Novice Investing - Sigmatel at Half Cash

Date: Monday 13th 2008f October 2008 06:20:37 PM

Sigmatel at Half Cash - 04/30/2006

By: Novice Investing Staff

Sigmatel Inc. (SGTL) used to be riding hot from the popularity of Apple's iPod. Apple is one of its biggest customer. Sigmatel fortune rise and fall with the announcement of Apple's latest product release. For a while now, Sigmatel has announced that Apple will not use its audio-processing chips for the its iPod product line. Stock has dropped precipitously from the $ 40 range to the single digit now.

The latest news from Sigmatel really hammered its stock down to $ 7 range now. Sigmatel reported a net first quarter loss of 69 cents per share last week and going forward, it expects to net a loss of 53 cents for the second quarter of 2006. Meanwhile, revenue was down 67% compared to the same period last year. This is due to to the Apple's effect as the majority of Sigmatel revenue came from Apple's iPod.

At the current market capitalization, one can buy Sigmatel for half of its cash value. Latest balance sheet shows Sigmatel owning $ 117 Million of cash and short-term investment while having $ 0 of long term debt. This is equivalent to $ 3.33 per share of positive net cash. Meanwhile, on Friday April 28th 2006, Sigmatel is valued at $ 6.69 per share.

This reminds us of one stock that was mentioned here last November. At the time, OmniVision Technologies Inc. (OVTI) was trading at $ 13.68 per share, while it has a $ 5.33 positive net cash. Its shares has since leapt to $ 29.05, a 112% rise in the span of six months.

Sigmatel may not rise that fast due for several reasons. One, Sigmatel is expected to burn $ 1.20 for the first six months of 2006. On November 2005, OmniVision was expected to report a small profit. Two, it is hard to find buyers, considering that Sigmatel reported loss of $ 24.7 Million with merely $ 33.0 Million in revenue. Finally, Apple has become such a success that there are no other significant competitors willing to employ Sigmatel's technology. For now, hope lies in Apple going back to use Sigmatel's chips.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Sigmatel Inc. or any other securities.

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