Sigma Designs, Inc. Reports First Quarter Fiscal 2010 Results

Sigma Designs^®, Inc. (NASDAQ: SIGM), a leading provider of highly integrated system-on-chip, or SoC, solutions that are used to deliver multimedia entertainment throughout the home, today reported financial results for its first fiscal quarter ended May 2, 2009.

Net revenue for the first quarter was $51.2 million, up $3.9 million, or 8%, from $47.3 million in the previous quarter and down $5.7 million, or 10%, from $56.9 million reported for the same period last year.

GAAP net income for the first quarter was $2.7 million, or $0.10 per diluted share which includes a charge of $3.5 million, or $0.13 per diluted share, for the write-off of deferred tax assets due to changes in California corporate income tax laws. This compares to GAAP net income of $6.6 million, or $0.24 per diluted share, for the previous quarter which included a tax benefit of $2.4 million, or $0.09 per diluted share, due to Sigma’s reduction of its effective income tax rate for fiscal 2009. GAAP net income was $6.6 million, or $0.22 per diluted share, in the first quarter one year ago.

At the end of Sigma’s first quarter, total cash, cash equivalents and marketable securities totaled $221.3 million, or $8.32 per share outstanding. The increase of $29.1 million, or $1.08 per share, during the quarter was due to the reduction of inventory, an increase in accounts payable and accelerated collections that resulted in a temporary reduction of accounts receivable. Additionally, other operating activities generated $10.1 million, or $0.38 per share outstanding.

Non-GAAP net income for the first quarter was $8.3 million, or $0.30 per diluted share. This compares to non-GAAP net income of $10.1 million, or $0.38 per diluted share for the previous quarter and non-GAAP net income of $13.6 million, or $0.46 per diluted share during the same period one year ago. Non-GAAP adjustments for the first quarter consisted of $832,000 in amortization expense for acquired intangibles related to the Zensys, VXP and Blue7 acquisitions, $1.2 million in non-cash share-based compensation expenses and $3.5 million from the write off of the deferred tax assets associated with the benefits from California state income tax credits no longer expected to be received in future periods. The reconciliation between GAAP and non-GAAP results for all referenced periods is provided in a table immediately following the GAAP financial tables below.

Management Comment

"We are pleased to report a sequential increase in our revenue for the first quarter, which we feel provides continued signs of stabilization and strength in our primary markets. We are continuing to place heavy efforts on bolstering sales as well as expanding the breadth of our market opportunities. The IPTV market is continuing to show resilience to current economic issues and we are confident that it will continue to demonstrate some level of growth for this year. We are also pursuing design activity in the cable industry and helping to drive the transition to Tru2way IP cable solutions, which will substantially increase our addressable market. We are also pushing forward with our consumer products agenda by working with a widening range of vendors for Blu-ray player designs, digital media adapter products and home entertainment connectivity devices. Additionally, we are encouraged about the potential opportunities addressed by our recent acquisition of the Z-Wave brand home control products and anticipate a growing synergy within the set-top box market,” stated Thinh Tran, chairman and chief executive officer, Sigma Designs.

First Quarter Highlights

• Announced that Sigma’s highly integrated SMP8654 media processors will be used to power Celrun’s TD-1100 set-top box (STB), which has been selected by telecom provider LG Dacom to be deployed throughout Korea.
• Announced that Z-Wave technology has reached a new milestone by providing IP interoperability. As part of a public showing which took place at Interop 2009, Sigma announced complete interoperability between its Z-Wave wireless home control standard and IP (Internet Protocol), with the single chip "IP-Wave” solution demonstrated in real products for energy management, remote home monitoring and security.

Investor Conference Call

The conference call relating to Sigma’s first quarter fiscal 2010 results will take place following this announcement at 5:00 PM ET today, May 27, 2009. Investors will have the opportunity to listen live to the conference call via the Internet through www.sigmadesigns.com/IR or www.earnings.com. Institutional investors can access the call via Thomson StreetEvents at www.streetevents.com. To listen to the live call, please go to the website at least 15 minutes early to register and download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call via the internet through www.sigmadesigns.com/ir or www.earnings.com. The audio replay will be available for one week after the call.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Sigma reports non-GAAP net income, which excludes amortization of acquired intangibles, stock-based compensation calculated under APB No. 25 and SFAS No. 123(R) and, with respect to the first quarter of fiscal 2010, the expense resulting from the write-off of the deferred tax asset due to the change in California tax laws and, with respect to the first quarter of fiscal 2009, in-process development costs acquired during the quarter. Sigma believes that its non-GAAP net income provides useful information to management and investors regarding financial and business trends relating to its financial condition and results of operations. Sigma also believes the non-GAAP measures provide useful supplemental information for investors to evaluate its operating results in the same manner as the research analysts that follow Sigma, all of whom present non-GAAP projections in their published reports. As such, the non-GAAP measures provided by Sigma facilitate a more direct comparison of its performance with the financial projections published by the analysts as well as its competitors, many of whom report financial results on a non-GAAP basis. The economic substance behind its decision to use such non-GAAP measures is that such measures approximate its controllable operating performance more closely than the most directly comparable GAAP financial measures. For example, Sigma’s management has no control over certain variables that have a major influence in the determination of share-based compensation such as the volatility of its stock price and changing interest rates. Sigma believes that all of these excluded expenses do not accurately reflect the underlying performance of its continuing operations for the period in which they are incurred, even though some of these excluded items may be incurred and reflected in Sigma’s GAAP financial results in the foreseeable future.

The material limitation associated with the use of the non-GAAP financial measures is that the non-GAAP measures do not reflect the full economic impact of Sigma’s activities. Sigma’s non-GAAP net income is not prepared in accordance with GAAP, is not an alternative to GAAP financial information, and may be calculated differently than non-GAAP financial information disclosed by other companies. Accordingly, investors are cautioned not to place undue reliance on non-GAAP information.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding potential opportunities emerging for Sigma’s strategic initiatives, growth in the IPTV market and the potential impact of new products and technology. Actual results may vary materially due to a number of factors including, but not limited to, the risk that, upon completion of further closing and audit procedures, that the financial results for the first quarter are different than the results set forth in this press release, general economic conditions, including continuance of the current economic conditions specific to the semiconductor industry, the rate of growth of the IPTV, high definition DVD and HDTV markets in general, the ramp in demand from our set-top box and telecommunication customers, our ability to deploy and achieve market acceptance for Sigma products in these markets, the ability of our SoCs to compete with other technologies or products in these emerging markets, the risk that such products will not gain widespread acceptance, or will be rendered obsolete, by product offerings of competitors or by alternative technologies, the risk that anticipated design wins will not materialize and that actual design wins will not translate into launched product offerings, and other risks including delays in the manufacturer’s deployment of set-top boxes or consumer products. Other risk factors are detailed from time to time in our SEC reports, including our annual report on Form 10-K as filed April 2, 2009. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Sigma undertakes no obligation to publicly release or otherwise disclose the result of any revision to these forward-looking statements that may be made as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

About Sigma Designs, Inc.

Sigma Designs is a leading fabless provider of highly integrated SoC solutions that are used to deliver multimedia entertainment throughout the home. Sigma’s SoC solutions include media processors and wireless communication devices which combine semiconductors and software as critical components of high-growth consumer applications including IPTV-based set-top boxes, Blu-ray players, HDTVs, entertainment connectivity devices and RF-based home control devices. Headquartered in Milpitas, Calif., Sigma Designs also has design centers or sales offices in Canada, China, Denmark, France, Japan, Korea (third party), Singapore and Taiwan. For more information, please visit Sigma Designs’ web site at www.sigmadesigns.com.