Image source: Sigma Designs.

What: Shares of Sigma Designs (NASDAQ:SIGM) got crushed today, down by 19% as of 11:45 a.m. ET, after the company reported fourth-quarter earnings.

So what: Revenue in the fourth quarter was down 6% to $51.5 million. Gross margin was 49.6% on an adjusted basis. That all translated into non-GAAP net income of $0.9 million, or $0.02 per share. Both top- and bottom-line results actually bested the Street's expectations, which called for $51.3 million in revenue and $0.05 per share in adjusted losses.

Now what: On the conference call, management detailed guidance for the first quarter. Revenue should be in the range of $52 million to $56 million, which is in line with consensus estimates at the midpoint. Analysts are modeling for $54.1 million in sales. The company notes that revenue rose 20% last fiscal year, and expects the coming fiscal 2017 to build momentum in Internet of Things design wins that will drive another year of profitable growth.

However, investors may be concerned with falling margins. The adjusted gross margin figure mentioned above was down both sequentially and year over year. Adjusted gross margin in the first quarter should be in the range of 46% to 50%, suggesting continued pressure on profitability.

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.