Sigma Designs (Nasdaq: SIGM), the multimedia chip maker, zoomed deep into the red with a worse-than-expected third-quarter loss as it shifted focus to next-generation products that would be less costly to manufacture.

Let's take a closer, Foolish peek at what Sigma is working on.

Counting the chips
The company saw revenue drop by half to just $39.7 million. This was mainly due to a transition toward selling second-generation media processors and connectivity products, which have a lower average selling price. However, the company also failed to roll out its set-top boxes on time, which resulted in a further drop in revenue.

But that's not all. Because of higher expenditures caused by writedowns, the company slipped deep into the red with a net loss of $121.6 million.

In comparison to Sigma, peer NXP Semiconductors (Nasdaq: NXPI) was relatively better off with its net income at $301 million, although it was 18% lower than the previous year's quarter. However, it was caused by a mixed bag of one-time gains and losses.

Another peer, STMicroelectronics (NYSE: STM), also saw its net income crash by 64% to $71 million on the back of poor economic conditions.

But, despite its performance woes, Sigma is not willing to take things lying down.

Not giving up without a fight
Even though Sigma's chip sales have benefited from the growth of Internet-based products, of late the company has lost out to more powerful chip makers like Broadcom (Nasdaq: BRCM).

Nevertheless, Sigma has been determined to power ahead with sales of its much cheaper new generation of chipsets, hoping to capitalize on the Internet-based content market. Sigma has also made efforts to interact with content service providers such as cable operators, so that it can promote the use of products that use its multimedia chips.

The Foolish bottom line
Sigma has been losing business to its competitors, apparent by the trend of declining revenue over the past four quarters. Unless there is an increase in revenue, I'm reluctant to put my money on Sigma's chips for now. What do you Fools think about Sigma? Leave your comments in the box below. And don't forget to stay up to speed with the latest on Sigma Designs by adding it to your very own watchlist. It's free, and lets you keep in touch with the latest news and analysis on your favorite companies.

Fool contributor Keki Fatakia does not hold shares in any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of NXP Semiconductors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.