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Sigma aims for upper end of sales forecast

SINGAPORE (Reuters) - U.S. chipmaker Sigma Designs Inc SIGM.O may reach the upper end of its $300-$350 million revenue forecast for the fiscal year ending January 2009, thanks to new customers in Internet-Protocol television

(IPTV).

Sigma, which competes with Broadcom Corp BRCM.O and STMicroelectronics STM.PA, makes chips that are used in set-top boxes which allows users to watch TV shows over the Internet, and Blu-ray high-definition DVD players.

“To get to $300 million is conservative expectations for a lot of people -- getting to $300 million does not seem to be a very big leap of faith,” Sigma Vice President Ken Lowe told Reuters in a telephone interview on Friday.

“To get to the next level -- $350 million -- means we’ve got some market developments going on, means we’ve got some new customers we need to bring online. If new customers come online, we obviously have an opportunity to go above the 300 level.”

Lowe added that Sigma expects to sign on "a handful" of IPTV customers later this year, and was in talks with France Telecom FTE.PA, U.S-based Verizon Communications Inc VZ.N and India's Reliance Communications RLCM.BO.

“We see a strong year for IPTV -- we see unit volumes continuing to increase in each of the continents,” he said.

"France is the strongest by far in Europe, AT&T T.N in North America, and Korea is leading the pack in Asia Pacific."

Sigma, with a market value of nearly $700 million, derives more than 70 percent of group revenues from the IPTV segment and about 15 percent of sales from Blu-ray players.

Industry shipments of IPTV set-top boxes are expected to surge 75 percent to 14 million units in 2008 from last year, while Blu-ray players are likely to jump five-fold this year, according to company estimates.

Blu-ray technology recently won out over rival format HD DVD in a battle to become the next generation industry standard, a move analysts expect to spur a jump in demand for Blu-ray players.

Sigma holds about 80 percent of the global IPTV chipset market, while its share for Blu-ray stand-alone players is about 75 percent.

“We continue to believe that Sigma is well-positioned to benefit from accelerating deployments of IPTV worldwide. Blu-ray should also become an important revenue contributor in the second half of the year, driven by seasonality and increased availability of low-cost players from Chinese and Taiwanese manufacturers,” said UBS Investment Research analyst Uche Orji in a recent client note. He has a buy call on the stock.

Earlier this month, Sigma reported fourth-quarter earnings that slightly missed Wall Street estimates, due to a drop in its gross margins, and forecast a sequential decline in first-quarter revenue. It said it expects the sequential revenue growth to resume in the second quarter.

In the fourth quarter, the company’s net income jumped to $35.3 million from $4.6 million a year ago. Gross margins fell to 49 percent in the quarter, from 51.3 percent a year ago.

Lowe said he expected gross margins to remain in the 50 percent range as the company focuses on advanced chips with new features and on lowering the cost of production.

Sigma’s shares have lost nearly 60 percent in the last three months.

(Editing by Jan Dahinten and Lincoln Feast)

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