"Motley Fool Rule Breakers members are a patient bunch, but I have to admit: Sigma Designs (NASDAQ:SIGM) would try the patience of a saint."

So began my Foolish Forecast for Sigma on Wednesday. True to form, management looks likely to keep us cooling our heels (alongside its rapidly cooling stock price) for a while longer:

  • Revenue shot up 37% to $58.2 million in the second quarter of fiscal 2009
  • However, gross margins shed 170 basis points to land at 50.7%
  • But operating margins nearly tacked on 110 basis points to hit 21.8% (on lower stock-options costs and no repeat of a research and development writedown that occurred in fiscal Q2 2008). Thus, Sigma retains its lead over rivals Broadcom (NASDAQ:BRCM), STMicro (NYSE:STM), and Conexant (NASDAQ:CNXT) in the margins race, still lagging only Texas Instruments (NYSE:TXN)
  • However, thanks in large part to a larger tax bite, profits grew only 9% to $0.35 per share

Now, you can hardly blame a company for anemic earnings growth just because the tax man came-eth. But to my Foolish ears, the protestations of "it's not our fault" are starting to ring just a little bit hollow.

In the Foolish Forecast, I mentioned that Sigma blamed an inventory glut among its customers (the alphabetical list of which stretches at least as far as from AT&T (NYSE:T) to Motorola (NYSE:MOT) ... and maybe as far as Zenith.) But according to the latest balance sheet, Sigma doesn't seem to be doing much to fix the problem on its side. Inventories are still up 170% year over year -- or roughly 4.5 times the rate of Sigma's slowing sales. Accounts receivable look nearly as bad, up 88%, or more than twice the pace of sales. I can't imagine that these numbers bode well for Sigma Designs' cash flow -- but to protect our delicate ears, management hardly discussed that number with us on Thursday. 

More bad news to come
Which means, of course, that we'll have to wait for the 10-Q filed with the SEC to come out to learn the extent of the damage to the company's cash flow statement. Shortly thereafter, it will be time to check back in on the Q3 results -- which could be even worse. According to the company, we're looking at flat revenue in the current quarter compared with the previous one -- well short of Wall Street's estimates -- little growth in the near term, and lower-than-previously-expected revenue from Blu-ray player sales.

I can't wait.

Fools of a feather don't always fly together. Find out whether the gang at Motley Fool Rule Breakers still has designs on Sigma Designs when you take a free trial. Sigma Designs is also recommended in Motley Fool Hidden Gems Pay Dirt.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.