Sigma Designs- Up 50% per Month- Why? Message Board

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Technology Stocks : Sigma Designs- Up 50% per Month- Why?

SIGM 0.280

-0.2%

Aug 17 5:00 PM EST

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To: John Rieman who wrote (423)	6/20/1998 12:59:00 PM
From: Grantcw	Read Replies (3) of 849

Hello John, I thank your for your contribution to the board. I was wondering how on earth my numbers could be so high while the stock price was so low. So what you're saying is that the board price includes the chip into it. You're also saying that the bulk sale to an OEM will force SIGM to sell its boards at a discount to normal price. On top of this, competition will force margins down later in the year. Finally, a conservative 600k should be used to compensate for various risks of the DVD-Rom market and SIGM's market share. Soooo.... 600k sales, $40 a board seems to be a conservative number to compensate for the discounted sales to OEMs and margin pressure. 600,000 X 40 = 24 million. Not quite as high as 80 million!<gggg> This would be an addition of more than 1/2 of current annual sales. I remember from the conference call that margins on the chips were low 40%'s and the margins on the boards (I'm pretty sure the boards he was referring to were the previous ones w/out the SIGM chip) were mid 20%'s. Let's be conservative again, using a 25% margin. 25% X 24 million = 6 million contribution margin from the DVD-Rom product line. I don't think that all of this 6 million will go to the bottom line due to increased other costs possible, but this six million could amount to ~.50/share on the high side. I know John mentioned that part of the sales would be from daughtercards, but I have no idea about margins or prices for these so I left them out. Sorry about the lack of total realism... Do these numbers look more reasonable John? Thanks again, Grant

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