Sigma Designs shares hit after 3Q sales shortfall

AP News
Posted: Dec 03, 2009 2:38 PM

Shares of Sigma Designs Inc. took a hit Thursday after the chip designer posted a third-quarter loss amid a sales decline linked to lower demand for its Internet protocol television products.

The company reported a 24 percent revenue drop to $35.5 million, well below the $46 million analysts polled by Thomson Reuters had expected.

"It wasn't a major slowdown at carriers nor any big competitive change but rather the mundane use of refurbished set-top boxes that created a shortfall for Sigma Designs," wrote RBC Capital Markets analyst Mark Sue in a note to investors.

Some of Sigma's telecommunications customers refurbished some existing set-top boxes and sent them out to consumers. As Ken Lowe, Sigma's vice president of business development explained in a conference call, "for every box that they fixed and put back out there, that's another chip they didn't have to buy from us."

Sigma said this was a one-time event and it expects IPTV demand to pick up.

Sue kept a "Sector Perform" rating on Sigma but lowered his target price to $13 from $18.

Collins Stewart analyst John Vinh, meanwhile, reiterated a "Sell" rating and lowered his target price to $8 from $9. He called the quarter's results disappointing and said he is concerned about the company's potential market share loss to new IPTV set-top boxes from Microsoft Corp., which he says will likely be exclusively using chips from Broadcom Corp.

Shares of Milpitas, Calif.-based Sigma fell $1.01, or 8.8 percent, to $10.50 in afternoon trading. In the past 52 weeks, the stock has traded between $8.15 and $17.63.