Sigma Designs likely to offload units or put itself up for sale

US chip firm Sigma Designs is “considering its strategic alternatives” with the help of Deutsche Bank, usually a coded expression for putting all of part of itself up for sale.

Sigma is one of the few chip vendors still providing system-on-chip products for set-tops and smart TVs, but of late it has been expanding in IoT devices on the back of its low power Z-Wave technology – a direct competitor to the more globally accepted ZigBee and Bluetooth technologies.

It is primarily a design firm which also makes specialized ASIC chips. It promised that fiscal 2018 would be a transition year as it focused on IoT, and achieved LTE network certification for its Mobile IoT. It has also promised a next generation version of Z-Wave with sufficiently low to embrace the sensor market. And in November 2015 Sigma acquired Bretelon for $22m in cash, for the cellular IoT product.

The latest Sigma results showed quarterly revenue of just $39.6m, down from $53.8m a year earlier, with slightly declining margins, and a small operating loss and a $13.4m net loss. It had lost $6m a year earlier.

The firm said at its last results conference that it is carefully reviewing all of its product lines to determine which offer the best fit with its long term growth plans. It said in a statement: “This review may result in Sigma continuing to implement value-enhancing initiatives as a standalone company, such as the continued implementation of its previously announced restructuring plans, a sale of the company or certain product lines, or other possible transactions.”

The far larger Marvell recently went through a similar strategy review before putting in new management and selling off divisions, including its home networking chip. We mention Marvell, because Sigma is still making chips and has some design wins on the powerline version of it, so that too could be on the block soon, especially as that market has still not reached the kind of volumes it needs to be profitable.

Sigma got into this business by spending some $160m on acquiring Israeli home networking chipmaker CopperGate in 2009. This firm had pioneered HomePNA, the precursor to G,hn, which also took it into the HomePlug market, pioneered by Intellon, which was acquired by Atheros. The HomePlug market is now considered end of life, with no further powerline technology versions planned, and yet with the HomePlug run rate still making it valuable, that is surely something that Sigma will want to offload.

Rivals to the camp will be delighted that a second US chipmaker for the home networking technology is down at heel, and ready to move onto pastures new.

Thinh Tran, the founding CEO of Sigma Designs is a long term engineer of distinction, coming to the fore in the IBM compatible mainframe market through Amdahl and Trilogy Systems, in the 1980s and he formed Sigma in 1982.