|SIGM set-top IPTV player|
Tristan Gerra, the Baird analyst that, like Roth, has a $15 price target on the stock, is out with a new report. The following is from Gerra’s report.
SBC Communications announced yesterday it has chosen Scientific-Atlanta and Motorola to deliver next-generation video-on-demand and IP TV services as part of SBC's Project Lightspeed. The set-top boxes will operate Microsoft's TV IP TV Edition software. SBC is planning on an initial rollout late 2005 or early 2006 using Motorola set-top boxes, with a more broadbased rollout beginning mid-2006 featuring DVR and HD capabilities using both Scientific Atlanta and Motorola's set-top boxes.
Sigma's Win At SFA And MOT Set-Top Boxes.
We continue to believe that Sigma Designs' advanced H.264/VC-1 SMP8634 decoder is designed in both SFA and Motorola set-top boxes, and we believe these wins could be announced soon. We expect a meaningful revenue ramp for Sigma Designs in the first half of calendar 2006, specifically in association with the introduction of Project Lightspeed's high-definition capabilities.
The SMP8634, The Only Decoder Optimized To Run With Microsoft's IPTV Software.
Importantly, we believe that Sigma's SMP8634 is the only decoder optimized to run with Microsoft's IPTV software. The Microsoft interface supports VC-1 decoding, which is part of Sigma Design's chip and should be a technology central to the deployment of video-on-demand services. The SMP8634 supports other features of Microsoft's IPTV software including multiple streaming including two at high-definition, and multiple DRM engines. The fact that the Motorola and Scientific-Atlanta set-top boxes will operate Microsoft's TV IPTV Edition software is a positive for Sigma beyond the first rollout wave in our view, given the strong relationship between the two companies. This has been and remains a major hurdle for Sigma Designs' competitors, in our view.
Second-Half Drivers Include DMAs, IPTVs, And DTVs.
In the second half of this year, catalysts for Sigma include digital media adapters, IP TV trial deployments in Europe and in Asia, and ramp into digital TVs. We also expect tier-one OEMs to showcase high-definition DVD players at next CES featuring Sigma's advanced decoders.
SBC's announcement, combined with Sigma's announcement yesterday that its SMP8634 advanced decoder is currently sampling and is slated for volume production in November of this year, should provide investors with a more concrete timetable for Sigma's participation in the deployment of IPTV services worldwide and in SBC's Project Lightspeed. We are reiterating our $15 price target and our Outperform rating on SIGM shares.
IP TV More Than Just TV Over The Internet: The Era Of Interactive TV.
IP TV offers limitless channels with no bandwidth limitations, interactive applications, and personalized guides/options. Unlike cable and satellite, an IP set-top box plugs into a home digital network, enabling the management of video content on the PC, TV, and across multi-room personal video recorders (PVRs.) With IP TV, interactive guides and navigation can be personalized to different users, similar to profiles on Windows XP, with search functions enabling customers to locate the content they want to watch. IPTV services will also offer integrated services including gaming, caller ID on set-top boxes, on-screen notification, TV-based email, address books, billing, video surveillance, customer services, as well as features enabling consumers to integrate their own video and audio content.
We believe the IP TV infrastructure is now largely in place. Costs of streaming, storing, and accessing content have come down. A 2004 Parks Associates study showed that 65% of respondents would switch to IPTV if it saved them money, with the option of purchasing TV channels "a la carte" a second reason for switching. Globally, there were 1.9 million IPTV viewers in 2004, growing to 25 million viewers by 2008, per industry estimates.
Sigma Designs, Pioneer And Leader Into The IPTV Market.
Sigma Designs currently has a leading market share position (above 50%) in the rapidly-growing IP set-top box market worldwide. We believe the company, as a pioneer and leader in IP TV services, is very well positioned to benefit from the pending deployment of HD IPTV services. While competition from Broadcom and STMicroelectronics should materialize starting in the second-half of 2006, in our view, we believe that the market size opportunity of IP TV, combined with Sigma's world-class video engineering team and first-entrant status on the market, should enable the company to sustain strong growth beyond 2006 as it retains a significant market share of the market.