Why Sigma Designs, Inc. Shares Rose 11.1% in July

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What happened

Shares of Sigma Designs (NASDAQ: SIGM) gained 11.1% in July 2017, according to data from S&P Global Market Intelligence.

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So what

The maker of microchips powering smart TV sets and smart home devices saw share prices surge 10% higher July 26, when the company's board of directors let it be known that Sigma Designs is up for sale. The technical term is that Sigma is "exploring strategic alternatives" under the wing of a major investment bank, but an all-out sale of the company is definitely on the table now.

Now what

The board also promised to consider other value-enhancing alternatives, such as selling off operations that aren't at the core of Sigma Designs' operations, or simply shaving costs off the business model wherever possible.

That being said, investors have lost patience with Sigma Designs' patchy results in recent quarters. Last December, another mixed earnings report, with a side of gloomy revenue guidance based on a saturated chip pipeline for the smart TV market, sent share prices crashing 31% lower in a single day. That event set the tone for Sigma Designs' market action for months to come, and the effects still linger.

A buyout might indeed be the best exit strategy here, and Sigma Designs would be a comfortable low-cost play on the Internet of Things for several of the market's larger semiconductor players. Stay tuned as this potential buyout story continues to develop.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.