Sigma Designs Inc. (Nasdaq: SIGM) has been getting asked when competition from Broadcom Corp. (Nasdaq: BRCM) will get serious.

Even with a shocking revenue shortfall announced yesterday, the answer is still "not yet."

Sigma shares are down $1.01 (8.8%) at $10.50 this morning after the company reported revenues of $35.5 million for its third quarter, which ended Oct. 31. (See Sigma Designs Reports Q3.)

Analysts had expected $46 million, according to Thomson Financial .

Sigma, which got 64 percent of its third-quarter revenues from chips for IPTV set-top boxes, insists it was struck with multiple temporary setbacks, none of them caused by Broadcom.

"We do not believe any of those factors were driven by competitive factors," said Ken Lowe, vice president of business development, during yesterday's earnings call.

One factor was the economy. Telcos kept lower inventories of set-top boxes, and some began deploying used boxes, which saved them money but cost Sigma some sales.

And one telco started charging subscribers for extra set-top boxes, rather than doling out unlimited boxes for free. Customers responded by (hey, guess what) using fewer boxes, an average of just more than two per household as oppsed to three. This was fine for the telco, but cut into Sigma's revenues.

"We feel that most of this decline is recoverable," CEO Thinh Tran said -- a statement that puts Sigma on the hook to prove that revenues can rebound.

For its fourth quarter, Sigma is predicting revenues of $50 million to $55 million, on par with the consensus analyst forecast of $53.2 million.

So, when does Broadcom become an issue? Now that Sigma's rival has chips qualified for Microsoft Corp. (Nasdaq: MSFT) Mediaroom-based IPTV deployments, the question finally becomes less abstract. (See Sigma vs. Broadcom.)

Specifically, one analyst yesterday asked whether Broadcom could start nibbling into Sigma's market share in the second half of 2010. "Sure, that possiblity exists," Lowe said.

Sigma will be countering with its newest generation of chips, the SMP8650 series. Set tops built around those chips could enter trials and deployments next year, company officials said.

— Craig Matsumoto, West Coast Editor, Light Reading