Sigma Design upgraded

We haven’t written a lot about this company as nothing much has happened, but underneath, things seem to be improving. We called earlier that 15 would be the bottom, it went a little below that, but we have left these distressed levels and some dosis of guarded optimism is warranted.

First, the upgrade:

  • Sigma Designs upgraded to Buy at BWS Financial; tgt $22 . Target $22. BWS Financial upgrades SIGM to Buy from Hold and sets target price at $22 saying the inventory issue SIGM was going through at the start of the year has been resolved, and IPTV subscriber levels have continued to increase. The firm says SIGM is the company that continues to benefit from the growth in IPTV subscribers. The co remains the market share leader in providing processors for set-top boxes.

Although the price target is relatively modest, considering this stock reached $70+ last year, it’s at least good to know the inventory problems are behind us.

There is some corroborating evidence on the end of those inventory problems, as well on the growth of the IPTV market, for instance:

  • AT&T has shifted into overdrive on subscriber acquisition for U-verse TV, shooting to nearly double its midyear count to end 2008 with 1 million customers. A compelling high-definition lineup is a crucial part of meeting that goal, says Dan York, AT&T’s executive vice president of content. But he notes that the telco needs to balance channel counts with programming costs.
  • AT&T expects to have 1 million U-verse TV subscribers by the end of this year.

Of course, AT&T was the main cause of the inventory problem earlier this year.

Other markets keep developing, like Korea:

  • KT, Korea’s largest telecom company which has suffered a growth slowdown, is set to make a major breakthrough with IPTV business. Nam Joong-soo, CEO of KT pledged that IPTV is a core business for KT’s transformation into a media entertainment company. Mr. Nam said that KT would seek collaboration with leading media groups around the world.
  • In this vein, KT decided to put 710 billion won in network sophistication to provide real time IPTV service. By the end of this year, 70 percent of networks will be replaced with FTTH. In 2010, 95 percent will be using FTTH, said KT. Along with that, the company plans to spend 70 billion won in IPTV platform expansion and 40 billion won in premium network sophistication.
  • KT plans to subscribe 300,000 people to its renewed IPTV service.

Or Italy:

  • Telecom Italia added 80,000 subscribers for its “Alice TV” IPTV service in the first half of this year, reaching a total of 180,000 at the end of June and at its current growth rate it will reach around 260,000 by the end of this year.

Both KT and Telecom Italia use SIGM chips. And there is more good news, a new customer. So far, that supposed threat from Broadcom hasn’t materialized all that much. In their latest earnings conference call (July 23), IPTV wasn’t mentioned even once!

  • Sigma Designs (Nasdaq:SIGM – News), a leader in digital media processing system-on-a-chip (SoC) solutions for consumer electronics, and I-O DATA, a leading Japanese manufacturer and provider of computer peripherals and interface products, today announced that Sigma’s industry leading SMP8634LF media processors are being used in I-O DATA’s new, updated set-top box models, the AV-LS500L and AV-LS500UL.
  • The set-top boxes have been designed under the name of “TV Connected PCs” exclusively for “GyaO NEXT,” Video-on-Demand (VOD) service launched in June, 2007 by the USEN CORPORATION, a Japanese domestic cable music broadcasting company. Sigma’s advanced media processors enable “TV Connected PCs” to decode both standard and high definition video and audio signals into playable formats so the viewers can enjoy “GyaO NEXT” programs on TVs with bigger screens.

Let’s look at the chart so see the consolidation.

We’ve broken the 50 day average, but we yet have to take out the 18 top convincingly. Let’s look at the 2 years chart.

There are some reasons to have a modicum of optimism from this. The slide downwards is less steep since April, both at the tops and the bottoms (although both are still lower). We don’t expect a big break out that would take us above 25 any time soon, but we feel confidence coming back to this company. We said it would be a matter of time.