Lower Sales and Profits (SGTL, AAPL)

Tony Sagami, owner and founder of Harvest Advisors, submits: SigmaTel (Ticker: SGTL) makes chips that go into portable consumer electronic devices: MP3 players, notebook PCs, DVD players, and the red-hot iPod from Apple. Despite the avalanche of business from Apple (ticker: AAPL), business isn’t so hot at SigmaTel. I say that because SigmaTel warned that its Q3 sales and profits would be below expectations. Details:

==> Instead of $78.6 million, SigmaTel says it will only pull in $74.4 million instead.
==> Instead of $78.6 million of sales, SigmaTel expects to pull in $74.4 million of sales.
==> Instead of 30 cents per share of profits, SigmaTel now expects to make 20 cents of profit.
==> Sigmatel now expects gross margins of 51%, considerably lower than before.

The demand for electronic goods is shrinking and everybody in the doodad food chain will have to face the painful fight for a shrinking pie.

Related:

• Sigmatel Earnings Report
• Apple Misses Consensus Revenue Estimate; Stock Down 10% in After Hours Trading (AAPL 4Q05 Earnings Results)
• “iPod Tax

Comments

[User 1:]

Tony,
Not sure that this is really an indicator of weak demand. Sigmatel said on its conference call that the cause of the shortfall was production problems, and that without those production problems it would have hit its numbers. Sure, it said the quarter was back-end-loaded into September, but that's normal seasonality.

2005 Oct 14 04:30 AM