Sigma Designs (SIGM) 4Q:2007 Results (2)

Gross margins were about 100 bps light and operating margins came in significantly lower (300 bps) due to R&D and legal expenses.

Motorola, the company's largest customer, has too much inventory. Shipments to Motorola are expected to go from roughly 23mm (30% of total) this quarter to 6mm (10% of total) next quarter. This is the entire shortfall relative to consensus.

Broadcom will enter the market soon and is obviously a competitive threat as they are well capitalized and diverse.

As there's no clear indication of the depth of the Motorola inventory problem, there's no near-term catalyst.

The chart suggests the stock is going to $19 near-term and there's risk that could become $14 if that level doesn't hold. My guess is the short interest will drive covering at the $19 level and it will hold there for a while.

I think you get some larger companies kicking the tires as they're in some attractive growth markets but that's just me talking, I don't know of any companies exploring acquiring the company.

Bottom line: I like it but there's no near-term positive catalyst and its probably going lower so hang back for now.