As expected, we got a highly abbreviated financial report from Sigma Designs (NASDAQ:SIGM) for its fourth quarter and full year of 2006. It would have made the shortest Fool By Numbers ever, with nothing but net revenues reported in black and white.
For any substance beyond that, you had to tune in to the company's conference call, where management was slightly more forthcoming with business details. But only slightly.
The latest full report we have from Sigma was filed in June, 2006. Since then, the company has fallen under the options review curse, and is currently working toward filing three years' worth of data by May 4. That is, unless the Nasdaq grants them another extension.
So, we've been told not to rely on the information we do have for that three-year period, and the new info we're getting in these calls is rather vague. Gross margins have supposedly been improving for three quarters now, but management won't say by how much. Same goes for operating margins. Stock options rarely count against the cost of revenues, so it's hard to see the justification for that particular obfuscation.
Sigma does claim a 75% market share in its bread-and-butter Internet protocol television (IPTV) chipsets, and repeated this position again last night. The management team also kept noting that Broadcom (NASDAQ:BRCM) and STMicroelectronics (NYSE:STM) formed the only competition.
ST Micro has been claiming a 50% global market share for IPTV boxes, to begin with. That company is a lot more diversified than Sigma and doesn't like to break out unit sales on that level of granularity, so it's word against word in this more-than-100% total market situation. And that's without accounting for Broadcom at all.
But wait, there's more. You can have a look at the comparable IPTV platforms from Analog Devices (NYSE:ADI) and Texas Instruments (NYSE:TXN) if you like. It's true that these are multi-chip solutions rather than the system-on-a-chip Sigma likes to design, but they do the same things in the end.
It's also true that TI and Analog Devices sell mainly to set-top box makers in markets like China, Japan, and Poland, rather than to Motorola (NYSE:MOT) and Cisco's (NASDAQ:CSCO) Scientific-Atlanta, both of which are on Sigma's customer list.
There's no question that Sigma Designs has an impressive platform, selling into a market in its infancy that will become huge in a couple of years. But the company could be a lot more forthcoming with preliminary results, even amid options reviews and switching auditors. And why shrug off several serious competitors, acting as if they didn't exist? I think there's something fishy bubbling under the surface here. We'll see about that when Sigma gets around to releasing full results. Maybe by then, we'll know how the company defines its market.
Further Foolishness:
- Foolish Forecast: The Alpha and Omega of Sigma Designs
- Media Giants Tune In to Net TV
- Good Corporate Citizens
Sigma Designs recently dropped from a four-star CAPS rating to three stars. Weigh in with your own insights atMotley Fool CAPS, where nearly 25,000 investors like you and me gather to share their thoughts on the best and worst stocks of today.
Fool contributor Anders Bylund holds no position in any of the companies discussed here, but there's a STMicro graphics chip in his old Dreamcast. You can check out Anders' holdings if you like, and Foolish disclosure is always worth a read.
