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Sigma Designs (NASDAQ:SIGM)

Q4 2012 Earnings Call

March 07, 2012 5:00 pm ET

Executives

Edward McGregor -

Thomas E. Gay - Chief Financial Officer, Principal Accounting Officer and Secretary

Thinh Q. Tran - Founder, Chairman, Chief Executive Officer and President

Kenneth Lowe - Vice President of Strategic Marketing

Analysts

Gary W. Mobley - The Benchmark Company, LLC, Research Division

Quinn Bolton - Needham & Company, LLC, Research Division

Hamed Khorsand - BWS Financial Inc.

Stephen Chin - UBS Investment Bank, Research Division

Philip Lee

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2012 Sigma Designs Earnings Conference Call. My name is Keisha, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to hand the conference over to Mr. Ed McGregor, Director of Investor Relations. Please proceed, sir.

Edward McGregor

Thanks, Keisha. Welcome to Sigma Designs' conference call to discuss financial results for our fourth fiscal quarter of 2012. I am Ed McGregor, Sigma's Director of Investor Relations and with me today are Thinh Tran, our Chairman and CEO; Tom Gay, our CFO; and Ken Lowe, our Vice President of Strategic Marketing.

Press release containing the quarter results including selected income statement and balance sheet information was released after the market closed today. If you did not receive the results, the release is available in the Investors section of our website.

Today's agenda will begin with my brief introduction, a review of selected financials by Tom, an executive overview by Thinh, a market update by Ken and comments on guidance by Thinh. We'll then open the call to questions from analysts and institutional investors, and we expect to conclude the call within one hour.

Before we begin, I would like to remind everyone that today's call contains forward-looking information, including guidance we provide about our future revenue, gross margins and other financial measures and anticipated trends in our target markets. We caution you that the forward-looking information that we present today is based on our current beliefs, assumptions and expectations, speak only as of today's date and involve risks and uncertainties that could cause actual results to differ materially from our current expectations.

Other risk factors that may affect our business and future results are detailed from time to time in Sigma's SEC reports, including Sigma's quarterly report on Form 10-Q as filed with the SEC on September 8, 2011. A partial list of these important risk factors is set forth at the end of today's earnings press release. Sigma undertakes no obligation to revise or update publicly any forward-looking statement except as required by law.

In addition, during today's call, we will be including certain financial information on a non-GAAP basis, such as non-GAAP net income, which excludes certain costs and expenses. These excluded items are described in more detail in today's earnings press release along with a detailed reconciliation of our GAAP to non-GAAP results.

And with that, I'll turn it over to Tom.

Thomas E. Gay

Thank you, Ed. For the fourth quarter of fiscal 2012, revenue was $35.6 million, a decrease of $4.1 million or 10% compared to $39.7 million in the previous quarter. Compared to the year-ago quarter, our revenue decreased $35 million or 50% from $70.6 million.

Our revenue breakouts for the quarter are as follows: by target market and percentage of total revenues for the quarter, IPTV Media Processor segment represented $11 million or 31% of the total; Connected Home, $15.8 million or 44%; Connected Media Player, $5.4 million or 15%; Prosumer, $3.1 million or 9%. During the fourth quarter, we had 3 customers that each exceeded 10% of our net revenue. Motorola represented $4.9 million or 14% of our total; Flextronics, $4.8 million or 13%; and Gemtek, $4.2 million or 12% of our total for the quarter.

GAAP gross margins were 46.6% for the fourth quarter compared to 45.3% in the preceding quarter, and 49.4% in the same period last year. Non-GAAP gross margins were 51.4% in the fourth quarter compared to 52.4% in the preceding quarter and 53.3% in the same period last year. GAAP net loss for the fourth quarter of fiscal 2012 was $18.8 million or $0.58 per diluted share. This compares to GAAP net loss of $121.6 million or $3.78 per share in the previous quarter and GAAP net income of $2.5 million or $0.08 per diluted share in the year-ago quarter.

On a non-GAAP basis, net loss for the fourth quarter was $14 million or $0.43 per diluted share. This compares to a non-GAAP net loss of $2.7 million or $0.08 per diluted share in the previous quarter and non-GAAP net income of $10.1 million or $0.32 per diluted share in the year-ago quarter.

Please refer to our press release for a detailed reconciliation of our GAAP to non-GAAP performance. The reconciliation includes the 3 following categories of differences for the fourth quarter: first, amortization of intangible assets associated with acquisitions, a total of $1.9 million; second, stock-based compensation of $2.9 million; and third, the fair value markup on inventory purchased through acquisitions and sold during Q4 of $0.1 million.

I'd now like to cover a few key areas from our balance sheet. Cash, cash equivalents, restricted cash and marketable securities totaled $150 million at the end of the quarter, a decrease of $11 million or $0.42 per share outstanding compared to the beginning of the fiscal quarter.

Based on our shares outstanding at the end of the quarter, the total value of cash, cash equivalents, restricted cash and marketable securities equals $4.60 per share outstanding. Significant items contributing to the year-to-date decrease in cash include payments for capital and other assets of $14.2 million and long-term investments of $4.6 million. Cash used by operations in the fourth quarter was $7.8 million.

Net accounts receivable was $21.2 million at the end of the fourth quarter, a decrease of $4.8 million compared to the beginning of the fiscal quarter. The average days sales outstanding for our receivables as of the end of the fourth quarter was 54 days, a decrease of 6 days compared to the previous quarter. Net inventory was $22 million at the end of the quarter, a decrease of $0.4 million compared to the beginning of the fiscal quarter. The decrease in inventory brings our inventory turns for the quarter to 3.3 on an annualized basis.

Now I will turn the call over to Thinh for an executive overview.

Thinh Q. Tran

Thank you, Tom. I would like to start by thanking all of you for joining us today and for your continued interest in Sigma. In today's call, I would like to review the results for the fourth quarter and discuss our achievements.

First off, we report $35.5 million in revenue for the fourth quarter in line with our previous guidance. Our current revenue level continues to be affected by our transition to second-generation media processors and connectivity products. These aggressively positioned second-generation products provide us with cost and performance advantage that should result in higher overall unit volumes as we penetrate and deploy to a widening set of accounts over the course of the year. Towards this goal, we demonstrate over 20 new product concepts at the year 2012, and expect to see many of these being shipped as consumer products later in this year.

Our direct engagement with service providers is also a fundamental part of our strategy, which enables us to gain the visibility and influence needed to anticipate new trends and all our new products before our competition. Our confidence in our long-term strategy drive us to continue investing in new technologies that will enable Sigma to become the leading connected media platform company.

During the quarter, we continued to make progress in many business segments. First, we achieve adoption of Z-Wave technology as the new IT U.S. standard, a sub 1 gigahertz narrow band wireless specification which defines backward compatibility with more than 600 Z-Wave products. We introduced a suite of home video conference solution at CES, EMET consumer electronics market. These new solutions which combine Sigma PL330 video encoder technology with its SMP8670 secure media processor technology create a home video conferencing solution within a set-top box design. We also announced our collaboration with Avtrex, Inc. and Syabas Technologies, to add leading software and middleware technology to the industry's most advanced platform reference designs. Sigma Ultra Thin Set-Top Box. The Ultra Thin Set-top Box is a feature-rich, HomePlug AV connected device so small that it fits in the palm of your hand

We also announced a joint Wi-Fi Display plus DLNA reference design with Qualcomm Atheros Inc. This new design enables connected media players based on Sigma Media Processors to receive video wirelessly over the emerging Wi-Fi Display standard as well as being interoperable with DLNA-enabled devices supporting the appropriate profile.

We also announced the addition of Intel WiDi technology to our set-top box reference design, enabling consumer electronics partners to deliver a wider range of viewer content, by streaming content from notebooks wirelessly to a HDTV via a set-top.

We are announced a unique set-top box reference design with Quantenna high-performance 4 × 4 MIMO technology. That enables Sigma set-up box to receive video wirelessly, SME, the strict requirement for quality, [indiscernible] and reliability service to provide [indiscernible]. We jointly participate in the first public G.hn interoperability demonstration at CES show. And we were the key contributor behind the newly announced G.hn-MIMO standard approved by the ITU.

As a result of this progress, we feel that we are in a better position to take advantage of several new business opportunities. Moving forward, we are heavily investing in a wide range of technologies and platforms that are driven by emerging market trends that will drive our growth over the next several years.

I'd now like to pass the call to Ken who will discuss the long-term significance of these technologies and the market trends. Ken?

Kenneth Lowe

Thank you, Thinh. Sigma continues to make substantial investments towards becoming a long-term leader in connected media platforms. This call will summarize our outlook before we drill them with the details. First, we're continuing to experience demand weakness, created by many product and customer transitions, which should eventually result in regrowth for new opportunities by the middle of our fiscal year. Second, we expect our overall market position in IPTV to become stronger over the course of the year, following largely to the introduction of the unique and new technologies that match the desires of operators. Third, overall demand for our Z-Wave product line continues on a high-growth trajectory based continued options by strategic operator accounts. Fourth, we're continuing to execute our strategy to deliver complete platform solutions that emphasize the strong synergies between our technologies. This should result in increased revenue per share and as well as improved time-to-market for our customers.

IPTV continues to remain strong -- on a strong growth trend as evidenced by the majority of the industry analysts' forecast. Even in traditional broadcast markets, many operators are planning their transition to an IP delivery strategy within the home, which will eventually result in IPTV set-top boxes becoming the dominant form of video delivery in the future. Based on this combined trend, MRG Research just released a report indicating the number of global IPTV subscribers will grow from 53 million in 2011 to 105.1 million in 2015, compound annual growth of 18.7%.

Sigma continues to penetrate more telco providers with the goal of securing and increasing market share in our leading segment. The strong relationship with the majority of top-tier operators will provide ongoing visibility, influence and opportunity. As a result, we have one or more opportunities for new upcoming deployments at each of the following telcos and we would expect to result in additional revenue growth for 2012 and beyond. That includes AT&T, Telefónica, Deutsche Telekom, TELUS, CenturyLink, Bell Canada, VimpelCom, Verizon and many second- and third-tier opportunities as well as operators in developing countries. We're well positioned for Mediaroom generation 2 led by our 865x Media Processor family, which combines the highest performance, lowest power and lowest BOM cost of any mediaroom SoC.

We also broadened our served market through the launch of our jointly designed high-performance Wi-Fi 4.4 platform based on the Quantenna 802.11n chipset. As a result, we expect to see substantial deployments begin at many providers during calendar 2012.

We're also beginning to participate in opportunities for hybrid set-top boxes that combine IP with satellite, terrestrial or cable broadcast reception. At the recent CES 2012 show, we demonstrated a range of platform solutions aimed at new standards and thrusts in the broadcast and hybrid space. These solutions included DVB-T2 platform running 3View software and ISDB-T platform running Ginga software. The demonstration of the new hybrid broadcast broadband TV or HbbTV, which is a major new pan-European initiative aimed at harmonizing the broadcast and broadband delivery of entertainment to the end consumer through connected TVs and set-top boxes. In short, we have a key platform technology to become a leading player in this segment, anticipate this will be one of our strongest areas and future growth for Sigma.

The market for Connected Media Players continues to expand and involve new product classes. These product classes include IP streaming players, direct or network-attached storage players, WiDi and Wi-Fi direct devices and the combination players. As a leading CMP vendor, Sigma offers a strong class of value line media processors that are optimal for these consumer applications.

At CES, we demonstrated several exciting product concepts including the smartphone to TV Wi-Fi dongle, PC to TV WiDi dongle, a DLNA streamer with Atheros' 2 x 2 Wi-Fi connectivity, a media player with Skype video conferencing built-in, Sigma's ultra-thin, client-set platform with its built-in powerline networking, and a comprehensive over-the-top content support package. These new concepts are being aggressively marketed to consumers, and customers, with the goal of new product launches reaching retail by this holiday season.

The market for home control appears to be rapidly expanding as many new initiatives are taking place with many large providers for energy management and security services. More and more operators, especially telcos, have been entering this market to increase their average revenue per unit. As a result, major design wins have been emerging over the last year with Sigma becoming a leader in much of these applications though the appeal of our Z-Wave product line. This will result in increased revenue as these announced wins continue to ramp.

Furthermore, these design wins work synergistically with the development of our industry leading home control ecosystem, which now supports over 600 interoperable consumer devices on the market today. Adding further to the appeal of our home control solution, our Z-Wave technology was adopted in the new ITU G.9959 standard, which defines backward compatibility with our entire ecosystem of products and relieves adoption barriers for our customers' concern with the open standardization. We expect Z-Wave to continue its growth in the foreseeable future as well as provide value-added leverage to our position within set-top boxes and operator deployment plan.

Sigma's Prosumer, video processing offerings provide studio quality video for a host of professional and high-end consumer applications. This market serves to drive our video processing technology and has grown into a highly profitable segment of around $3 million per quarter.

Moving to connectivity, we see continuing growth for home video networks in most regions around the world. Using our industry leading status in IPTV networks, Sigma has positioned itself as a key provider of network solutions, installation diagnostics and as a technology adviser for many of the top-tier operators. As a result, we are working with some of the largest operators to plan future deployments of Sigma-driven solutions for a wide range of technology. The HomePNA solutions continued to deploy in mass volumes from North America with many new rollouts already ramping in Latin America. Based on current usage trends, we expect the strong base business to continue until it blends in with the growth of G.hn solution.

HomePlug AV solutions featuring our patented ClearPath technology are expected to begin deployments during the first half of this year. G.hn solutions are now in field trials and expected to begin deployments by the end of this year, driven largely by robust powerline connectivity and all-wire flexibility. The popular G.hn standard received additional strength during this quarter, with the addition of Chunghwa Telecom as a member and the announcement of the G.hn MIMO standard, largely based on technology contributed by Sigma Designs.

Wi-Fi solutions based on Sigma's Media Processor reference design with key industry partners are being evaluated for use in many product classes. Based on the current demand trends and partnership models, Sigma expects to participate in a wide range of Wi-Fi deployments in the future.

As a long-term goal, Sigma is developing a differentiated technology for consumer entertainment products as delivered with a connected media platform. Since new products and technologies are the lifeblood in the semiconductor industry, Sigma continues to invest in its core areas at a record rate with plans to intercept our target markets and gain key transition points. In summary, Sigma continues to invest in the future and develop complete technology platforms to enable products with the way consumers want to live.

I'd like now to pass to Thinh to cover our forward guidance.

Thinh Q. Tran

Thank you, Ken. As indicated, we are confident that our long-term strategy to build the leading connected media platform company will eventually result in strong future growth. Overall, we remain heavily engaged with service providers and OEMs, and continue to win new accounts with media processors, home networking and home control.

Moving on to our forward guidance, we would like to shape the expectation for Sigma performance over the first half of this year. Given reasonable reserves at this time, we expect revenues for the first quarter should be within $35 million to $40 million. We expect sequential growth in the second quarter. We expect our first gross -- first quarter gross margin on the pro forma basis to remain the same as in the fourth quarter.

In summary, I would like to reinforce that our fundamental remains strong. Our team is in place and our process is being optimized to maximize our long-term success. Would now like to open up the call for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Gary Mobley with Benchmark.

Gary W. Mobley - The Benchmark Company, LLC, Research Division

I want to question whether or not your operating expenses are at an appropriate level given current revenue trends? And for the quarter, you reported a 50% year-over-year decline in revenue, but yet non-GAAP operating expenses increased 14%. And if I'm not mistaken, your new breakeven point in quarterly revenue is about $65 million, $30 million above today's level. So I'm just wondering how much longer are you willing to stick it out and spend the current level? And then as well do you think you even serve markets big enough to support $65 million or more in quarterly revenue?

Thomas E. Gay

Divides into 2 sections. I'll talk about the expense side of it first. In the fourth quarter, there was an unusual item of about $2 million in the sales and marketing. And except for that expense, the operating expenses have actually been relatively flat for the last year as we have experienced this overall decline in revenues and transition to the next generation of products and reengagement in some of our target areas. We have felt comfortable that the investment in R&D is targeting a good size opportunities in growing markets that we feel well positioned to be able to take advantage of in the foreseeable future. And the key to being successful at that is to continue to invest wisely and effectively in getting there. Ken may want to speak a bit to the markets themselves just reiterating some of the points that he made during his remarks.

Kenneth Lowe

Well, Gary, the question about are we in markets big enough to support this kind of expenditure, I think the answer is absolutely yes. I think the markets that we're addressing are hundreds of millions units per year. I think the issue is purely market share and us climbing back up on top of the spaces that we've been dominant in before. And that's what our plans are all about at this point in time. So as you know, there's a lot of moving parts in the industry and a lot of design wins you get take a while to come to fruition and actually move into deployments which then turn into revenues. So we are somewhere in the midst of that growth and reconnecting with the markets, so I think that's the way we're looking at it. We don't want use -- lose the valued employees that we have to a temporary, what we view as a temporary trough in revenue.

Gary W. Mobley - The Benchmark Company, LLC, Research Division

Okay. So your IPTV media process revenue now is about $11 million per quarter. Can you walk us through what helps get that to let's say $25 million, which might be an appropriate level to try to get to that breakeven target? And then, along those lines, can you talk about on the connected home technology front, what it is that can help drive their revenue assuming that's not HomePNA at AT&T that drives that, what is the driver there?

Kenneth Lowe

So okay. IPTV first. You're talking about essentially doubling the volume that we're getting there, and 2 things. First of all, is our revenue slid from a reasonable amount due to the pricing adjustments that took place over the last couple of years moving from first to second generation. That's over with. I think everybody has gone down to the level where prices have stabilized substantially. So now we're talking about unit growth. And for us, that kind of breaks up into 2 segments. The Mediaroom segment, where we are actually experiencing a renewed set of demand for generation 2. We got in Gen 2 a little bit later than we had hoped to, but as a result, we're now seeing many more design wins that should go through the path of from win to validation and then into the market as we have deployments during the course of this year. So we're in the -- we're in some various stages of the pipeline for various telcos at this point in time. So we're pretty confident about the growth factor coming from there. In non-Mediaroom, we're investing heavily into hybrid. So we've got new technologies, tuners to modulators and other types of front-end components as well as software that's going to put us into a growth vector there. And again it's a matter of going through that pipeline of how many operators are in the stages of engagement versus actual design versus deployment. So we're proceeding to fill the pipeline. And obviously, there's that whole process of getting the products in place and then filling the pipelines and then actually shipping. So we're on that roadmap. And then thirdly, to the Connected Home Technologies, we're finding a lot of traction with the continued sales of our HPNA. That has really started to take off in Latin America and that's really provided a big boost. Latin America and other North American accounts, as you well know, that was dominated by AT&T some -- up to about a year or so ago and last year, it's really diversified. And now, we've got the -- approaching a trend line of 50-50 split. So it's showing a lot of life to that. The G.hn is in a quite a number of trials and we're hoping for considerable amount of uptake in that. So we're in a pretty good position, we think, to go ahead and -- and the other multiplier in Connected Home Technologies is their several devices that ship per connected home. So if you have a residential gateway, you have -- and then you have several set-top boxes, you end up having quite a few units we ship into a home. So, we get a nice multiple there.

Gary W. Mobley - The Benchmark Company, LLC, Research Division

Okay. And then for the Connected Media Player sales, they're certainly at a depressed level, the lowest level I've seen them in years. I'm just wondering if that's a function of perhaps a design win loss that a key customer like Western Digital or is that just a decline in that market because of the popularity of over-the-top boxes?

Kenneth Lowe

You know it's there -- it's cyclical to a large degree. People like WD and other people that are pushing products at retail, they end up going through a seasonal cycle. And as you know, we're in the post-Holiday season right now and so you end up pumping that up in the third quarter, early fourth quarter, the majority of units shipped and then late fourth quarter and then into early first quarter, you end up seeing a slackness there. So we are pushing out more types of products, more new product concepts and have more customer engagements than we've ever had. But it does take a lot to replace -- to go ahead and drive the volume up in that. A little of that volume bleeds over into the growing smart TVs and a little bit of that volume may bleed over in other product classes including set-top boxes that service over-the-top. A lot of operators are initiating new services for things like that. So we think the entire -- I guess, the biggest thing is the long-term investment into high-quality delivery of over-the-top services is something that we think will grow with the public and we think the consumer is going to continue to buy that and so our long -- our investment, we think, is sound over the long-term.

Operator

Your next question comes from the line of Quinn Bolton with Needham & Company.

Quinn Bolton - Needham & Company, LLC, Research Division

I wanted to sort of follow up on Gary's first question there, just about sort of OpEx levels versus revenue. It sounds like your current plan is to keep the OpEx at roughly levels of the past year and to grow back -- to grow the revenue to absorb that level of OpEx. I guess my question is, how long in terms of quarters or fiscal years would you be willing to tolerate losses on the bottom line before you would think about cutting that OpEx? I guess and that's -- ultimately, I'm trying to think, when would you anticipate getting back to profitability either through revenue growth or some ultimate decision to cut OpEx?

Thomas E. Gay

Well our near-term focus is being successful in growing the revenues. And you don't really make plans to -- as to exactly what you'll do if things develop differently. But what we're constantly doing is assessing the focus effectiveness and payback of each of our engineering efforts, and trying our best to match against the opportunities that I have the best payback within a predictable amount of time. So it's a constant challenge as customer opportunities and engagements develop. Nevertheless, the level of R&D in particular that we currently got is one that we feel is well suited to our opportunities and the time being at least affordable with tolerable cash burn that we can we see reaching minimal levels if not turning to positive by the end of fiscal 2013.

Quinn Bolton - Needham & Company, LLC, Research Division

Okay. So reaching potential profitability by the end of this current fiscal year?

Thomas E. Gay

Yes, profitability and cash flow positiveness.

Quinn Bolton - Needham & Company, LLC, Research Division

Okay. Okay. So, I guess, a sort of just and, Tom, a follow-up to that, if I look at 2013 and appreciate you guys giving us some shape for first half of revenue, certainly sounds like the new programs continue to ramp into the second half of that fiscal year. I'm wondering if you can make any comments on a fiscal year basis, '13 versus '12? Do you think you have an opportunity to grow revenue if you're looking at reaching profitability and cash flow positive by the end of the year? It certainly sounds like growth year-over-year certainly could be in your forecast, but I'm wondering if you can give some comment on growth year-on-year?

Thomas E. Gay

We find it very difficult to have the exact timing predictable enough to go on record here. But I think the trend that we're talking about is a good one for you to anticipate. Some of the particulars, I think, are just going to have to work out. We have our plan but they may not turn out exactly to be the combination of winners that we expect. Other areas can surprise us a little bit and still add up to a pretty darn good result.

Quinn Bolton - Needham & Company, LLC, Research Division

Okay. And then just sort of looking at the IPTV market, it looks like it was actually up slightly quarter-on-quarter January versus October. Do you guys think you've actually put a trough in that business back in the October time frame and the ramp of 8652-based designs going to drive sequential growth through each quarter in fiscal '13?

Kenneth Lowe

There's another way to answer that. We definitely think that we bottomed out in that trough. And we expect to now see the incremental build back in the future.

Quinn Bolton - Needham & Company, LLC, Research Division

And can -- sort of just a follow-on on that IPTV business, you said that the pricing pressure is now mostly played out over the last couple of years. You see a much more stable pricing environment. Should we read into that that your mix has now shifted predominantly from 8634 over to the 8652 in that business or you're still doing a fair amount of volume on your older SoC, but have sort of priced that SoC on a kind of a forward basis at the levels where you would expected 8652 to price as it ramps and takes over the majority of the end shipments in that business?

Kenneth Lowe

So it's a good question. It's still a mix right now but if you envision it this way that the 8634 business is at a -- has ebbed down to a lower level but there'll be long tail on that low-level business. But the growth will come from all the new products, the 8650 series, the 8670 series, et cetera. As that builds, it builds a more aggressively positioned second-generation product. And so that -- I think that's we're trying to refer to is that -- that second-generation product was born out of an era where everybody had to be aggressive to be able to hold onto sockets. Whereas, when we entered in the first generation business, it was price to value. So I think you're looking at an adjustment that largely has been made and just needs small tweaks in the future.

Quinn Bolton - Needham & Company, LLC, Research Division

Okay. Great. And then, Ken, you mentioned a number of the operators are looking to home control as a way to grow revenue, obviously Verizon is a well-publicized one. Can you talk about the growth of the Z-Wave business? Give us some sense where it was in the quarter and how do you see that growing? I know sort of over a couple of years, it sounds like that business could become as large as some of other business lines but just wondering if you could provide some more detail on the ramp and perhaps some of the other service providers in addition to Verizon you may be working with.

Kenneth Lowe

Yes. So as you mentioned, everybody knows about Verizon and that's a nice marquee operator win out there and everybody knows about security provider ADT, which is a substantive account when we've got there. Again those are still in the very early stages of putting together their rollouts. Still earlier, there's a lot of anecdotal evidence that has been publicized to date that AT&T is rolling up its home life service and expecting to roll that out and a lot of anecdotal descriptions and evidence has been shown that that's the Z-Wave home control stuff being used in that. And that will be a handsome win when that thing starts to deploy. And there's also the -- there's another operator in Europe that has been seriously looking at it and going through development plans. So there's a lot of legs to the Z-Wave product line. And, of course, the leverage really comes in. It's not the -- getting the home control unit in the one set-top box in the home, it's the other dozen little devices that get put in the home to control lights and plugs and thermostats and things that you really make your volume on.

Quinn Bolton - Needham & Company, LLC, Research Division

And then just last one for me -- just sort of a follow up on that Z-Wave. Now that Z-Wave is officially an ITU standard, are you seeing more interest from the European carriers? You had mentioned the one in your last comment but just general standard, does that increase the momentum for that business?

Kenneth Lowe

I think it increased the momentum a little bit. I think the interest is the same. What it does is it removes a barrier that's kind of one of those soft barriers that people would like to see that you're full -- open-standard so that there's comfort. That if and when this thing were to take off, the huge levels that they've got, a standard's body that's behind the thing. So I think that's the play on that and I think it also validates the authenticity and strength of the line that ITU would actually move forward create the G.9959 standard after it. I think that, that goes a long way.

Operator

Your next question comes from the line of Hamed Khorsand from BWS Financial.

Hamed Khorsand - BWS Financial Inc.

I'll start off with the simplest question here. Can you break out what the revenue was from Z-Wave from this past quarter?

Thomas E. Gay

Yes, Z-Wave was up by just a couple of hundred thousand for the quarter. I'm looking for my details on that one, though. At $2.5 million, so that didn't recover back to its best quarter ever back in Q2 but it's showing some uptrends still.

Hamed Khorsand - BWS Financial Inc.

Okay. Any of this revenue that's you're booking from Z-Wave and I still say with -- there's more product from the market now and then you guys were saying there's 600 products out there for Z-Wave and that's more than the commentary you're provided in the past but it's not really showing up on the revenue line?

Thomas E. Gay

Well each one you get just it's like a snow falling. The little part of something that's growing takes time to really get going, but each part of it is a good sign that there's momentum and increasing opportunities and the idea that there's more products to be connected to whichever ones begin the movement into each home.

Hamed Khorsand - BWS Financial Inc.

Okay. Media player, it was down significantly quarter-over-quarter in Q4. Is there -- was that really just Thailand-based as far as not enough hard drives out there and how much are you expecting of a ramp in Q1?

Kenneth Lowe

I think that was more seasonal. We're not expecting a large ramp in Q1 at all and it's a seasonality again that I mentioned of -- those are retail products so a lot of buying in third quarter, early fourth and then a slack late fourth and early first. So fourth quarter, first quarter should be pretty similar.

Hamed Khorsand - BWS Financial Inc.

And so the visibility that you're providing us with the revenue guidance, I mean where are you seeing that order trend? Is it just one-time orders you're getting or are there solid bookings here in different categories?

Kenneth Lowe

You mean across the board?

Hamed Khorsand - BWS Financial Inc.

Across the board.

Kenneth Lowe

Well, what we're doing is we're looking at continued ongoing business from every one of our major customers and that's how we track this stuff. We're looking at this as a business build and we're either trying to capture new accounts of trying to deepen the penetration we have in our existing accounts as they go from one initiative to another. So I think the answer is that the vagaries come in the timing of the stuff and I think probably one of the biggest things that hits the timing to our bottom line is -- for our top line that is, is when these things actually start deploying which sometimes can shift by 1 or 2 quarters from when a program starts.

Hamed Khorsand - BWS Financial Inc.

Okay. And so when all this -- this has started about it's been 5 quarters now, sequential to the revenue decline, you guys had been telling investors, "Hey, just give us 2 quarters, give us 3 quarters." Now it's been 5 quarters. And the 6th quarter coming up with this guidance, it looks like it's going to be flat. I mean are we there? Are we going to see this ramp occur or is it just another give-us-2-more-quarters kind of story?

Kenneth Lowe

We know we truly believe it's -- we're going to resume growth in second quarter. We've looked at all the indicators, we looked at all the programs, we've tried to factor in risk. We're not 100% in control of these things. Those are some of the same words that we've echoed back to our customers where demand was supposed to start and then it got -- a delay was inserted. I think our best judgment is that -- and based on a combination of forecasting backlog, coming from our customers, that's what it would indicate, that the second quarter is where we resume growth and we certainly have strengthening, strengthening accounts as we move throughout the second half.

Hamed Khorsand - BWS Financial Inc.

Okay. It was made public last week, I mean, you -- and before I go into that, you guys have different kind of distraction going on business, like I said 5 quarters of sequential revenue declines here and it was disclosed last week that you guys have actually made a bid for the Trident assets in court and that's just a whole different realm of acquisitions and cash spending. And I just want to know what was the reasoning for that? Because you guys are obviously burning cash right now, why would you do something like that?

Thinh Q. Tran

Well, we are constantly looking at new market, new opportunity and new technologies. I mean -- and we make the correct decision to do it or not and on opportunity. And we do that all the time. Nothing unusual.

Hamed Khorsand - BWS Financial Inc.

All right. But I'm just -- I mean, it becomes more distracting, right? I mean, I'm more interested in management being focused on growing business, not going out and trying to buy revenue and work on something else, [indiscernible] within self.

Thinh Q. Tran

We'll be well.

Kenneth Lowe

I guess the other layer I'd throw on top of that is, we're trying to invest smartly and it's not that we're ignoring the current business. But acquisition versus organic growth, as a method in our market, is a very valid route and what we're trying to do spend the smart money. It will take us another 3 years and a bunch of engineers to get into a new market and there's a good portion of the business on the block. Sometimes it makes more sense to go ahead and acquire that entry.

Operator

Your next question comes from the line of Stephen Chin with UBS.

Stephen Chin - UBS Investment Bank, Research Division

First one is for Tom on, I guess, the outlook for guidance for the OpEx, in particular? Tom, you earlier mentioned that there are, I think, some exceptional items in the sell-to-marketing lines. Could you clarify that first of all? And then also, can you give what the OpEx is expected to be for the second quarter?

Thomas E. Gay

Yes, so in sales and marketing, there was a $2 million expense associated with a onetime technology expenditure and that is not expected to be repeated. Then G&A, you'll see the seasonal uptick into Q4 with our year-end expenses that tends to be somewhat similar in Q1 and then drop down to previous levels. We think that pattern is expected to repeat itself in the coming few quarters. And then R&D, I think you'll notice, it's been fairly flat for almost 4 quarters in a row now.

Stephen Chin - UBS Investment Bank, Research Division

Okay. And then the next question that I have on the product side, it's probably more for Ken. For the IDTV Mediaroom products, I guess first of all, if in the longer term you look at the AT&T bucket there, is the 50% target roughly in terms of market share for the second-generation boxes? Is that target something we should continue to assume in our models? Or there a different assumption that you guys believe that we should be looking at?

Kenneth Lowe

No, I think the model should be built around long-term target of 50%. I think that's appropriate, I think there's no reason for us to believe that we will get any more in less than half of the business that comes from them. I think their pre-disposition is having multiple soft suppliers, multiple set-up box suppliers. I think that's a very reasonable expectation.

Stephen Chin - UBS Investment Bank, Research Division

And I guess given the -- or the delays in the second-generation products for you guys to ramp up, do you think the overall lifecycle of the AT&T second-generation boxes will also be pushed out as a result, or do you think there's that it would just result in a shorter time frame for you guys to sell your products into AT&T second gen?

Kenneth Lowe

Kind of a couple of factors going on, one of which is, there are a lot of moving parts to that equation. There's a lot of flux in terms of what Microsoft is doing, in terms of their generational transitions. There is AT&T's play on that, which there's a lot of uncertainty as to how quickly they'll adopt any generational change from Microsoft. And so the bottom line is we do think that Gen 2 will move out in time and Gen 2 will live from longer than what people thought. Just like Gen 1 lived for a lot longer than people thought. But we -- and we do think that's a benefit for us because we think we're solidifying more the Gen 2 business right now.

Stephen Chin - UBS Investment Bank, Research Division

Okay. And lastly for non-U.S. Mediaroom customers out there. Do you feel that it's actually upgrades that the service providers are doing with the Gen 2 boxes that they're currently qualifying? Or is it just -- are they just getting ready for the future incremental deployment?

Kenneth Lowe

I think it's a combination of both. I think there are certain operators that are continuing to penetrate their markets and so it's subscriber growth. And I think there's also upgrades, but I think actually the dominant portion today is subscriber growth over the upgrades.

Stephen Chin - UBS Investment Bank, Research Division

And just this a last one on Z-Wave, do you feel that the growth in Z-Wave for this year, is that still early? Is it going to be more from new homes that get installed and equipped with Z-Wave technologies or do you think there's still -- or that most of it will come from a new subscriber, Verizon, for example by a set-top box and then choosing to upgrade or install home services that are based in Z-Wave?

Kenneth Lowe

So, I guess, what you're trying to devise same question applies to Z-Wave whether it's additional build-outs within an existing home or whether it's new homes. Yes, I think it's more new homes. There -- the Z-Wave base, like any of the home control, there is -- that's largely, largely being driven right now by new homes going in. And many of the homes only have 2, 3, 4 devices in them. Eventually, that will creep up but I think it's dominated by new homes now.

Operator

Next question comes from the line of Philip Lee with Lazard Capital Markets.

Philip Lee

I just want to follow up on the pricing. Can you comment on the ASP declines that you're currently seeing?

Kenneth Lowe

We had mentioned that we had gone through the majority of price declines over the last year to 1.5 years. And that was largely driven by generational transition between kind of what we consider our first-generation high definition SoCs in our second-generation.

Philip Lee

So for like the IPTV chip, is that in the high single digits now or slightly lower than that?

Kenneth Lowe

I think to average that out for our value line, we have a value line and a premium line. We will call our value line somewhere in the $10 range. It's how we refer to it.

Philip Lee

Okay. And then can you quantitatively comment on the Z-Wave ramp for this year. I believe Tom or Ed had mentioned you guys are on track to do $12 million for this year at CES?

Thomas E. Gay

We came in pretty close to that and the overall year just had a really great quarter and the rest of it was within a fair range. But, yes, we achieved our target there and we see continued growth coming into the next year.

Philip Lee

So what about for the year going forward, this coming up year?

Thomas E. Gay

Well we achieved the double last year over the previous. We've -- I'm not sure we want to go on record and say we're going to do that again, but we do think that a strong double-digit growth is expected.

Philip Lee

Got it. And can you give us some more color on the adoption of G.hn? Are you going to be seeing any meaningful revenues for this year?

Kenneth Lowe

The G.hn is still in the trial phase and unfortunately, everybody would like these things to move at a faster rate but communication infrastructure moves at a much slower rate than a lot of other products. So the build-out required to start using G.HN and to outfit this into the home and prove everything out, move the lines over to that and the operator makes a pretty substantive investment. So networking for an operator is so crucial because they're install times at homes are driven by the network they choose. And right now, they're all bleeding from install times being too high. So these are very crucial decisions and I think you'll see that this stretches out a little bit more than what people thought. So we're looking out second half of this year as when probably the earliest of the G.hn deployments will take place.

Philip Lee

Got it. And I just have one more question to follow-up on Hamed. How would trying an acquisition fit in with your current strategy anyway?

Kenneth Lowe

Well, we look for both complementary businesses and businesses that help to expand the addressable market that we're in. And then secondly, we also look for addition of key technology that we need to invest in for the future and whether or not we again organically grow that technology or we acquire it at a good deal than -- those are the main things that we look for.

Operator

There are no further questions in queue at this time. I would now like to hand the conference back over to Mr. Ed McGregor for any closing remarks.

Edward McGregor

Thank you, Keisha. We'd like to thank everybody for joining us on our fourth quarter fiscal 2012 conference call. We do appreciate your interest in Sigma and we do look forward to our next scheduled call to discuss our first quarter of fiscal 2013. Thank you.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect your lines. Good day.

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