Sigma Designs could be “severely harmed” if dissident shareholder...

twist in Sigma’s proxy battle with Potomac, which owns 7.9 percent of the company and is nominating a rival slate of directors before shareholders at the company’s annual meeting in August. Sigma’s business strategy is yielding “objective results,” Sigma said. That includes a $16.8 million fee that Sigma landed through a licensing agreement with an unidentified company for its Z-Wave software that will be paid over 12 months, the company said. “The lack of any specificity from Potomac about its plan for Sigma gives the Sigma Board great concern that the investments already made to execute this strategic plan will be wasted by a short-term investor looking to capitalize quickly on Sigma’s strong portfolio of technology,” said the Sigma letter, which was signed by Chairman William Almon. “What does Potomac intend to do with control of the Company and why won’t it pay a premium to Sigma’s shareholders for it?” Potomac has accused Sigma’s four-member board of “self-dealing” in some of the company’s investments and blames it for “dismal financial results” despite a string of recent acquisitions. Sigma has countered that Vizio recently deployed Sigma’s HiDTV Pro chipsets, developed by Sigma’s newly acquired Trident DTV processor business, in its 58-inch 21:9 LCD TVs, and that that design win demonstrates a “potential upside” for Sigma’s digital connected home business. Vizio wasn’t a “significant customer” for Trident before the acquisition, Sigma said. Sigma also landed an agreement with Chunghwa Telecom to deploy HomePlug AV technology in its IPTV system. The deal gives Sigma a chance to be a “major provider” of connectivity technology in Asia, something that wouldn’t have occurred without its buying Coppergate, Sigma said. Sigma has singled out Potomac board nominee Eric Singer for criticism, based on his “poor performance” record at Zilog, including selloffs of assets and low stock prices. Singer is Potomac’s co-managing director. “In order for Sigma to compete in its large target markets, it must invest in next generation technologies and diversify its business,” Sigma said. “It should not simply cut its employees’ salaries, sell off businesses and sell the company. It should look to build value for its shareholders.” Potomac hasn’t given shareholders a plan if it gains control of the company and has provided only “generalities” about cutting expenses, Sigma said. Sigma said it acknowledges that the “new perspectives” that Potomac members would bring if elected to the board would benefit the company and has been open to discussing Potomac’s demands. But Potomac countered that Sigma has rebuffed its proposals and has “inundated” shareholders with letters misstating facts and “touting the future success of a strategy that clearly isn’t working” (CED July 11 p5).