he magic words have been said, the inventory problems are a thing of the past, they got a (modest) upgrade, and now it appears that the IPTV market is taking off. And we still haven’t seen much competition from Broadcom, an argument that played a big role in the sell of last year.

A couple of good days and we’re almost at $20 again. We might pause there a little as $20 could provide something of a resistance and we’re getting close to being overbought, but after that possible little pause we see little resistance until $23-4:

IPTV growth is going to be excellent:

• August 12, 2008 – The number of IPTV subscriber worldwide will reach 53mn in 2009, according to new estimates from a report from UK research firm Companies and Markets, with the APAC region leading growth in terms of subscribers, service revenue, infrastructure and other metrics, thanks to high broadband penetration and a supportive regulatory framework.
• Worldwide IPTV service revenue is predicted to reach US$38bn in 2009, with the Americas and Western Europe forecast to be the biggest markets in terms of revenue per user, according to the report, entitled “Global IPTV Market Analysis (2006-2010)”.
• China is expected to be the future “IPTV dragon”, thanks to its rapid urbanisation, fast-growing economy and expanding middle class, while the US is expected to be a more difficult market for IPTV due to high existing pay-TV penetration, and stiff price and service competition likely to come from “entrenched” operators of cable and satellite services.
• Consumer familiarity of IPTV is described as being “very low”, although young consumers are much more aware of it than their older counterparts, and in terms of principal barriers to IPTV adoption, cost is named as “far and away” the most significant factor across all countries and age groups.

Not all message boards are populated with distortion artists as the Yahoo IOC board, the Sigma board does have a couple of excellent posters. Here some of the most interesting results in calculating this to SIGM figures:

• If these figures are right, and IPTV subscribers go from 15.5m now to 53m next year, then SIGM revenues just from IPTV alone will be over $500m next year, and this is a $100 stock. [Byron]

Not everybody agrees:

• $500MM is a little out there IMHO,but here’s how they could get to $400MM which is well within reason: IPTV Chips (units) go from 11MM this year to 18MM next year (up 81%). At an $18 ASP that equates to $324MM. It is now becoming clear that BRCM won’t have a dog in the fight for a year or a year and a half. The 18MM represents 70% marketshare on 25.7MM chips. Remember, included in the estimates you are quoting are Standard Def low end solutions. With the introduction of the fully integrated Blue Ray Chip. BlueRay revs could go to $50MM next year. This would equate to about 2,778,000 chips. [A full integrated chip will allow the cost of the high end players to come down to $150 to $200 and volumes will expand dramatically.]
• Then you add an extra $50MM from everything else like UWB, Docsis 3.0 and media adapters. Voila, you get $400MM. the back of envelope earnings calculation would be: $400MM REVS $200MM Gross Profit (GM=50%) SGA @20% of REVs= $80MM Operating Profit=$120MM Tax Rate 22% After Tax earnings of $93.6MM using 23MM shares thats $4.06 per share
• This is a rough calculation, but could be pretty close. Docsis 3 could bea big wildcard. [SevePC]

Even that is a little optimistic, perhaps. Earnings estimates by analyst following Sigma run from $1.75-2.70 for next year. However, we certainly think they could get above $2, perhaps pretty close to $3. Which still makes them cheap. Cheap enough for the rally to continue for a while, market environment providing.