Sigma Designs a Train Wreck

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Times are rough for companies that sell televisions, make televisions, or even make the components that power televisions. Even Sigma Designs (Nasdaq: SIGM), which makes chips that will help to power the next generation of Web-enabled televisions, is feeling the crunch.

Best Buy's (NYSE: BBY) slashing guidance, and Circuit City's gone bankrupt. LCD TV maker LG Display (NYSE: LPL) is cutting production of LCD TV screens, while Philips (NYSE: PHG) does the same with the TV sets into which those screens are placed.

Sigma Designs took its place in this parade of pain earlier this week, preannouncing Q3 results that fell about a mile short of what management had previously predicted. Whereas last we heard, SD was looking for sales to approximate Q2's number in the upper $50s, now we're told that they actually came in light by about 20% -- $46.5 million or thereabouts.

Bad news, worse news
And if you think that's bad, just listen to what management had to say about next quarter: "The outlook for the fourth quarter is for revenue to be flat to down 10% from the third fiscal quarter of 2009." If that's the way things play out, it should make for about $42 million in fiscal Q4 sales, and more than a 20% miss when judged against consensus estimates of around $55 million.

So to recap, we've got:

• a 20% sales miss in Q3,
• followed by a presumed another 20% miss in Q4.

Business, shmizness. Get a load of that bank account!
Perhaps the only silver lining to all this is that while sales are sliding, SD had about $7 per share in cash and investments, according to MarketWatch. This is about 91% of market cap.

And yet, all this still leaves yours Fool-y with one question unanswered: What's a screaming value play like Sigma Designs doing in the Motley Fool Rule Breakers portfolio anyway?

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