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Will Sigma Ever Deliver On Its Promise?

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It seems like the good times are always just around the corner for Sigma Designs (Nasdaq: SIGM  ) . But the market opportunity will evaporate unless the company can find a real catalyst soon.

Sigma's multimedia chips are a common find in today's set-top boxes and high-end television sets. Whether said system runs vanilla Linux software, some variant of the Google (Nasdaq: GOOG  ) Android platform, or even a mobile version of Microsoft (Nasdaq: MSFT  ) Windows, Sigma's got the bases covered. Whatever media delivery product you want to build, there's probably a Sigma design for it. In fact, the company is a market leader in this niche.

Digital media is hot. Network-based TV services are everywhere. Google is just one of the biggest elephants dancing around the digital TV market in search of an advantage. Sigma Designs should be exploding right about now.

But I said the same thing last quarter. Sigma also looked tremendously cheap six months ago. Though the stock has recovered some since that low point, neither short-term traders nor long-term owners have much to celebrate about this stock. That magic moment never seems to come.

This week's earnings report was more of the same. A 6% sequential revenue boost to $78 million was barely enough to keep pace with competitor Zoran (Nasdaq: ZRAN  ) . Earnings ballooned to $0.16 per share, up from $0.02 of profits last quarter and a $0.09-per-share loss a year ago, but it's easy to present impressive percentage gains on the bottom line when you're skimming this close to the breakeven point.

I'm all for giving Sigma time to find its footing, but the company has been stumbling just short of some amazing breakthrough for years now. This time, CEO Thinh Tran is pursuing "major design wins in our target markets" that he expects to ignite a firestorm of sales -- at some point in the unspecified future.

I'm sorry, but I'm running out of patience with this stock after a long and patient watch. If you want a chip stock with proven hooks into the digital trends of today, I think you'd be happier owning audio chip designer Cirrus Logic (Nasdaq: CRUS  ) , which is finding its way into nearly every hot product on the market these days while Sigma seems content just to defend its traditional strongholds.

Add Sigma Designs to your watchlist by clicking here to keep track of the digital media market from a hardware perspective.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Google and Microsoft are Motley Fool Inside Value picks. Google and Sigma Designs are Motley Fool Rule Breakers choices. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Cirrus Logic, Google, and Microsoft. 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. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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