SigmaTel's Bad News
SigmaTel (NASD:SGTL), the Texas-based fabless semiconductor company, revised guidance down yesterday, with a vengeance. The company had revenue of $324 million last year and an operating profit of $56.3 million. It made money in every quarter except one.
The company has already been downgraded by four brokerages since October. The only piece of good news the company has had lately is that it prevailed in a patent dispute against Actions Semiconductor.
Sigmatel is now saying that Q1 will have a top line in a range of $30 million to $35 million. It's previous forecast was $52 to $60 million, so the miss is massive. A back-of-the-envelope calculation would say that, based on past expenses, the company could loss over $40 million in the quarter. As of December 31, the company had cash and cash equivalents of about $120 million, so let's hope that they don't keep this up for any long period of time.
If the stock drops sharply, and it will, the reasons for the miss could benefit shareholders as the company moves into the latter part of the year. The transition from the company's 3500 series chips to the 3600 series went more slowly than expected. The company expects those orders to show up in Q2. The company also said that the availability of a hardware and firmware solution for public casings customers had created order delays. SigmaTel claims this has been addressed by management. So, there could be some net positives in Q2 and beyond.
On the distressing side of the ledger, NAND flash prices have declined sharply. The company was unclear about how this would be resolved, or when.
SigmaTel is in some attractive and growing businesses. The company provides semiconductors for PCs, the huge portable audio business, digital TV, and television set-top boxes. These businesses are likely to grow rapidly, so the issue will be whether SigmaTel can get a reasonable share.
The stock has come down from $38 to $10 so far this year, so it is already out of the running in any popularity contests. The stock dropped closer to $9 after hours.
Because SigmaTel is at the center of some hot markets, if management's assessment that most of the company's products will be resolved in Q2, at a $375 million market cap with a fair amount of cash on hand, the stock could be getting cheap.
Let's hope cheap does not get expensive for investors.
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine, which was on the Adweek Ten Hottest Magazines list in two separate years. He was also the president of Switchboard.com when the company was the 10th most visited site in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of Edgar Online and TheStreet.com. He does not own securities in companies he writes about.
SigmaTel (NASD:SGTL), the Texas-based fabless semiconductor company, revised guidance down yesterday, with a vengeance. The company had revenue of $324 million last year and an operating profit of $56.3 million. It made money in every quarter except one.
The company has already been downgraded by four brokerages since October. The only piece of good news the company has had lately is that it prevailed in a patent dispute against Actions Semiconductor.
Sigmatel is now saying that Q1 will have a top line in a range of $30 million to $35 million. It's previous forecast was $52 to $60 million, so the miss is massive. A back-of-the-envelope calculation would say that, based on past expenses, the company could loss over $40 million in the quarter. As of December 31, the company had cash and cash equivalents of about $120 million, so let's hope that they don't keep this up for any long period of time.
If the stock drops sharply, and it will, the reasons for the miss could benefit shareholders as the company moves into the latter part of the year. The transition from the company's 3500 series chips to the 3600 series went more slowly than expected. The company expects those orders to show up in Q2. The company also said that the availability of a hardware and firmware solution for public casings customers had created order delays. SigmaTel claims this has been addressed by management. So, there could be some net positives in Q2 and beyond.
On the distressing side of the ledger, NAND flash prices have declined sharply. The company was unclear about how this would be resolved, or when.
SigmaTel is in some attractive and growing businesses. The company provides semiconductors for PCs, the huge portable audio business, digital TV, and television set-top boxes. These businesses are likely to grow rapidly, so the issue will be whether SigmaTel can get a reasonable share.
The stock has come down from $38 to $10 so far this year, so it is already out of the running in any popularity contests. The stock dropped closer to $9 after hours.
Because SigmaTel is at the center of some hot markets, if management's assessment that most of the company's products will be resolved in Q2, at a $375 million market cap with a fair amount of cash on hand, the stock could be getting cheap.
Let's hope cheap does not get expensive for investors.
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine, which was on the Adweek Ten Hottest Magazines list in two separate years. He was also the president of Switchboard.com when the company was the 10th most visited site in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of Edgar Online and TheStreet.com. He does not own securities in companies he writes about.
posted by douglas mcintyre at 6:11 AM
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