Baird: Sigma Designs Losing Major Customers

Baird is out with a negative call on Sigma Designs (SIGM) saying their checks indicate Broadcom (BRCM) has won Motorola's (MOT) second-generation high-end IPTV set-top boxes (Microsoft's Mediaroom platform), for launch in 2009. As a result, they expect Sigma Designs to lose IPTV share at large telcos including AT&T (T), British Telecom (BT), and KDDI starting next year. They also believe Sigma will lose market share at Samsung for Blu-ray players this second-half, due to pricing. The Firm believes Broadcom-based Motorola IPTV set-top boxes are already prototyping, and are scheduled for launch in calendar 1H09.

Checks also indicate Sigma Designs could lose significant market share at Samsung Blu-ray players this second-half due to pricing. Baird believes Broadcom has design wins in Blu-ray ramping this year. Both Broadcom and Mediatek plan on launching an integrated back-end/front-end SOC next year. Panasonic is currently selling a 45nm-based Blu-ray back-end SOC.

Reducing estimates, as well as price target to $26 from $30 on SIGM shares. Neutral rating.

Notablecalls: Motorola generated 23% of Sigma Designs' revenues in fiscal 2008, making it their largest customer. SIGM will be a $17-$18 stock soon. Nice call by Baird's Tristan Gerra.

Comments

[turd furgeson:]

Is this information legitimate and confirmed, or is it a guestimate?

2008 Apr 15 09:28 AM

[specterchaos:]

WOW! Talk about manipulating a stock with heresay and BS. It would be nice to hear what Sigma, Motorola, and all else involved have to say on the matter, first, before crushing a stock based on RUMOR!!
Anyone selling their stock today based on this article is a fool.

2008 Apr 15 12:26 PM

[User 118545:]

What kind of "CHECKS " are done, especially ones done for chips not even approved and ready for depolyment like Broadcom's? Why hasn't MOT announced their second generation winner? Why hasn't Broadcom annouced their second generation winner. They sure didn't have any trouble spewing out tons of press releases at this years CES !!! There is absolutely NO mantion of Broadcom being approved by Microsoft. Broadcom probably got approved by MOT for the chips in there low end STBs and NOT in the high end where SIGMA plays all by itself !!

2008 Apr 15 02:31 PM

[haydete:]

Oops!

seekingalpha.com/artic...

2008 Apr 15 04:31 PM

[JEHill72:]

SIGMA DESIGNS INC COM Company Overview
Sigma Designs, Inc. (Sigma) is engaged in providing video-oriented product solutions. The Company has chipset and board solutions for emerging convergence products, including video over Internet protocol (IP) television (IPTV), high-definition (HD) digital versatile disc (DVD) playback, high-definition television (HDTV) reception, personal video recording (PVR) and video-on-demand (VOD). It specializes in silicon-based digital media processor chipsets. Its core technology allows it to offer chipsets that provide decoding of H.264, moving picture experts group (MPEG)-4, MPEG-2, MPEG-1 and Windows Media Video 9 (WMV9) content. Sigma sells its products to manufacturers of consumer electronic devices and products. Sigma's chipset products consist primarily of video and audio decoding chips, such as the EM8400 series, EM8500 series, EM8610 series, EM8620L series and SMP8630 series. In February 2008, the Company acquired VXP Image Processing business from Gennum Corporation.
Reuters ProVestor Plus Company Report

Shareholder Equity
Shares Outstanding 26.5 M
Institutional Ownership 91.42%
Number of Floating Shares 26.0 M
Short Interest as % of Float 41.35%

Valuation (MRQ)
Price/Earnings (TTM) 8.91x
Price/Sales 2.52x
Price/Book 1.83x
Price/Cash Flow 3.83x

SIGM's P/E Ratio is lower than 72% of other companies in the Computer Peripherals industry. This typically means that investors are willing to pay less for its level of earnings relative to future growth.Profitability (TTM)
Gross Margin 50.99%
Operating Margin 25.90%
EBITDA Margin 27.44%
Profit Margin 31.74%

SIGM's Gross Margin is more than 65% of other companies in the Computer Peripherals industry, which means it has more cash to spend on business operations as compared to its peers. As indicated by the Operating Margin, SIGM controls its costs and expenses better than 97% of its peers.Financial Strength (MRQ)
Quick Ratio 8.29x
Current Ratio 9.10x
Debt/Equity 0.00x
Debt/Assets 0.00x
Management Effectiveness (TTM)
Return on Assets 30.82%
Return on Equity 35.23%
Return on Inves. Capital 35.08%

The Return on Equity for SIGM shows that it is able to reinvest its earnings more efficiently than 99% of its competitors in the Computer Peripherals industry. Typically, companies that have higher return on equity values are more attractive to investors.Growth Rate (TTM)
Earnings Per Share 899.7
Sales 142.5
Dividend (MRQ) --

SIGM's EPS Growth Rate is greater than 98% of its peers in the Computer Peripherals industry

And thanks to the rubbish announced by the "analyst" at Robert Baird today, you can by Sigma Designs for a P/E you would expect to see for a company securitizing subprime mortgages and selling risky SIV's and CDO's...Go long on Sigma and ignore the noise, Microsoft Media is using Sigma's SMP 8654 SoC's, thereby ensuring Sigma has the inside track for IPTV for the long haul (just as they utilized Sigma's SMP 8634 SoC's back in 2004--you can read about that directly on Microsoft's website)...Sigma looks good to me! And as far as the stock's fundamentals go, Sigma crushes those of Broadcom (on measures such as ROE, ROA, profit margins, growth for the next 5 years, etc.) Buy Sigma ultra cheap...Taking Baird's advice from today on BRCM is like trading US dollars for Zimbabwe dollars....

2008 Apr 15 04:32 PM

[BM1087:]

Seriously would love to know the full disclosure of the people involved with this bear raid! Robert Baird short --- any SEC lawyers out in the audience? Sure smells like market manipulation to me. Perfect example why the uptick rule should be reversed.

2008 Apr 15 04:53 PM

[editorseyes:]

this headline is atrociously inaccurate.it is a real shame to our culture that bloggers aren't held under the same standards of integrity honored by journalists. a reporter and his/her editor would have had a comment from customers before ever posting such a market moving headline. In this case, had they done that, this blog would have zero legs on which to stand. shame on the executioner of misinformation.

2008 Apr 16 02:29 PM

[The-Yellow-...:]

It makes me nervous that any company has 25% of the same revenue from the same company.

That being said this looks, smells, and feels, dirty. I'm going to do some serious DD here as this stock has fell well into my "opportunity price" range. When the big boys ask analysts to cut a great company's stock down to size for 'em... if you can't beat em join em...

2008 Apr 21 03:48 PM

[The-Yellow-...:]

revenue. Not same revenue. Typo.

2008 Apr 21 03:49 PM