The digital video revolution is happening. It's just taking a break. That's what I see in the first-quarter report from media-chip specialist Sigma Designs
CEO Thinh Tran said he was "disappointed" in this quarter, although sales and earnings both landed within the guided range. Non-GAAP earnings fell from $0.29 per share a year ago to $0.07 per share this time around, while sales declined 7% to $60.6 million.
A planned transition to a new generation of Internet protocol TV solutions took a somewhat harder toll than expected, and the changeover will cause some more pain in the current quarter before going away. Nevertheless, customers are adopting the new chips with gusto, and the long-term outlook remains optimistic.
More than just talking a big game, Sigma is putting its wallet where its mouth is: R&D expenses shot up 15% year over year, and the company invested heavily in engineering design tools and software. That's a sure sign of management with true confidence in its strategy.
The silverback gorilla in Sigma's markets is Broadcom
It's a large market that has many years of serious growth ahead of it, and Sigma has established itself as an important player. I'm sure the stock will bounce back from this temporary trough as Sigma delivers on that growth promise. As a cord-cutter myself, I'm convinced that IP-based alternatives will overthrow the cable and satellite hegemony in due time.
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