Media-processor designer Sigma Designs (NASDAQ:SIGM) will report fourth-quarter earnings come Thursday night, so we patched in a feed from the market to get a picture of the company's current prospects.

What analysts say:

  • Buy, sell, or waffle? Eleven Wall Street firms cover Sigma Designs. Seven of them are buying, and the other four are holding. In our Motley Fool CAPS database, 171 player ratings combine with market performance and other factors to form a three-star stock.

  • Revenues. The average analyst calls for $28.8 million.

  • Earnings. The average forecast calls for about $0.21 per share, significantly higher than the $0.02 per share in last year's fourth quarter.

What management says:
"Our current growth is directly attributable to the strength of demand for telco-based IPTV deployments, as well as Sigma's leadership position in this market," said CEO Thinh Tran in the third-quarter earnings release. "Current demand is so strong that we are on track to ship approximately 1 million chips in the fourth quarter to IPTV set-top box customers."

IPTV, or Internet protocol television, is a service that streams video content over data pipes designed for high-speed Internet traffic. Examples include Verizon's (NYSE:VZ) FiOS services, or AT&T's (NYSE:T) U-verse.

What management does:
Gross margins are sliding down, down, down, as more competition and its attendant pricing pressures take the edge off Sigma Designs' competitive advantage and pricing power. The other margins are all over the place, even on the normally stable trailing-12-month basis, and it's hard to come up with a credible forecast for the next few quarters.

You'll note that these figures are a bit out of date. Wouldn't you know it -- this is another one in that long line of options-granting reviews, which delay regulatory filings and limit earnings releases to mere "estimated revenues" and the like. So we don't know what's been going on for the last couple of quarters, and we probably shouldn't expect a full release this time, either.

Margins

7/2005

10/2005

1/2006

4/2006

Gross

68.6%

68.1%

65.7%

61%

Operating

(5.4%)

(6.2%)

(4.1%)

1.2%

Net

(0.2%)

4.5%

5.7%

4.9%

FCF/Revenue

(5.1%)

2.6%

1.8%

(1.8%)
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Serving up media decoders is becoming a tough way to make a living. Competitors in this market include heavyweights Texas Instruments (NYSE:TXN), Broadcom (NASDAQ:BRCM), AMD (NYSE:AMD), and Analog Devices (NYSE:ADI), all of which are touting new products supporting the latest and greatest encoding standards and low-power envelopes.

On the upside, the market for these chips is expanding rapidly and should be able to support a number of major hardware suppliers. Cable companies and the aforementioned telcos dream of putting digital services with mandatory set-top boxes into every home -- and high-end television sets can dispense with that box entirely -- while cell phones and other handheld gadgets are getting increasingly video-savvy. And Sigma says that its solutions are often marketed "a year or more ahead of the competition."

On balance, Sigma should do just fine with steady -- if unexciting -- growth for the next couple of years. Once the on-demand and IPTV revolutions hit their respective stride, this is one of the peripheral companies that should benefit greatly.

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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is always cutting-edge.