Collins Stewart Downgrades Sigma Designs (SIGM) to Sell; Cisco & Motorola Using Competitor

November 11, 2009 7:37 AM EST

Collins Stewart downgrades Sigma Designs (Nasdaq: SIGM) to Sell. Price target $9.

Collins analyst says, "We are downgrading SIGM to a SELL rating and $9 PT on concerns of greater than anticipated share loss to Broadcom (Nasdaq: BRCM). Our checks indicate that Cisco (Nasdaq: CSCO)/Motorola (NYSE: MOT) will move exclusively to Broadcom (Nasdaq: BRCM) SOCs for next-gen Microsoft (Nasdaq: MSFT) Mediaroom IPTV STBs in 2H CY 10. Our previous estimates had anticipated a dual-source scenario with more modest share loss assumptions...Checks indicate that initial shipments of BRCM IPTV STBs are expected to ship in 2H CY 10 which is later than we had originally anticipated (end of CY 09). We believe that a motivating factor in SIGM s acquisition of Coppergate was to mitigate the revenue impact of share loss to BRCM on MSFT Mediaroom platforms especially at AT&T.

"We are lowering our FY'11 estimates to $239M / 68c from $255M / 71c. Note that our lowered FY 11 estimates are in line with consensus of $237M since most estimates have not been adjusted to reflect the Coppergate acquisition, which contributes ~$70M/year. We assume BRCM will get 70% market share of MSFT IPTV shipments in 2010, as we anticipate that some service providers will continue to take shipments of first-gen IPTV STBs. Our EPS reduction is more modest since we assume more conservative opex growth given anticipated market share loss."

To see more analyst ratings on SIGM Click Here.

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