Deutsche Bank is out with a positive call on Sigma Designs (NASDAQ:SIGM) saying their meeting with the management at CES indicated that the potential competition from Broadcom and ST Micro has not yet materialized. SIGM stock has recently declined in value over unsubstantiated speculation of competitive solutions taking market share in the IPTV and Blu-ray DVD segments.
Firm's checks indicate that Sigma's competitors, despite announcing new products at the CES show, are still not certified by Microsoft for its IPTV platform. They view this as validation for Sigma's superior software/hardware IPTV solution and should help lay to rest concerns of market share loss in 2008.
In IPTV, Sigma is adding new features to its existing SoC solutions in order to enhance its ASPs. As a result, the company expects less than normal overall ASP erosion in 2008 (-10% y/y vs. DB est of -16% y/y).
In Blu-ray, the company is set to release a cheaper version of its chip this spring which should further distance its offering from the competition. Deutsche Bank notes that SIGM is currently the only supplier to both Sony and Samsung for high-def Blu-ray DVD players. In addition, they believe the format war has all but ended with Warner now choosing the Blu-ray with Sigma benefiting significantly.
Reiterates Buy and $75 target.
Notablecalls: I'm going to re-issue an actionable call alert on SIGM here. The stock took a pounding despite very positive commentary from several firms yesterday. While I have failed to come up with a credible explanation for the decline, I think Deutsche's comments should at least temporarily bouy the stock.
I heard Kaufman as out with a call yesterday morning saying DTSI and DLB are the best ways to play Warner Bro's decision on Blu-Ray. One of my best contacts among the NCN opined that SIGM was sold in order to put money at work in DTSI & DLB. Go figure...
Sometimes the market sure does work in mysterious ways.