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Hard times for Sigma as revenues crash and it moves it into loss

Sigma Designs fell into a loss this quarter, something it has avoided for the past five years and showed a fall in revenue down $10 million from the p

By PETER WHITE

Published: 2 June, 2011

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Sigma Designs fell into a loss this quarter, something it has avoided for the past five years and showed a fall in revenue down $10 million from the prior quarter and down almost $5 million from this time last year to $60 million. The net loss was $5.7 million, compared to net income of $2.5 million in the immediate prior quarter and $1.1 million a year ago.

The timing of this revenue shortfall is critical to G.hn given that it is Sigma that has been helping to drive the new standard, and which has single-handed salvaged its performance criteria by providing a system which uses all three power cables to increase the capacity of G.hn threefold. Any perceived weakness at Sigma could also be felt in the effort to establish G.hn and concede the market to a combination of HomePlug, WiFi and MoCA.

But Sigma says that its first quarter would have had an income of $2.3 million if it had not taken $4.7 million in amortization expense related to acquisitions and a further $3.2 million in non-cash stock-based compensation expense.

The company still has a considerable amount of cash in the bank at around $169 million, but that’s a drop of $10 million. It says the decrease is due to the timing of shipments as well as increased payments for design tools and software during the quarter and the company says that this is no surprise because its numbers were within the low end of its guidance.

CEO Thinh Tran, said “Still, we are confident in our connected media platform strategy and remain confident of the mid- and long-term opportunities before us. Our new generations of media processors, the SMP8650 series and SMP8670 series are being well received by the marketplace and we are encouraged by the design-ins with both service providers and OEMs.”

Tran pointed out that the company had doubled its sales force during the past year which was resulting in much closer and more productive relationships with service providers and given better visibility into design cycle windows and key market requirements.

He highlighted the company’s joint venture with Vietnam Multimedia Corporation to make set-top boxes and home connectivity products for the Vietnamese market and the recently acquired PL330, the company’s new low-power HD video encoder chip used for video calling on set-tops, media players and video phones.

The company lost 20% of its value overnight on the announcement and the company is now valued at just $110 million plus cash, so around $280 million in all – not a vote of investor confidence.

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