Gigamedia Ltd. (NASDAQ:GIGM) Expected Earnings Release Provides For Action
26 Aug 2010

Gigamedia Ltd. (NASDAQ:GIGM) decision to announce its second quarter results before the market opens today was obviously a good one. As least considering yesterday’s trading session, in which the anxiety was enormous and the stock made a real break up.

In expectation of the news, GIGM share price jumped 13.27% up and closed the market at $2.22, breaking up its trading channel on over 3.3 million share volume. Thus, today’s opening of almost 8% down will make up an interesting trading session as there were no updates on Gigamedia’s business recently.

In the middle of July, the company registered 1.2 million new shares of common stock. The amount represents the maximum number of shares issuable under GIGM’s 2010 Equity Incentive Plan and under 2010 Employee Share Purchase Plan. Under these incentive plans, the company may grant to its management and employees options, stock appreciation rights, restricted stocks, restricted stock units or other stock-based awards.

With its nearly 54 million outstanding common shares, the expected dilution did not seem that huge, but as GIGM share price has been declining persistently since the beginning of this May, it was not exactly the update that could reverse the downtrend.

Maybe today’s press release announcing the financial results for the second quarter of the year will try to do this. Gigamedia operates in two business segments, online gaming segment and gambling software segment. During the second quarter of this year, the company has sold out 60% of its interest in the gambling software business. The results presented today are deconsolidated and take into account only the remaining 40% interest in the gambling segment.

Thus, the effects of the business restructuring are still to be seen, though so far is clear that the revenues from the remaining online game and service segment have declined from the first quarter as well as on a year-over-year basis.

Further, among the recent developments of the company and the launch of a new game application, it has been mentioned that Gigamedia is currently in dispute with its former China head, who is attempting to usurp certain assets of the company in China. GigaMedia states to have undertaken legal actions and hopes the issue will be rapidly resolved.

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