Michael B. Krause

Sigma Post-Earnings Update: Staying Long, Though Concerns Remain

With regards to inventories from the conference call:
'Inventory was $34.5 million, an increase of $8.2 million over the previous quarter primarily due to the decrease in our shipment and the purchased VXP inventory... (Per the VXP inventory) We book it at its selling value and that was one of the adjustments that I explained to our gross margin. There’s about a $700k gross margin miss or unrealized amount associated the VXP sales during Q1. As we sell through the purchased inventory we’ll begin to get new inventory in that will actually have a gross margin and that will be another positive affect on our gross margin.'

It'd probably be fair to assume at least half of that inventory build was actually the booking of inventory at selling price on the VXP assets (18m purchased).

Still, 28m of inventories is a little over a buck a share to discount. I don't see your point. On the goodwill and intangible, again similar numbers. Thus the $14 strong buy target.

Sigma "Massacre" - What To Do?

Have a new entry posted. Go to scriabinop23.blogspot..... Coming to seekingalpha in a few days.

Sigma Earnings Analysis: Shorts Should Soon Have to Cover

Very nice ... Jim Cramer ! Why resort to the low blows? Are you short?

I'm not advocating buying a hot potato here. 143% growth is definitely not in the cards, but even a 25% growth rate is realistic going forward. 3-5 years out = perpetuity as far as the stock market pricing mechanism, anyway.

Even a meet at 300M for FY09 is 36% growth y/y. Impose that over a typical curve ... 36 ... 25 ... 20 and you get a multiple somewhere in between, with a price target way above currently trading prices.

SIRF's margins after operating expenses are attrocious. Furthermore, the IPTV business is nascent, in the very early stages. Sure, there's always commoditization pressure of any chip product (and may I dare venture to say that GPS consumption is much more saturated than IPTV or Blu-ray), but surviving semi companies adapt with R&D and innovation. They now have a cash hoarde to be able to adapt.

Blu-ray is another story entirely -- and even a fractional ownership of the market with accelerating adoption a year or two out spells an entirely new source of growth.

Sigma Earnings Analysis: Shorts Should Soon Have to Cover

Go to the 2007 annual earnings report (with 90M of revenue).
You don't have to be a rocket scientist to figure out that even a repeat of that year with .24/share of earnings with a 20 PE gives you a 4.80 valuation. But on top of 300M assets reserve, this company now can leverage itself into many directions. Combine the book value with that 4.80 valuation at you have the most ridiculous price target of about $15/share, assuming earnings decline from 240M to 90M.

So why would anyone in their mind be short from $20? You don't need any sophisticated ASP trend analysis to reveal that there's really an unfavorable risk:reward profile for a short position at these prices. Even if the Needham analyst is right, and SIGM's 300-350M guidance for FY09 is unrealistic (due to overall market weakness / demand limitations), even back under FY08 #s still yields an extremely viable business.

The burden of proof now lies with the shorts now -- nothing past a superficial balance sheet and cash flow analysis is necessary to support the long case, simply because this valuation is so absolutely out of whack.

Sigma Earnings Analysis: Shorts Should Soon Have to Cover

I've made a few corrections to account for correct taxes, multiples. Although at 21.15, the current price, they are non issues.

Sigma Designs: Too Inexpensive to Overlook

the last 2 week's volume and price moves are either evidence of naked shorting, or a a consortium of major institutional holders all unwinding positions ... I'm apt to believe in #1. This is still a $40-$50 stock easily, even if guidance was down.