The soft spot in the IPTV market is behind us.

Last quarter, IPTV chip specialist Sigma Designs (Nasdaq: SIGM) reported poor results -- along with a note that this was a temporary condition. The company's customer list, which includes or supplies to such giants as AT&T (NYSE: T), Vodafone (NYSE: VOD), and China Telecom (NYSE: CHA), held back on new IPTV cable box buys in order to clear out old inventory and deploy some refurbished boxes. Management guided to a respectable 40% revenue rebound in the fourth quarter, to the lower-$50-million range.

Well, the fourth-quarter numbers are in, and the one-time shortfall proved to be exactly that. Sales bounced 92% sequentially and 44% year over year to $68.1 million. Gross margins, which were expected to stay roughly flat from last quarter when you back out the temporary effects of marking up recently acquired inventories, shot up by 260 basis points. Non-GAAP earnings landed at $0.37 per share, within shouting distance of the year-ago period's $0.39 per share and far above the $0.10 per share seen last quarter.

CEO Thinh Tran reported that the IPTV market "is moving into a new growth phase evidenced by the many telco accounts that achieved their highest ever net subscriber additions in the fourth quarter."

The recent acquisition of home networking expert CopperGate put a damper on GAAP results this time around but adds both substantial sales and new market opportunities to Sigma. Combine user-friendly networking over existing power lines with the media-processing powers of Sigma's IPTV chips and you get the core of a very attractive media center for the next era of home entertainment. Sigma can already deliver products running the Microsoft (Nasdaq: MSFT) Media Room software, Google's (Nasdaq: GOOG) Android -- which is not meant only for smartphones -- and Linux.

Being a fabless chip designer, Sigma could have sold even more chips if the entire semiconductor industry wasn't suffering from manufacturing capacity bottlenecks. There's plenty of room for this Rule Breaker to grow, as demand clearly outstrips supply, and I'd be surprised to see a repeat of that disappointing third quarter in the next couple of years.

Is Sigma out of the woods, or do you see fresh speed bumps in the road ahead? Share your thoughts in the comment box below.

Fool contributor Anders Bylund owns shares in Google, but he holds no other position in any of the companies discussed here. Microsoft is a Motley Fool Inside Value pick. Google and Sigma Designs are Motley Fool Rule Breakers recommendations. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters today, free for 30 days. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.