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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[ ]  Annual Report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the fiscal year ended:  January 31, 1999

                                       OR
[ ]  Transition Report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the transition period from ____________ to ____________

                      Commission File Number      000-15116    

                            -------------------------
                               Sigma Designs, Inc.
             (Exact name of Registrant as specified in its charter)

           California                                       94-2848099
      (State or other jurisdiction of                    (I.R.S. Employer
       incorporation or organization)                  Identification Number)

  355 Fairview Way, Milpitas, California                        95035
(Address of principal executive offices)                      (Zip Code)


       Registrant's telephone number, including area code: (408) 262-9003

   Securities registered pursuant to Section 12(b) of the Act:  None

  Securities registered pursuant to Section 12(g) of the Act:   Common Stock
                                                             (Title of Class)
                            -------------------------

   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirement for the past 90 days.

                                   Yes [X]   No [ ]





   Indicate by check mark if disclosure of delinquent filers pursuant to Rule
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's  knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.   [X]


   The aggregate market value of the voting stock held by non-affiliates of the
Registrant was approximately $95,528,329 as of April 14, 1999 based on the
closing price of the Common Stock as reported on The Nasdaq Stock Market for
that date. There were 15,596,462 of the Registrant's Common Stock issued and
outstanding on April 14, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE


Certain  sections of Sigma Designs, Inc.'s definitive Proxy Statement for the
1999 Annual Meeting of Shareholders to be held on June 11, 1999 are incorporated
by reference in Part III of this Form 10-K to the extent stated herein.

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                                     PART I

ITEM 1.  BUSINESS

     This Annual Report on Form 10-K contains forward-looking statements 
that involve risks and uncertainties.  Our actual results could differ 
materially from those anticipated in these forward-looking statements as 
a result of certain factors, including those set forth under "Certain 
Factors Affecting Business, Operating Results, and Financial Condition" 
and elsewhere in this Annual Report on Form 10-K.  In this Annual Report 
on Form 10-K, the "Company," "Sigma," "we," "us," and "our" refer 
to Sigma Designs, Inc.

Overview

     We design, manufacture (using subcontractors) and market multimedia 
products for use with personal computers.  The emergence of multimedia 
technology in the personal computer (PC) market has dramatically changed 
the way in which users interact with computers.  Multimedia integrates 
different elements, such as sound and video, to enhance the computing 
experience and deliver a heightened sense of realism.  Through its 
REALmagic product line incorporating Moving Picture Experts Group (MPEG) 
technology, Sigma Designs has become a leader in this emerging market.

     Prior to MPEG's introduction, video on personal computers suffered 
from serious drawbacks.  Motion pictures appeared jerky, and video was 
confined to small window sizes.  MPEG, a defined International Standards 
Organization (ISO) standard for video compression, eliminated many of 
those problems and revolutionized multimedia on the PC platform.  For the 
first time, MPEG users could play back full-screen, full-motion video 
combined with stereo audio, even from a standard CD-ROM.  A single CD-ROM 
using the MPEG compression technique can store up to 74 minutes of full-
motion video and audio.

     With MPEG technology, producers can create (and users can enjoy) an 
interactive, television-like experience on a desktop PC.  The result is a 
significant new visual impact, thereby opening possibilities for a wide 
range of entertainment, education, training and business presentation 
applications.  In April 1997, we announced our entry into the Digital 
Video Disk ("DVD") market.  A key element of the DVD specification is 
the use of MPEG-2 for digital video compression, a technology in which 
Sigma has established expertise.  Sigma's REALmagic EM8300, EM8220 and 
EM8800 PC-based DVD and Super Video Compact Disk ("SVCD") solutions are 
extensions of our MPEG expertise and provide a highly-integrated solution 
for the PC-DVD and PC-SVCD markets.

The REALmagic MPEG Standard

     Since its first shipment in November 1993, REALmagic technology has 
received support from PC industry leaders, software developers, and OEM 
and retail customers.

Partnership with PC Industry Leaders

     Sigma has developed strategic partnerships to develop and market 
network streaming video products with companies such as Hughes Network 
Systems, IBM, Microsoft Corporation, OptiVision, Oracle Corporation, 
Silicon Graphics, Inc., Starlight Networks, acquired by Picturetel, Sun 
Microsystems, and FVC.com.

Support from Software Developers

     Support for Sigma's REALmagic MPEG standard has grown to over 1,200 
software developers.  To further expand the list of developers, Sigma has 
worked directly with Microsoft on Microsoft's new streaming standard for 
MPEG-2 called DirectShow.  Sigma Designs is the first and currently the 
only company shipping drivers with DirectShow support for streaming MPEG-
2 video, making it the first recommended decoder for use with Microsoft's 
NetShow Theater video server.

     Using the DirectShow standard, software developers can create 
streaming video applications with virtually any video server-without any 
C programming at all.  This enables universities and corporations to get 
live video and video on demand applications online very rapidly, which 
shortens the sales process.

Support from Original Equipment Manufacturer ("OEM") Customers

     In the United States, Dell Computer Corporation, Compaq Computer 
Corporation, IBM, Hughes Network Systems and OptiVision have purchased 
REALmagic cards for installation inside their systems for streaming 
video.  Additionally, Philips, Sony, Panasonic Canada, Matsushita, 
Toshiba, VideoLogic and several other companies market DVD kits that 
include REALmagic Hollywood Plus playback cards, and several vendors base 
their DVD systems on REALmagic DVD playback cards.

Acceptance by the Corporate Market

     REALmagic is the most well-known and most recognized brand name for 
MPEG video on PCs.  Sigma Designs has developed this brand name through 
marketing campaigns and by building a reputation for delivering and 
supporting inexpensive MPEG decoders with robust, powerful and flexible 
software drivers.  This has made Sigma Designs' REALmagic the de facto 
standard for corporate market projects such as corporate-wide rollouts at 
Merrill Lynch, Smith Barney and Wal-Mart.

REALmagic Business Strategy

     Sigma's corporate objective is to continue to be a leading provider 
of MPEG multimedia products that enable full-screen, full-motion, TV-like 
quality video on the standard desktop and the notebook PC.  To accomplish 
this goal, we intend to promote widespread acceptance of REALmagic 
technology.  The key parts of this strategy include:

Win More OEM Partnerships and Further Penetrate the Corporate Market

     To establish REALmagic for MPEG-2 as a standard, we will continue 
to seek design wins with major PC manufacturers worldwide, in which the 
OEMs will factory-install REALmagic boards or chipsets inside their 
multimedia PCs.  On the retail side, our systems integration sales team 
will continue to work with its network of national distributors and 
special Value Added Resellers (VARs) to distribute our high-end REALmagic 
playback card.  In Europe and Asia Pacific, we intend to continue to 
expand our relationship with distributors as well as OEMs and VARs.  In 
addition, we will seek to sell chipsets to add-on card manufacturers that 
will, in turn, market to owners of Pentium PCs.

Introduce New Generations of REALmagic, Offer REALmagic products at 
Competitive Prices and Continually Reduce Product Costs

     A significant aspect of our product strategy is to increase the 
sale of REALmagic chipsets while continuing to develop newer versions and 
generations of REALmagic products, including chipsets for both desktop 
and notebook PCs.  We seek to continue to offer consumers better-featured 
and lower-priced products over time.

REALmagic Products

     We currently offer a complete family of REALmagic products including:

     o    REALmagic Hollywood Plus-In April 1997, we announced our 
          entry into the DVD market. The REALmagic Hollywood Plus MPEG-
          2 playback card turns a PC into a full-featured DVD player 
          that exploits many of the digital video and digital surround 
          sound capabilities of the DVD format and upcoming MPEG-2 
          interactive titles.  The REALmagic Hollywood Plus DVD/MPEG-2 
          playback card displays flicker-free video at full-screen 
          resolution, making video watching on a PC a new experience.  
          Movies can be simultaneously displayed on the PC monitor and 
          on a large-screen TV.

     o    REALmagic NetStream 2-In October 1997, we announced our 
          entry into the MPEG-2 networked video market.  Products in 
          the NetStream family include specialized hardware and 
          software developed specifically for delivering video to 
          corporate desktops and can be used for both video on demand 
          and broadcast video playback.  NetStream 2 is an MPEG-2 
          playback card offering full plug and play installation and 
          compatibility with a broad range of third-party applications, 
          including video servers for video on demand, MPEG encoders 
          for stored or real-time playback, satellite delivery systems, 
          streaming video playback systems and scores of customizable 
          interactive training titles.

     o    REALmagic EM8300-In March 1998, we announced the 
          introduction of the EM8300 REALmagic DVD/MPEG-2/MPEG-1 
          decoder Integrated Circuit ("IC").  Integrating virtually 
          all functions of a DVD decoder on one chip, the EM8300 is 
          designed to provide a highly integrated, cost effective 
          vehicle for high-quality DVD.  The EM8300 feature set draws 
          on Sigma's industry-leading experience in the DVD/MPEG-2 
          market with earlier designs such as the REALmagic Ventura and 
          REALmagic Hollywood decoder cards.  The result is a blend of 
          performance and affordability that can be key to gaining 
          market share in the rapidly growing DVD market.

     o    REALmagic EM8220 DVD/MPEG-2 VGA Add-On Card-In June 1998, we 
          announced the introduction of a daughter card to add to Intel 
          i740-based 2D/3D Video Graphics Array ("VGA") graphics 
          cards to quickly and effectively deliver high-performance, 
          video-ready multimedia systems.

     o    REALmagic DVD/MPEG-2 Notebook Module-Designed to connect 
          directly to the VGA controller through the ZV-bus and to the 
          system bus through the module's Peripheral Component 
          Interconnect ("PCI") interface, the notebook module gives 
          notebook users all of the power and impact of DVD performance 
          with their go-anywhere systems.

     o    REALmagic EM8800-In October 1998, we announced the REALmagic 
          EM8800 decoder IC, the first single-chip PC solution for 
          China's new SVCD standard.  Integrating virtually all SVCD 
          decoding functions on one chip, the EM8800 can turn a PC into 
          a full-featured home theater video player that fully exploits 
          the improved video quality supported by the SVCD standard.

Marketing and Sales

     Sigma Designs currently distributes its products through sales to 
national and regional distributors, VARs and OEMs in the U.S. and 
throughout the world.  Our U.S. distributors include Ingram Micro, Inc. 
and Tech Data, and our OEMs include Sony, Philips, Panasonic Canada, IBM, 
Matsushita, Toshiba, Kapok Computers, Royal Computer, ASE Technologies, 
LungHwa Electronics Co., Ltd., Formosa Industrial Computing, Labway 
Corporation and others.  Our international distributors are strategically 
located in many countries around the world.

     We generally acquire and maintain products for distribution through 
corporate markets based on forecasts rather than firm purchase orders.  
Additionally, we generally acquire products for sale to our OEM customers 
only after receiving purchase orders from such customers, which purchase 
orders are typically cancellable without substantial penalty from such 
OEM customers.  We currently place noncancellable orders to purchase 
semiconductor products from our suppliers on a twelve- to sixteen-week 
lead time basis.  Consequently, if, as a result of inaccurate forecasts 
or cancelled purchase orders, anticipated sales and shipments in any 
quarter do not occur when expected, expenses and inventory levels could 
be disproportionately high, requiring significant working capital and 
resulting in severe pressure on our financial condition.  One customer 
accounted for 28% of our net sales in fiscal 1999.

     Sales to distributors are typically subject to contractual rights 
of inventory rotation and price protection. Regardless of particular 
contractual rights, the failure of one or more distributors or OEMs to 
achieve sustained sell-through of REALmagic products could result in 
product returns or collection problems, contributing to significant 
fluctuations in our operating results.

Research and Development

     As of January 31, 1999, we had a staff of 36 research and 
development personnel.  The research and development personnel conduct 
all of our product development.  We are focusing our development efforts 
primarily on MPEG multimedia products, including new and improved 
versions of REALmagic MPEG chipsets and cost reduction processes.

     To achieve and maintain technological leadership, we must continue 
to make technological advancements in the areas of MPEG video and audio 
compression and decompression.  These advancements include maintaining 
compatibility with emerging standards and multiple platforms, making 
improvements to the REALmagic architecture, and developing enhancements 
to the REALmagic Application Programming Interface (API).

     We cannot assure you that we will be able to make any such 
advancements in the REALmagic MPEG technology or, if they are made, that 
we will be able to market such advancements to maintain profitability and 
technological leadership.

     During fiscal 1999, fiscal 1998 and fiscal 1997, our research and 
development expenses were $5,678,000, $4,948,000 and $4,688,000, 
respectively.  We plan to continue to devote substantial resources to 
research and development of future generations of MPEG and other 
multimedia products.

Competition

     The market for MPEG multimedia products is highly competitive; 
companies such as C-Cube Microsystems have a high profile in the 
industry.  Although we do not believe that any products sold by a third 
party are in direct competition with the REALmagic decoding card in terms 
of price and performance, the possibility that other companies with more 
marketing and financial resources may develop a competitive product may 
inhibit the wide acceptance of REALmagic technology.  We believe that 
many computer product manufacturers are developing MPEG products that 
will compete directly with REALmagic products in the near future.

     We believe that the principal competitive factors in the market for 
MPEG multimedia hardware products include time to market for new product 
introductions, product performance, compatibility with industry 
standards, price, and marketing and distribution resources.  We believe 
that we compete most favorably with respect to time to market, product 
performance and price of our REALmagic products.  

Licenses, Patents and Trademarks

     We are seeking patent protection for certain software and hardware 
features in current and future versions of REALmagic.  We currently have 
fifteen pending patent applications for our REALmagic technology.  Ten 
patents have been issued to us.  We cannot assure you that more patents 
will be issued or that such patents, even if issued, will provide 
adequate protection for Sigma's competitive position.  We also attempt to 
protect our trade secrets and other proprietary information through 
agreements with customers, suppliers and employees and other security 
measures.  Although we intend to protect our rights vigorously, we cannot 
assure you that these measures will be successful.

Manufacturing

     To reduce overhead expenses, along with capital and staffing 
requirements, we currently use third-party contract manufacturers to 
fulfill all of our manufacturing needs, including chipset manufacture and 
board-level assembly.  All of the chips used by us to develop our 
decoding products are manufactured by outside suppliers and foundries.  
Each of these suppliers is a sole source of supply to us of the 
respective chips produced by such supplier.

     Our reliance on independent suppliers involves several risks, 
including the absence of adequate capacity and reduced control over 
delivery schedules, manufacturing yields and costs.  Any delay or 
interruption in the supply of any of the components required for the 
production of REALmagic products could seriously harm our sales of 
products and, thus, our operating results.

Backlog

     Since our customers typically expect quick deliveries, we seek to 
ship products within a few weeks of receipt of a purchase order.  
However, the customer may reschedule delivery of products or cancel the 
purchase order entirely without significant penalty.  Historically, our 
backlog has not been reflective of future sales.  We also expect that in 
the near term, our backlog will continue to be not indicative of future 
sales.

Employees

     As of January 31, 1999, we had 78 full-time employees, including 36 
in research and development, 19 in marketing, sales and support, 9 in 
operations, and 14 in finance and administration.
Our future success will depend, in part, on our ability to continue 
to attract, retain and motivate highly qualified technical, marketing, 
engineering and management personnel, who are in great demand.  Our 
employees are not represented by any collective bargaining unit, and we 
have never experienced a work stoppage.  We believe that our employee 
relations are satisfactory.

Certain Factors Affecting Business, Operating Results, and Financial 
Condition

     You should carefully consider the risks described below before 
making an investment decision.  The risks and uncertainties described 
below are not the only ones facing our company.  Additional risks and 
uncertainties not presently known to us or that we currently deem 
immaterial may also impair our business operations.

     If any of the following risks actually occur, our business, 
financial condition or results of operations could be materially 
adversely affected.  In such case, the trading price of our Common Stock 
could decline, and you may lose all or part of your investment.

We Have a History of Operating Losses and We Could Sustain Future Losses

     We incurred significant operating losses in fiscal 1995, 1996 and 
1998 and had negative cash flow in fiscal 1995 and 1998.  Since our 
introduction of the REALmagic Moving Picture Experts Group ("MPEG") 
product line in November 1993, we have made significant investments in 
marketing and technological innovation for our REALmagic products.  As a 
result of our investments, we experienced significant losses through 
fiscal 1996.  Fiscal 1995, 1996 and 1998 also included significant losses 
associated with products other than those related to our REALmagic 
technology.  Since our inception through January 31, 1999, our total 
accumulated deficit is $41,452,000.  We cannot assure you that we will 
continue to sell our new REALmagic products in substantial quantities or 
generate significant revenues from those sales.  We cannot assure you 
that we will return to profitable operations in any future fiscal quarter 
or fiscal year.  If profitable operations are achieved, we cannot assure 
you that they will be sustained.

Liquidity

     We have an Amended and Restated Business Loan Agreement with 
Silicon Valley Bank, dated October 26, 1998.  Under the Agreement we gave 
two secured Promissory Notes in total principal amounts of $12 million 
and $6 million to Silicon Valley Bank, under which we may borrow as 
needed.  Under the Agreement and the Notes, we are subject to a certain 
profitability covenant.  Since July 1997, we have, on occasion, been in 
violation of the profitability covenant and have obtained waivers 
releasing us from our obligation to meet this covenant.  We were granted 
such a waiver for the quarter ended January 31, 1999.  We may need 
another waiver for the quarter ending April 30, 1999 or for future 
periods.  We cannot assure you that Silicon Valley Bank will grant these 
waivers.  If we do not meet this covenant, and if we do not obtain 
waivers, the loans may be in default.  If we are in default, then the 
lender could accelerate payments on the Notes and we could suffer serious 
harm to our business, financial condition and prospects.

Marketing Risks and Volatility of OEM Customer Sales and Resale Distribution

     Our ability to increase sales, achieve profitability and maintain 
REALmagic as a personal computer ("PC") industry multimedia standard 
depends substantially on our ability to achieve a sustained high level of 
sales to new Original Equipment Manufacturer ("OEM") customers.  We 
have not executed volume purchase agreements with any of our customers.  
Our customers are not under any obligation to purchase any minimum 
quantity of our products.  We have not achieved bundling agreements with 
many OEM customers to ensure the success of our REALmagic product line.  
Also, even if we achieve new design wins, we cannot assure you that PC 
manufacturers will purchase our products in substantial volumes.  Sales 
to any particular OEM customer are subject to significant variability 
from quarter to quarter and to severe price pressures by competitors.  In 
addition, 28% of our net sales were derived from one customer in fiscal 
1999; any reductions in those sales could seriously harm us.  Based on 
our experience in the PC industry, we expect that our actual sales to OEM 
customers will experience significant fluctuations.  Also, estimates of 
future sales to any particular customer or groups of customers are 
inherently uncertain.

     Our ability to achieve sustained profitability also depends on a 
substantial increase in the sales of REALmagic products through domestic 
and international distributors for resale through corporate markets.  
Sales to such distributors are typically subject to contractual rights of 
inventory rotation or price protection.  The failure of distributors to 
achieve sustained sell-through of REALmagic products could result in 
product returns or collection problems.  This could contribute to 
fluctuations in our results of operations.  We cannot assure you that we 
will be successful in maintaining a significant market for our REALmagic 
products.

Our Market May Undergo Rapid Technological Change and Our Future Success 
Will Depend on Our Ability to meet the Changing Needs of Our Industry

     The market for multimedia PC products is characterized by the 
following:

     o    rapidly changing technology and user preferences;
     o    evolving formats for compression of video and audio data; and
     o    frequent new product introductions.

     Even though REALmagic products and related software titles have 
gained initial market acceptance, our success depends, among other 
things, on our ability to achieve and maintain technological leadership 
and to remain competitive in terms of price and product performance.

     To have technological leadership, we must continue to make 
technological advancements and research and development investments in 
the area of MPEG video and audio decoding.  These advancements include 
the following:

     o    compatibility with emerging standards and multiple platforms;
     o    improvements to the REALmagic architecture; and
     o    enhancements to the REALmagic application programming interface.


     We cannot assure you that we will be able to make these 
advancements to our REALmagic technology.  If we do make these advances, 
we cannot assure you that we will be able to achieve and maintain 
technological leadership.  Any material failure by us or OEMs and 
software developers to develop or incorporate any required improvement 
could adversely affect the continued acceptance of our technology and the 
introduction and sale of future products based on our technology.  We 
cannot assure you that products or technologies developed by others will 
not render obsolete our technology and the products based on our 
technology.

     To be competitive, we must anticipate the needs of the market and 
successfully develop and introduce innovative new products in a timely 
fashion.  We cannot assure you that we will be able to successfully 
complete the design of our new products, have these products manufactured 
at acceptable manufacturing yields, or obtain significant purchase orders 
for these products.  The introduction of new products may adversely 
affect sales of existing products and contribute to fluctuations in 
operating results from quarter to quarter.  Our introduction of new 
products also requires that we carefully manage our inventory to avoid 
inventory obsolescence.  In addition, new products, as opposed to more 
mature products, typically have higher initial component costs.  This 
higher cost could result in downward pressures on our gross margins.

Our Industry is Highly Competitive and We Cannot Assure You That We Will 
Be Able to Effectively Compete

     The market for multimedia PC products is highly competitive and is 
driven by faster processors provided by Intel Corporation and other 
companies.  Intel processors have, in recent years, included increased 
graphics functionality. Other companies with more experience and 
financial resources may develop a competitive product that could inhibit 
future growth of our REALmagic technology.  Increased competition may be 
generated from several major computer product manufacturers that have 
developed products and technologies that could compete directly with 
REALmagic products on the PC platform.  These competitors include:

     o    SGS Thompson Microelectronics;
     o    C-Cube Microsystems;
     o    IBM Corporation;
     o    Zoran Corporation; and
     o    LSI Logic.

     In addition, Intel processors are becoming more powerful, so that 
video decoding could eventually be done in software.  Most of our 
competitors have substantial experience and expertise in audio, video and 
multimedia technology and in producing and selling consumer products 
through retail distribution.  These companies also have substantially 
greater engineering, marketing and financial resources than we have.  Our 
competitors could form cooperative relationships that could present 
formidable competition to us.  We cannot assure you that our REALmagic 
technology will achieve commercial success or that it will compete 
effectively against other interactive multimedia products, services and 
technologies that currently exist, are under development, or may be 
announced by competitors.

Our Net Sales Are Dependent on Market Demand for Multimedia Products

     Our business strategy is, and has been, to focus on REALmagic 
products by investing heavily in PC-based MPEG technology.  In the fiscal 
year ended January 31, 1999, sales of multimedia products accounted for 
virtually all of our net sales.  A decline in market demand for 
multimedia products will seriously harm our operating results.  Our 
present reliance on REALmagic products is further affected by the fact 
that multimedia product sales are concentrated in the PC industry.  A 
decline in demand for PCs could seriously harm our operating results and 
financial condition.  In addition, one international customer accounted 
for 28%, 39% and 22% of revenues in fiscal 1999, 1998 and 1997.

Our Operating Results Are Subject to Significant Fluctuations Due To Many 
Factors and Any of These Factors Could Adversely Affect Our Stock Price

     Our operating results have fluctuated in the past and may continue 
to fluctuate in the future.  This fluctuation is due to a number of 
factors, including the following and others:

     o    our new product introductions and product introductions by 
          our competitors;
     o    market acceptance of our products by OEMs, software developers
          and end users;
     o    the success of our promotional programs;
     o    gains or losses of our significant customers;
     o    reductions in selling prices;
     o    inventory obsolescence;
     o    an interrupted or inadequate supply of semiconductor chips;
     o    our ability to protect our intellectual property; and
     o    loss of our key personnel.

     In addition, sales to OEM customers are subject to significant 
variability from quarter to quarter.  This variability depends on OEMs' 
timing and release of products that incorporate our REALmagic technology, 
experience with sales of these products and inventory levels.

     The market for consumer electronics products is characterized by 
significant seasonal swings in demand. Demand typically peaks in the 
fourth calendar quarter of each year.  We expect to derive a substantial 
portion of our revenues from the sales of REALmagic products in the 
future.  The demand for our products will depend in part on the success 
of digital video technology.  In light of this, our revenues may vary 
with the availability of and demand for DVD titles.  This demand may 
increase or decrease as a result of a number of factors that cannot be 
predicted, such as consumer preferences and product announcements by 
competitors.

     Announcements of directly competing products will likely have a 
negative effect on our operating results.  Based on our experience, we 
believe that a substantial portion of our shipments will occur in the 
third month of a quarter, with significant shipments completed in the 
latter part of the third month.  This shipment pattern may cause our 
operating results to be difficult to predict.  Currently, we place 
noncancellable orders to purchase semiconductor products from our 
foundries with a long lead time.  Consequently, if, as a result of 
inaccurate forecasts or cancelled purchase orders, our anticipated sales 
and shipments in any quarter do not occur when expected, our inventory 
levels could be disproportionately high.  This could require significant 
working capital and harm our operating results.

We Rely Heavily on Certain Manufacturers and Suppliers

     Our REALmagic products and components are presently manufactured by 
outside suppliers or foundries.  We do not have long-term contracts with 
these suppliers.  We conduct business with our suppliers on a written 
purchase order basis.  Our reliance on independent suppliers subjects us 
to several risks.  These risks include:

     o    the absence of adequate capacity;
     o    the unavailability of, or interruptions in access to, certain 
          process technologies; and
     o    reduced control over delivery schedules, manufacturing yields 
          and costs.

     We obtain some of our components from a single source.  Delays or 
interruptions have not occurred to date, but any delay or interruption in 
the supply of any of the components required for the production of our 
REALmagic multimedia card currently obtained from a single source could 
have a material adverse impact on our sales of REALmagic products, and on 
our business.

     We must provide our suppliers with sufficient lead time to meet our 
forecasted manufacturing objectives.  Any failure to properly forecast 
such quantities could materially adversely affect our ability to produce 
REALmagic products in sufficient quantities.  We cannot assure you that 
our forecasts regarding new product demand will be accurate, particularly 
because we sell our REALmagic products on a purchase order basis.  
Manufacturing REALmagic chipsets is a complex process, and we may 
experience short-term difficulties in obtaining timely deliveries.  This 
could affect our ability to meet customer demand for our products.  Any 
such delay in delivering products in the future could materially and 
adversely affect our operating results.  Also, should any of our major 
suppliers become unable or unwilling to continue to manufacture our key 
components in required volumes, we will have to identify and qualify 
acceptable additional suppliers.  This qualification process could take 
up to three months or longer and additional sources of supply may not be 
in a position to satisfy our requirements on a timely basis.

     In the past, we have experienced production delays and other 
difficulties, and we could experience similar problems in the future.  In 
addition, product defects may occur and they may escape identification at 
the factory.  This could result in unanticipated costs, cancellations, 
deferrals of purchase orders, or costly recall of products from customer 
sites.

We Depend on Key Personnel

     Our future success depends in large part on the continued service 
of our key technical, marketing, sales and management personnel.  Given 
the complexity of REALmagic technology, we are dependent on our ability 
to retain and motivate highly skilled engineers involved in the ongoing 
hardware and software development of REALmagic products.  These engineers 
are required to refine the existing hardware system and application 
programming interface and to introduce enhancements in future 
applications.  The multimedia PC industry is characterized by high 
employee mobility and aggressive recruiting of skilled personnel.  
Despite incentives we provide, our current employees may not continue to 
work for us, and if additional personnel were required for our 
operations, we may not able to obtain the services of additional 
personnel necessary for our growth.  We do not have "keyperson" life 
insurance policies on any of our employees.

We Face Risks Related to Intellectual Property Rights

     Our ability to compete may be affected by our ability to protect 
our proprietary information.  We currently hold ten patents covering the 
technology underlying the REALmagic products.  We have filed certain 
patent applications and are in the process of preparing others.  We 
cannot assure that any additional patents for which we have applied will 
be issued or that any issued patents will provide meaningful protection 
of our product innovations.  Like other emerging multimedia companies, we 
rely primarily on trade secrets and technological know-how in the conduct 
of our business.  We also rely, in part, on copyright law to protect our 
proprietary rights with respect to our REALmagic technology.  We use 
measures such as confidentiality agreements to protect our intellectual 
property.  These methods of protecting our intellectual property may not 
be sufficient.

     The electronics industry is characterized by frequent litigation 
regarding patent and intellectual property rights.  Any such litigation 
could result in significant expense to us and divert the efforts of our 
technical and management personnel.  In the event of an adverse result in 
any such litigation, we could be required to expend significant resources 
to develop noninfringing technology or to obtain licenses to the 
technology that is the subject of the litigation, and we may not be 
successful in such development or in obtaining such licenses on 
acceptable terms, if at all.  In addition, patent disputes in the 
electronics industry have often been settled through cross-licensing 
arrangements.  Because we do not yet have a large portfolio of issued 
patents, we may not be able to settle an alleged patent infringement 
claim through a cross-licensing arrangement.

Our International Operations Are Subject to Certain Risks

     During the fiscal years ended January 31, 1999, 1998 and 1997, 
sales to international customers accounted for approximately 72%,  64% 
and 72% of our net sales, respectively.  We anticipate that sales to 
international customers, including sales of REALmagic products, will 
continue to account for a substantial percentage of our net sales.  Also, 
some of the foundries that manufacture our products and components are 
located in Asia.  Overseas sales and purchases to date have been 
denominated in U.S. dollars.

     Due to the concentration of international sales and the 
manufacturing capacity in Asia, we are subject to the risks of conducting 
business internationally.  These risks include unexpected changes in 
regulatory requirements and fluctuations in the U.S. dollar that could 
increase the sales price in local currencies of our products in 
international markets, or make it difficult for the Company to obtain 
price reductions from its foundries.  We do not currently engage in any 
hedging activities to reduce our exposure to exchange rate risks.  If and 
when we engage in transactions in foreign currencies, our results of 
operations could be adversely affected by exchange rate fluctuations.

     We derive a substantial portion of our revenues from sales to the 
Asia Pacific region.  This region of the world is subject to increased 
levels of economic instability, and this instability could seriously harm 
our results of operations.

Our Stock Price May Be Volatile

     The market of our Common Stock has been subject to significant 
volatility.  This volatility is expected to continue.  The following 
factors, among others, may have a significant impact on the market price 
of our Common Stock:

     o    our announcement of the introduction of new products;
     o    our competitors' announcements of the introduction of new 
          products; and
     o    market conditions in the technology, entertainment and 
          emerging growth company sectors.

     The stock market has experienced, and is currently experiencing, 
volatility that particularly affects the market prices of equity 
securities of many high technology and development stage companies, such 
as those in the electronics industry.  This volatility is often unrelated 
or disproportionate to the operating performance of such companies.  
These fluctuations, as well as general economic and market conditions, 
could decrease the price of our Common Stock.

There Is A Potential for Dilution From Conversion of Our Series C 
Preferred Stock

     Series C Preferred Stock.  As of April 14, 1999, 1,400 shares of 
our Series C Convertible Preferred Stock were issued and outstanding.  
The shares of Series C Preferred  Stock are convertible at the option of 
the holders into that number of shares of our Common Stock as determined 
by the following formula:

o       Multiply the stated value ($1,000) of the Series C Preferred Stock 
        by the number of outstanding shares of Series C Preferred Stock,  
        and divide the product by the then current Conversion Price (set 
        forth below).

o       The Conversion Price is based on the average of the closing sale 
        trading market price of our Common Stock over the five trading-day 
        period ending one day prior to the date of conversion of the 
        Series C Preferred Stock; provided, however, that no share of 
        Series C Preferred Stock may be converted into shares of our Common 
        Stock if the Conversion Price is less than $4.00.  Furthermore, the 
        maximum Conversion Price for the Series C Preferred Stock is fixed 
        at $7.00.  Thus, if the Series C Preferred Stock had been converted 
        on April 14, 1999, the Conversion Price would have been $5.43.

     Based on this formula, if the remaining outstanding Series C 
Preferred Stock was converted on April 14, 1999, it would have been 
convertible into approximately 257,827 shares of Common Stock.  
Purchasers of our common stock will experience dilution of their 
investment upon conversion of the Series C Preferred Stock.  Because the 
Conversion Price of the Series C Preferred Stock is capped at $7.00, the 
minimum number of shares of Common Stock that the remaining outstanding 
shares of Series C Preferred Stock may be converted into is 200,000 
shares.  And, because the Series C Preferred Stock cannot be converted at 
a Conversion Price that is less than $4.00, the maximum number of Common 
Stock that the remaining outstanding shares of Series C Preferred Stock 
may be converted into is 350,000 shares.

     In addition, the Series C Preferred Stock receives payment of 
dividends upon conversion into shares of our Common Stock.  Dividends at 
the rate of eight percent (8%) of the stated value ($1,000) of the 
Series C Preferred Stock accrue daily on the basis of a 360-day year 
beginning on January 22, 1999.  At our option, we can pay the dividend by 
issuing shares of our Common Stock or, if funds are legally available, by 
cash.  In the event we pay the dividends in cash, purchasers of our 
Common Stock will suffer less dilution.  Our election to pay cash, 
however, will divert our available cash from other potential uses. The 
shares of Series C Preferred Stock are not registered and may be sold 
only if registered under the Securities Act or sold in accordance with an 
applicable exemption from registration, such as Rule 144.

     As of April 14, 1999, warrants to purchase 95,000 shares of Common 
Stock issued to the purchasers of the Series C Preferred Stock and 
exercisable for a period of two years following January 22, 1999 at a 
price of $5.16 (as may be adjusted from time to time under certain 
antidilution provisions) were outstanding.

Year 2000 Issues Could Affect Our Business

     We are aware of the issues associated with the programming code in 
existing computer systems as the year 2000 approaches.  The "year 2000 
problem" is pervasive and complex as virtually every computer operation 
will be affected in some way by the rollover of the two-digit year value 
to 00.  The issue is whether computer systems will properly recognize 
date sensitive information when the year changes to 2000.  Systems that 
do not properly recognize such information could generate erroneous data 
or cause a system to fail.

     We have tested our products and believe our products are year 2000 
compliant.  Our management has also conducted a review of our exposure to 
the year 2000 problem, including working with computer systems and 
software vendors.  We currently believe that our internal systems are 
year 2000 compliant.  We do not expect to further incur any significant 
operating expenses or invest in additional computer systems to resolve 
issues relating to the year 2000 problem, with respect to both our 
information technology and product and service functions.

     However, significant uncertainty remains concerning the effects of 
the year 2000 problem, including uncertainty regarding assurances made by 
vendors.  In addition, we have not investigated year 2000 compliance of 
other entities that are not our vendors or that are vendors or purchasers 
of our product.  For example, we do not have control over the compliance 
of our distributors, partners, banks, stock markets or systems in which 
our products are used.

     We cannot assume that third parties will be year 2000 compliant, 
and if they are not, we cannot assume that we will not be subject to 
actions, liabilities or damages associated with these failures.




<PAGE>













EXECUTIVE OFFICERS OF THE COMPANY

     The executive officers and directors of the Company and their ages 
as of April 1, 1999 are as follows:

<TABLE>
<CAPTION>
           Name            Age                    Position
-------------------------- ---- ---------------------------------------------
<S>                        <C>  <C>
Thinh Q. Tran               45  Chairman of the Board, President, and Chief
                                Executive Officer
Silvio Perich               50  Senior Vice President, Worldwide Sales
Jacques Martinella          43  Vice President, Engineering
William Wong                51  Vice President, Marketing
Kit Tsui                    49  Director of Finance, Chief Financial Officer,
                                and Secretary
William J. Almon(1)(2)      66  Director
William Wang(1)(2)          35  Director
</TABLE>
 --------------------------
(1)   Member of the Audit Committee
(2)   Member of the Compensation Committee

     Mr. Tran, a founder of the Company, has served as President, Chief 
Executive Officer, and Chairman of the Board of Directors since February 
1982.  Prior to joining the Company, Mr. Tran was employed by Amdahl 
Corporation and Trilogy Systems Corporation, both of which were involved 
in the IBM-compatible mainframe computer market.

     Mr. Perich joined the Company in September 1985 as Director, Sales.  
In September 1992, Mr. Perich became Senior Vice President, Worldwide 
Sales of the Company.  Mr. Perich was a co-founder of Costar 
Incorporated, a manufacturer's representative organization for high 
technology products, where he served as partner from October 1979 to 
September 1985.  From September 1972 until September 1979, Mr. Perich 
served in several sales management roles at Siliconix Inc, a specialty 
semiconductor manufacturer.

     Mr. Martinella joined the Company in May 1994 as Director, VLSI 
Engineering.  In December 1995, Mr. Martinella became Vice President, 
Engineering.  From June 1990 to April 1994, Mr.  Martinella served in 
engineering and management positions at Weitek, a microchip manufacturer.  
In addition, Mr. Martinella was an engineer at National Semiconductor, a 
semiconductor manufacturer, from June 1982 to June 1990.

     Mr. Wong joined the Company in June 1998. as Vice President, 
Marketing. From 1995 to 1998 Mr. Wong served as Business Development 
Director at National Semiconductor Corporation. From 1993-1995 Mr. Wong 
served as Vice President of Marketing for Diamond Multimedia Systems. 
Prior to 1993, Mr. Wong held several senior marketing and sales 
management positions at Intel Corporation for 18 years.

     Ms. Tsui joined the Company in November 1982 as its Accounting 
Manager.  Ms. Tsui was promoted to Director of Finance in February 1990, 
acting Chief Financial Officer and Secretary in December 1996 and became 
Chief Financial Officer in July 1997.

     Mr. Almon has served as Director of the Company since April 1994.  
In May 1994, he became Chairman of the Board and Chief Executive Officer 
of StorMedia, Inc., a manufacturer of thin film disks.  StorMedia filed 
for protection under Chapter 11 of the federal bankruptcy laws in October 
1998.  From December 1989 until February 1993, Mr. Almon served as 
President and Chief Executive Officer of Conner Peripherals, Inc., a 
manufacturer of computer disk drives and storage management devices.  
From 1958 until 1987, Mr. Almon held various management positions with 
IBM Corporation, most recently as Vice President, Low End Storage 
Products.  Mr. Almon also serves as a Director of Read Rite Corporation.

     Mr. Wang became a Director of the Company in October 1995.  From 
January 1995 to the present, Mr. Wang has served as Chairman of the 
Board, Chief Executive Officer, and President of Princeton Graphic 
Systems (a supplier of computer monitors) and has served since January 
1996 as a Director of Diva LABS.  From 1990 to April 1997, Mr. Wang 
served as Chairman of the Board and Chief Executive Officer of MAG 
Innovision Co., Inc., a company that acts as the international sales 
representative for MAG Technology Co., Ltd. of Taiwan, a supplier of 
computer monitors.  From 1986 until 1990, Mr. Wang worked at Tatung 
Company of America in the Video Display Division.

ITEM 2. FACILITIES

     The Company currently leases a 25,000 square foot facility in 
Milpitas, California that is used as the Company's headquarters.  The 
lease will expire in September 2002.  The Company also leases facilities 
for sales offices in Hong Kong.  The Company believes that it has 
adequate facilities to accommodate the Company's operations in the near 
term.

ITEM 3. LEGAL PROCEEDINGS

     In February 1998, two putative class action complaints were filed 
in the United States District Court for the Northern District of 
California, Romine, et al. v. Sigma Designs, Inc., et al., No. C-98-0537-
TEH (N.D.Cal.) and Shah, et al. v. Sigma Designs, Inc., et al., No C-98-
0582-MHP (N.D.Cal.).  The federal court complaints allege that Sigma 
Designs, Inc. and certain of its officers and/or directors, issued false 
or misleading statements regarding the Company's business prospects 
during the period October 24, 1995 through February 13, 1997.  The 
complaints do not specify the amount of damages sought by the plaintiffs.  
The plaintiffs have filed a consolidated complaint.  The parties have 
stipulated that defendants will not move to dismiss the complaint until 
after the United States Court of Appeals for the Ninth Circuit renders 
its decision in In re Silicon Graphics Securities Litigation, which 
decision is expected to delineate the standards for pleading a securities 
fraud action under the provisions of the Private Securities Litigation 
Reform Act of 1995.  The Company believes that it has meritorious 
defenses to the allegations made in the complaint and intends to conduct 
a vigorous defense.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.

                                 PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

     Sigma Designs' Common Stock has been traded under the Nasdaq symbol 
"SIGM" since the Company's initial public offering on May 15, 1986.  
The table below sets forth the high and low closing prices in the Nasdaq 
Stock Market for the quarters indicated.

                                     Fiscal 1999        Fiscal 1998
                                   ----------------   ---------------
                                    High     Low       High     Low
---------------------------------- ------- --------   ------- -------
First quarter ended April 30.....   4 5/16  2 29/32    9 5/8   2 5/16
Second quarter ended July 31.....   4 3/8   2 1/2      5 5/8   2 9/16
Third quarter ended October 31...   2 9/16    31/32    9 1/4   4 9/16
Fourth quarter ended January 31..   5 3/4   1 31/32    6       3

     As of April 14, 1999, the Company had 258 shareholders of record.  
The Company has not paid cash dividends on its common stock and does not 
plan to pay cash dividends to its common shareholders in the near future.  
The Company is obligated to pay certain dividends on its outstanding 
preferred stock.  In 1999, the Company paid $93,112 in dividends on such 
stock.



<PAGE>























ITEM 6. SELECTED FINANCIAL DATA

(In thousands, except per share data and number of employees)

<TABLE>
<CAPTION>
                     Selected Financial Five-Year Data

Year ended January 31,       1999      1998      1997      1996      1995
-------------------------  --------  --------  --------  --------  --------
<S>                        <C>       <C>       <C>       <C>       <C>
Net sales.............     $43,540   $36,982   $41,214   $26,374   $43,700

Net income (loss)
 applicable to
 common shareholders..      (2,690)   (5,648)    1,529   (14,708)   (8,773)

Diluted net income
 (loss) applicable to
 common shareholders
 per share............       (0.21)    (0.51)     0.14     (1.88)    (1.20)

Working capital.......      23,578    18,960    20,164    11,461    17,446

Total assets..........      44,220    38,329    37,915    24,843    33,387

Shareholders' equity..      24,771    20,312    21,017    12,581    18,721

Number of employees...          78        71        86        60       138
</TABLE>


<PAGE>























ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
        RESULTS OF OPERATIONS

Results of Operations

     For the fiscal year ended January 31, 1999, the Company's net sales 
increased 18% to $43.5 from $37.0 million reported for fiscal 1998. The 
Company reported a net loss applicable to common shareholders of $2.7 
million, or $0.21 per share, for fiscal 1999 compared to a net loss 
applicable to common stockholders of $5.6 million, or $0.51 per share in 
fiscal 1998. Included in the net loss of $2.7 million in fiscal 1999 were 
$2.5 million in dividends on preferred stock. The dividends on preferred 
stock included cash dividends (including the effect of repurchase of 
certain shares of Series B preferred stock at an amount in excess of 
their carrying amount) and deemed dividends resulting from the conversion 
feature of the preferred stock, which provided for a conversion price at 
a discount to the common stock market value on the date of conversion. 
The deemed dividends had no effect on the Company's cash flow and total 
shareholders' equity. Excluding the dividends on preferred stock, the 
Company had a net loss of $151,000 in fiscal 1999 as compared to a net 
loss of $5,076,000 in fiscal 1998. The net loss for fiscal 1998 included 
a charge of $3.6 million to write down older MPEG and graphics products 
and associated receivables. 

     The following table shows certain items as percentage of net sales, 
which are included in the Company's Consolidated Statement of Operations:

                                           Fiscal     Fiscal     Fiscal
                                            1999       1998       1997
                                         ---------- ---------- ----------
Net sales...............................       100%       100%       100%
Cost of sales...........................        72%        77%        64%
                                         ---------- ---------- ----------
Gross profit............................        28%        23%        36%
Operating expenses:
  Research and development..............        13%        13%        12%
  Sales and marketing...................         9%        12%        13%
  General and administrative............         7%        14%         7%
Benefit from income taxes...............       --           2%       --
                                         ---------- ---------- ----------
Net income (loss).......................       --         -14%         4%
Dividends on preferred stock............        -6%        -1%       --
                                         ---------- ---------- ----------
Net income (loss) available to
     common shareholders................        -6%       -15%         4%

Sales

     Sales of the Company's products are affected by short product life 
cycles, uncertainties including the lack of product standards, and the 
rate of adoption of new technologies associated with markets for new and 
emerging products. The Company is also affected by the economic climate 
in Asia. The following discussion of sales trend reflects the effects of 
these uncertainties. The following table sets forth the Company's net 
sales in each of the product groups for the last three years (in thousands): 

                                           Fiscal     Fiscal     Fiscal
                                            1999       1998       1997
                                         ---------- ---------- ----------
Multimedia products:
     Boards.............................   $19,592    $18,264    $16,295
     Chipsets...........................    22,066     15,723     23,111
Other...................................     1,882      2,995      1,808
                                         ---------- ---------- ----------
  TOTAL NET SALES.......................   $43,540    $36,982    $41,214

     The multimedia products category includes MPEG playback solutions 
for both desktop and notebook computers as well as high performance 
graphics acceleration for PC manufacturers and add-on card makers. The 
board level product line is targeted at OEM customers and system 
integrators to address the computer-based training, kiosks, and corporate 
video-on-demand markets. The chipsets are targeted toward manufacturers 
and large volume OEM customers building interactive multimedia products 
for business and consumer markets. The "other" category includes CD 
titles, DVD ROM drives, video conferencing products and contract revenue. 

     The Company's net sales increased 18% in fiscal 1999, as compared 
to a 10% decrease in fiscal 1998. The increase in sales in fiscal 1999 
primarily reflected an increase in demand for the Company's proprietary 
DVD MPEG 2 decoding chipsets due to increased market acceptance of DVD 
technology. The company's net sales in chipsets increased 40% to $22.1 
million in fiscal 1999 from $15.7 million in fiscal 1998. The decrease in 
sales in fiscal 1998 as compared to 1997 was primarily due to the 
elimination of the Company's graphics business, and slower than expected 
growth in the DVD personal computer market caused by delays in developing 
industry standards. The Company's board level products primarily consist 
of two market groups: intranet/internet video streaming and DVD MPEG 2 
decoding applications. Video streaming board products accounted for 17% 
and 31% of the company's net sales respectively, in fiscal 1999 and 
fiscal 1998. DVD board products accounted for 28% and 19% of the 
Company's net sales respectively, in fiscal 1999 and fiscal 1998.
The table below sets forth the Company's sales by domestic and 
international sales for each of the last fiscal years (in thousands):

                                           Fiscal     Fiscal     Fiscal
                                            1999       1998       1997
                                         ---------- ---------- ----------
Domestic Sales..........................   $12,389    $13,349    $11,636
                                         ---------- ---------- ----------
International Sales:
     Asia...............................    26,706     20,833     26,708
     Europe.............................     3,926      2,429      2,400
     Canada.............................       519        371        470
                                         ---------- ---------- ----------
       Total International..............    31,151     23,633     29,578
                                         ---------- ---------- ----------
TOTAL NET SALES.........................   $43,540    $36,982    $41,214

     The Company's domestic sales as a percentage of total net sales 
were 28% in fiscal 1999, 36% in fiscal 1998, and 28% in fiscal 1997. The 
percentages of the Company's net sales attributable to international 
sales including Canada were 72% in fiscal 1999, 64% in fiscal 1998, and 
72% in fiscal 1997. The Company's international sales were made 
predominantly to customers in Asia-Taiwan and Hong Kong. In fiscal 1999, 
Taiwan and Hong Kong accounted for 43% and 8% of the company's net sales 
respectively, as compared to 40% and 9% in fiscal 1998. In fiscal 1999 
and 1998, one Taiwanese customer contributed 28% and 39 % to the 
Company's total net sales respectively. Total international sales 
increased 32% to $31.2 million in fiscal 1999 from $23.6 million in 
fiscal 1998. The increase was primarily attributable to the increased 
sales of the Company's MPEG decoding chipsets to computer board 
manufacturers in Asia.

Gross Margin

     The Company's gross margin as a percentage of net sales was 
approximately 28% in fiscal 1999, 23% in fiscal 1998 and 36% in fiscal 
1997. The increase in gross margin in fiscal 1999 was largely due to the 
comparatively low margin in fiscal 1998 primarily caused by an inventory 
charge of $1.7 million. The decrease in gross margin in fiscal 1998 was 
attributable to the decrease in sales in multimedia chipsets, which 
traditionally have higher gross margin than board products, and a $ 1.7 
million write-down of inventories. For the Company's board level 
products, video streaming products generally have higher margin than DVD 
products. Consequently, changes in the product mix of sales could 
significantly affect the Company's gross margin. 

Operating Expenses

     Sales and marketing expenses decreased $299,000, or 7%, in fiscal 
1999 over fiscal 1998. The decrease was primarily due to reduction in 
trade show and product sample expenses and the amount of commissions paid 
to outside sales representatives. The same expenses decreased $1.2 
million, or 21%, in fiscal 1998 over fiscal 1997; the reduction was 
primarily attributable to reduction in sales support personnel, less 
sales commission as a result of lower net sales, and reduction in media 
and cooperative advertising programs as the Company continued to shift 
from retail distribution to OEM sales. 

     Research and development expenses increased $730,000, or 15%, in 
fiscal 1999 over fiscal 1998. The increase was largely due to increase in 
technical development support, depreciation associated with research and 
development equipment, and engineering personnel expenses. The increase 
in research and development expenses in fiscal 1999 was primarily the 
result of the Company's continued efforts in the development of its 
proprietary DVD/MPEG 2 based products. Research and development expenses 
increased $260,000, or 6%, in fiscal 1998 over fiscal 1997; the increase 
was primarily due to an increase in engineering personnel expenses.

     The Company's general and administration expenses decreased 42% or 
$2.2 million to $3.0 million during fiscal 1999 as compared to fiscal 
1998. The significant reduction in general and administration expenses 
was largely attributable to a charge of $1.9 million in accounts 
receivable reserves in connection with the write-off of assets associated 
with graphics products during fiscal 1998. Excluding the effect of the 
write-off, general and administration expenses decreased by $281,000 in 
fiscal 1999 over fiscal 1998. The decrease was primarily due to less 
accounts receivable reserves and outside professional services as a 
result of the improvement of accounts receivable. The same expense 
increased $2.2 million in fiscal 1998, or 73%, over fiscal 1997. The 
increase was primarily attributable to $2.2 million accounts receivable 
reserves, of which, $1.9 million was set aside in connection with the 
write-off of assets associated with graphics products. 

Liquidity and Capital Resources

     The Company had cash, cash equivalents, and short-term investments 
of $18.1 million at January 31, 1999, compared with $16.7 million at 
January 31, 1998. The primary sources of cash in fiscal 1999 came from 
$6.4 million (net of expenses) proceeds from the sale of convertible 
preferred stock (Series B and C). The primary uses of cash included $3.2 
million used by operations, and $2.0 million used to repurchase all 
outstanding shares of Series A and B preferred stock. As of January 31, 
1999, the Company had $12 million outstanding under a $12 million bank 
revolving line of credit that expires in October 1999 and is 
collateralized by funds on deposit in accounts that have been assigned to 
the lender. The Company also has a $6 million bank line of credit 
available that expires in October 1999, and is collateralized by the 
Company's accounts receivable, inventories, equipment, and intangibles. 
This asset-based line of credit had an outstanding balance of $1.7 
million as of January 31, 1999. Under the existing loan agreement, the 
company is subject to certain financial covenants, including a net income 
covenant. Since July 1997, the Company has, on occasion, been in 
violation of the net income covenant and has obtained waivers releasing 
the Company from obligation to meet this covenant. The Company was 
granted such a waiver for the quarter ended January 31, 1999. The Company 
may need such waivers for future periods, and there is no assurance such 
waivers will be granted by the lender. The Company may become in default 
in the future under the current loan agreement with its lender if it does 
not meet this covenant and the Company does not obtain waivers.

     During fiscal 1999, the Company issued 5,000 shares of Series B and 
1,900 shares of Series C convertible preferred stock at $1,000 par value 
per share through private placements. Proceeds from the sale of preferred 
stock were used for general corporate purposes. As of January 31, 1999, 
no shares of Series A and B preferred stock were outstanding.

     The Company's primary sources of funds to date have been to date 
have been cash generated from operations, proceeds from preferred and 
common stock issuances, and bank borrowings under lines of credit. The 
Company believes that its current reserve of cash and equivalents and 
short-term investments and the availability of funds under its existing 
asset-based banking arrangements will be sufficient to meet anticipated 
operating and capital requirements for the next twelve months. Beyond the 
next twelve-month period, the Company believes that to the extent it does 
not generate cash from operations, it may have to raise additional 
capital through either public or private offerings of its common stock or 
preferred stock or from additional bank financing. There is no assurance 
that such capital or bank financing will be available to the Company.

Factors Affecting Future Operating Results

     The Company's annual and quarterly results have in the past and may 
in the future vary significantly due to a number of factors, including 
but not limited to new product introductions by the Company and its 
competitors; market acceptance of the technology embodied in the 
Company's products generally and the Company's products in particular; 
shifts in demand for the technology embodied in the Company's products 
generally and the Company's products in particular and/or those of the 
Company's competitors; gains or losses of significant customers; 
reduction in average selling prices and gross margins, which may occur 
either gradually or precipitously; inventory obsolescence; write-downs of 
accounts receivable; an interrupted or inadequate supply of semiconductor 
chips or other materials; the Company's inability to protect its 
intellectual property; loss of key personnel; technical problems in the 
development, rampup, and manufacture of products causing shipping delays; 
and availability of third-party manufacturing capacity for production of 
certain of the Company's products. The Company derives a substantial 
portion of its revenues from sales to the Asia Pacific region, a region 
of the world that is subject to increased economic instability. There can 
be no assurance that such instability will not have a material adverse 
effect on the Company's future international sales. Any adverse change in 
the foregoing or other factors could have a material adverse effect on 
the Company's business, financial condition, and results of operations.

     Due to the factors noted above, the Company's future earnings and 
stock price may be subject to significant volatility, particularly on a 
quarterly basis. Past financial performance should not be considered a 
reliable indicator of future performance, and investors should not use 
historical trends to anticipate results or trends of future periods. Any 
shortfall in revenue or earnings could have an immediate and significant 
adverse effect on the trading price of the Company's common stock. 
Additionally, the Company may not learn of such shortfall until late in a 
fiscal quarter, which could result in even more immediate and adverse 
effect on the trading price of the Company's common stock. Further, the 
Company operates in a highly dynamic industry, which often results in 
volatility of the Company's common stock price.

Impact of the Year 2000 Issue

     The Company is aware of the issues associated with the programming 
code in existing computer systems as the year 2000 approaches. The "year 
2000 problem" is pervasive and complex as virtually every computer 
operation will be affected in some way by the rollover of the two-digit 
year value to 00. The issue is whether computer systems will properly 
recognize date sensitive information when the year changes to 2000. 
Systems that do not properly recognize such information could generate 
erroneous data or cause a system to fail.

     The Company has tested its products and believes its products are 
year 2000 compliant. Our management has also conducted a review of our 
exposure to the year 2000 problem, including working with computer 
systems and software vendors. The Company currently believes that our 
internal systems are year 2000 compliant. The Company does not expect to 
further incur any significant operating expenses or invest in additional 
computer systems to resolve issues relating to the year 2000 problem, 
with respect to both its information technology and product and service 
functions. However, significant uncertainty remains concerning the 
effects of the year 2000 problem, including uncertainty regarding 
assurances made by vendors. In addition, the Company has not investigated 
year 2000 compliance of other entities that are not its vendors or that 
are vendors or purchasers of its product. For example, the Company does 
not have control over the compliance of its distributors, partners, 
banks, stock markets or systems in which its products are used. The 
Company cannot assume that third parties will be year 2000 compliant, and 
if they are not, the Company cannot assume that it will not be subject to 
actions, liabilities or damages associated with these failures. The 
Company will develop appropriate contingency plans in the event that a 
significant exposure arises relative to any such third parties.

Recently Issued Accounting Standards

     In June 1998, Statement of Financial Accounting Standards No. 133, 
"Accounting for Derivative Instruments and Hedging Accounting," was 
issued which defines derivatives, requires all derivatives be carried at 
fair value, and provides for hedging accounting when certain conditions 
are met. This statement is effective for all fiscal quarters of fiscal 
year beginning after June 15, 1999. Although the Company has not fully 
assessed the implications of this new statement, the Company does not 
believe adoption of this statement will have an material impact on the 
Company's financial statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The following discussion about the Company's market risk 
disclosures involves forward-looking statements.  Actual results could 
differ materially from those projected in the forward-looking statements.  
The Company faces exposure to market risk from adverse movements in 
interest rates and foreign currency exchange rates, which could impact 
its operations and financial condition.  The Company does not use 
derivative financial instruments for speculative purposes.

     Interest Rate Sensitivity.  At January 31, 1999, the Company held 
$15.1 million in short-term investments consisting of U.S. government and 
corporate debt securities with an average original maturity of less than 
one year.  These available-for-sale securities are subject to interest 
rate risk and will fall in value if market interest rates increase.  If 
market rates were to increase immediately and uniformly by 10 percent 
from levels at January 31, 1999, the fair market value of the short-term 
investments would decline by an immaterial amount.  The Company generally 
expects to have the ability to hold its investments until maturity and 
therefore would not expect operating results or cash flows to be affected 
to any significant degree by the effect of a sudden change in market 
interest rates for short-term investments.

     At January 31, 1999, the Company had $12,000,000 outstanding under 
a $12,000,000 variable interest rate bank line of credit and $1,716,000 
outstanding under a $6,000,000 variable interest rate bank line of 
credit.  If short-term interest rates were to increase 10 percent, the 
increased interest expense associated with these arrangements would not 
have a material impact on the Company' net income and cash flows.

     Foreign Currency Exchange Rate Sensitivity.  The Hong Kong dollar 
is the financial currency in the Company's subsidiary in Hong Kong.  The 
Company does not currently enter into foreign exchange forward looking 
contracts to hedge certain balance sheet exposures and intercompany 
balances against future movements in foreign exchange rates.  However, 
the Company does maintain cash balances denominated in the Hong Kong 
dollar.  If foreign exchange rates were to weaken against the U.S. dollar 
immediately and uniformly by 10 percent from the exchange rate at 
January 31, 1999, the fair value of these foreign currency amounts would 
decline by an immaterial amount.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Sigma's financial statements, the notes thereto, and the 
independent auditors' report appear on pages F-1 through F-21 and S-1 of 
this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE

Not applicable.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

     The information required by this item concerning the Company's 
directors and executive officers is incorporated by reference from the 
information set forth in the sections entitled "Election of Directors" 
and "Other Information" contained in the Company's Proxy Statement 
relating to the 1999 Annual Meeting of Shareholders to be filed with the 
Securities and Exchange Commission within 120 days after the end of the 
Company's fiscal year pursuant to General Instruction G(3) of Form 10-K 
(the "Proxy Statement").  Certain information required by this item 
concerning the executive officers of the Company is incorporated by 
reference to the information set forth in Part I of the Annual Report on 
10-K.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this item regarding executive 
compensation is incorporated by reference from the information set forth 
in the sections entitled "Election of Directors-Compensation of 
Directors" and "Other Information-Executive Compensation" contained 
in the Proxy Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item regarding security ownership 
of certain beneficial owners and management is incorporated by reference 
from the information set forth in the section entitled "Other 
Information-Security Ownership of Certain Beneficial Owners and 
Management" contained in the Proxy Statement.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Not applicable.

<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)


     1.  Financial Statements

     The following documents are filed as part of this report:

     Independent Auditors' Report 

     Consolidated Balance Sheets as of January 31, 1999 and 1998

     Consolidated Statements of Operations for the years ended
      January 31, 1999, 1998, and 1997

     Consolidated Statements of Shareholders' Equity for the years
      ended January 31, 1999, 1998, and 1997

     Consolidated Statements of Cash Flows for the years ended
      January 31, 1999, 1998, and 1997

     Notes to Consolidated Financial Statements

     2.  Financial Statement Schedules

     The following financial statement schedule is filed as part of this Annual
     Report on Form 10-K:

     Schedule II - Valuation and Qualifying Accounts and Reserves

     All other schedules have been omitted as they are not required, not
     applicable, or the required information is otherwise included.


     (b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the fourth quarter ended
     January 31, 1999.

     (c)  Exhibits

     The exhibits listed on the accompanying index to exhibits immediately
     following the financial statement schedules are incorporated by reference
     into this Annual Report on Form 10-K.

 Exhibit
 Number                      Exhibit Description
 ------- -----------------------------------------------------------------
2.1(7)   Agreement and Plan of Reorganization by and among the Registrant,
         Sigma Acquisition Corporation and Active Design Corp. dated as of
         April 23, 1996.

3.1(1)   Restated Articles of Incorporation, as amended.

3.2(8)   Certificate of Determination of Preferences of Series A Preferred
         Stock.

3.3(9)   Certificate of Determination of Preferences of Series B Preferred
         Stock.

3.4(10)  Certificate of Determination of Preferences of Series C Preferred
         Stock.

3.5(2)   Bylaws of Registrant, as amended.

4.1(10)  Form of Subscription Agreement by and between the Company and the
         purchasers of the Series C Preferred Stock and warrants.

4.2(10)  Form of Registration Rights Agreement by and between the Company
         and the purchasers of the Series C Preferred Stock and warrants.

4.3(10)  Form of Stock Purchase Warrant.

10.1(3)  Distribution Agreement dated September 10, 1985.

10.2(4)  Registrant's 1986 Employee Stock Purchase Plan, as amended, and
         form of Subscription Agreement.

10.6     Sublease between the Registrant and Sun Microsystems, Inc.

10.7(5)  Registrant's 1994 Stock Plan and form of Stock Option Agreement.

10.8(6)  Registrant's 1994 Director Stock Option Plan and form of Director
         Option Agreement.

10.9(11) Registrant's 1995 Business Loan Agreement with Silicon Valley
         Bank, as amended.

23.1     Independent Auditors' Consent.

24.1     Power of Attorney (See page 22).

27       Financial Data Schedule.

 --------------------------

     (1) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1988.

     (2) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1989.

     (3) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-1 (No. 33-4131) filed March 19,
         1986, Amendment No. 1 thereto filed April 28, 1986 and Amendment
         No. 2 thereto filed May 15, 1986, which Registration Statement
         became effective May 15, 1986.

     (4) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-8 (No. 333-61549) filed August
         14, 1998.

     (5) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-8 (No. 33-81914) filed July 25,
         1994.

     (6) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 33-74308) filed on January
         28, 1994, Amendment No. 1 thereto filed February 24, 1994,
         Amendment No. 2 thereto filed March 3, 1994, Amendment No. 3
         thereto filed March 4, 1994 and Amendment No. 4 thereto filed
         March 8, 1994.

     (7) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1996.

     (8) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 333-33147) filed on August
         7, 1997.

     (9) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 333-47835) filed on March
         12, 1998.

    (10) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 333-_________) filed on
         May 3, 1999.

    (11) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1998.





<PAGE>















                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the 
Securities Act of 1934, the Registrant has duly caused this report to be 
signed on its behalf by the undersigned, thereunto duly authorized, in 
the city of Milpitas, State of California, on the 30th day of April, 
1999.

                                  SIGMA DESIGNS, INC.

                                  By: /s/ Thinh Q. Tran
                                    ----------------------------------
                                          Thinh Q. Tran
                                          Chairman of the Board,
                                          President and Chief Executive Officer

                                POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose 
signature appears below constitutes and appoints Thinh Q. Tran and Kit 
Tsui, and each of them, jointly and severally, his true and lawful 
attorneys-in-fact, each with full power of substitution and 
resubstitution, for him in any and all capacities, to sign any or all 
amendments to this Annual Report on Form 10-K, with all exhibits thereto 
and other documents in connection therewith, with the Securities and 
Exchange Commission, granting unto said attorneys-in-fact and agents, and 
each of them, full power and authority to do and perform each and every 
act and thing requisite and necessary to be done in connection therewith, 
as fully to all intents and purposes as he or she might or could do if 
personally present, hereby ratifying and confirming all that each said 
attorney-in-fact and agent, or his or her substitute or substitutes or 
any of them, may lawfully do or cause to be done by virtue hereof.

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1934, THIS 
ANNUAL REPORT ON FORM 10-K HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON 
BEHALF OF THE OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES 
INDICATED:

<TABLE>
<CAPTION>
     Signature                       Title                     Date
--------------------  -----------------------------------  -------------
<S>                   <C>                                  <C>
/s/ Thinh Q. Tran     Chairman of the Board, President,    April 30, 1999
--------------------  and Chief Executive Officer
   Thinh Q. Tran      (Principal Executive Officer)


/s/ Kit Tsui          Director of Finance, Chief           April 30, 1999
--------------------  Financial Officer and Secretary
      Kit Tsui        (Principal Financial and Accounting
                      Officer)


/s/ William J. Almon  Director                             April 30, 1999
--------------------
  William J. Almon


/s/ William Wang      Director                             April 30, 1999
--------------------
    William Wang

</TABLE>
<PAGE>















































                         INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
   Sigma Designs, Inc.:

     We have audited the accompanying consolidated balance sheets of 
Sigma Designs, Inc. and subsidiaries as of January 31, 1999 and 1998, and 
the related consolidated statements of operations, shareholders' equity 
and cash flows for each of the three years in the period ended 
January 31, 1999.  Our audits also include the financial statement 
schedule listed in Item 14(a)2.  These financial statements and financial 
statement schedule are the responsibility of the Company's management.  
Our responsibility is to express an opinion on these financial statements 
and financial statement schedule based on our audits.

     We conducted our audits in accordance with generally accepted 
auditing standards.  Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the financial 
statements are free of material misstatement.  An audit includes 
examining, on a test basis, evidence supporting the amounts and 
disclosures in the financial statements.  An audit also includes 
assessing the accounting principles used and significant estimates made 
by management, as well as evaluating the overall financial statement 
presentation.  We believe that our audits provide a reasonable basis for 
our opinion.

     In our opinion, such consolidated financial statements present 
fairly, in all material respects, the financial position of Sigma 
Designs, Inc. and subsidiaries at January 31, 1999 and 1998, and the 
results of their operations and their cash flows for each of the three 
years in the period ended January 31, 1999 in conformity with generally 
accepted accounting principles.  Also, in our opinion, such financial 
statement schedule, when considered in relation to the basic consolidated 
financial statements taken as a whole, presents fairly in all material 
respects the information set forth therein.

/s/ Deloitte & Touche LLP

San Jose, California
February 25, 1999



<PAGE>











SIGMA DESIGNS, INC.

CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
                                                               1999      1998
                                                             --------- ---------
<S>                                                          <C>       <C>
ASSETS
CURRENT  ASSETS:
  Cash and equivalents.......................................  $2,946      $697
  Short-term investments.....................................  15,112    15,951
  Accounts receivable (net of allowances
    of $3,306 and $3,332)....................................  13,648    12,395
  Inventories - net..........................................  10,418     7,314
  Prepaid expenses and other assets..........................     629       592
                                                             --------- ---------
           Total current assets                                42,753    36,949
EQUIPMENT  - Net.............................................   1,311     1,241
OTHER  ASSETS................................................     156       139
                                                             --------- ---------
TOTAL........................................................ $44,220   $38,329
                                                             ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Bank line of credit........................................ $13,716   $13,316
  Accounts payable...........................................   4,109     3,014
  Accrued liabilities........................................   1,132     1,567
  Current portion of capital lease obligations...............     218        93
                                                             --------- ---------
           Total current liabilities.........................  19,175    17,990
                                                             --------- ---------
CAPITAL LEASE OBLIGATIONS....................................     274        27

COMMITMENTS AND CONTINGENCIES (Notes 10 and 13)

SHAREHOLDERS' EQUITY:
  Preferred stock - no par value:  2,000,000 shares
   authorized; shares outstanding: 1999, 1,900; 1998, 26,550.   1,536     2,715
  Common stock - no par value:  20,000,000
   shares authorized; shares outstanding:
   1999, 15,435,094; 1998, 11,645,876........................  64,699    56,419
  Shareholder notes receivable...............................     (12)      (63)
  Accumulated other comprehensive income.....................      --         3
  Accumulated deficit........................................ (41,452)  (38,762)
                                                             --------- ---------
           Shareholders' equity                                24,771    20,312
                                                             --------- ---------
TOTAL........................................................ $44,220   $38,329
                                                             ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>

SIGMA DESIGNS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
                                            1999       1998       1997
                                         ---------- ---------- ----------
<S>                                      <C>        <C>        <C>
NET SALES...............................   $43,540    $36,982    $41,214

COSTS AND EXPENSES:
  Cost of sales.........................    31,259     28,296     26,531
  Research and development..............     5,678      4,948      4,688
  Sales and marketing...................     4,072      4,371      5,541
  General and administrative............     2,985      5,166      2,987
                                         ---------- ---------- ----------
           Total costs and expenses.....    43,994     42,781     39,747
                                         ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS                 (454)    (5,799)     1,467
  Interest income.......................       935        820        594
  Interest expense......................      (946)      (927)      (540)
  Other income (expense), net...........        (7)         6          8
                                         ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES.......      (472)    (5,900)     1,529
BENEFIT FROM INCOME TAXES...............       321        824        --
                                         ---------- ---------- ----------
NET INCOME (LOSS).......................      (151)    (5,076)     1,529
DIVIDEND ON PREFERRED STOCK.............    (2,539)      (572)       --
                                         ---------- ---------- ----------
NET INCOME (LOSS) AVAILABLE TO COMMON
  SHAREHOLDERS..........................   ($2,690)   ($5,648)    $1,529
                                         ========== ========== ==========
NET INCOME (LOSS) AVAILABLE TO COMMON
  SHAREHOLDERS PER SHARE:
  Basic.................................    ($0.21)    ($0.51)     $0.16
                                         ========== ========== ==========
  Diluted...............................    ($0.21)    ($0.51)     $0.14
                                         ========== ========== ==========
SHARES USED IN COMPUTATION:
  Basic.................................    12,899     11,012      9,853
                                         ========== ========== ==========
  Diluted...............................    12,899     11,012     11,259
                                         ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>








SIGMA DESIGNS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(Dollars in thousands)
<TABLE>                                                                                    
<CAPTION>
                                                                                          Accumu-
                                                                                           lated
                                                                                  Share-   Other
                                                                       Deferred   holder  Compre-                        Compre-
                                 Preferred Stock     Common Stock        Stock    Notes   hensive   Accumu-              hensive
                              ------------------ ---------------------  Compen-  Receiv-   Income    lated               Income
                               Shares   Amount     Shares     Amount    sation     able    (Loss)   Deficit     Total    (Loss)
                              -------- --------- ----------- --------- --------- -------- -------- ---------- --------- ---------
<S>                           <C>      <C>       <C>         <C>       <C>       <C>      <C>      <C>        <C>       <C>
Balances, February 1, 1996..      --       $--    9,847,921   $47,575     ($164)    ($80)     $19   ($34,769)  $12,581

Net income..................      --        --          --        --        --       --        --      1,529     1,529    $1,529
Unrealized loss on
  short-term investments....      --        --          --        --        --       --       (19)       --        (19)      (19)
                                                                                                                        ---------
Comprehensive income.........                                                                                             $1,510
                                                                                                                        =========
Common stock issued under
  stock plans...............      --        --      827,221     3,719       --       --        --        --      3,719
Adjustment of E-Motions,
  Inc. purchase price.......      --        --                     21       --       --        --        --         21
Exercise of warrants........                        415,920     3,011                                            3,011
Amortization of deferred
  stock compensation........      --        --          --        (15)       64      --        --        --         49
Active Design, Inc. net
  loss for the month ended
  February 29, 1996.........      --        --          --        --        --       --        --        126       126
                              -------- --------- ----------- --------- --------- -------- -------- ---------- ---------
Balances, January 31, 1997..      --        --   11,091,062    54,311      (100)     (80)      --    (33,114)   21,017

Net loss....................      --        --          --        --        --       --        --     (5,076)   (5,076)  ($5,076)
Unrealized gain on
  short-term investments....      --        --          --        --        --       --         3        --          3         3
                                                                                                                        ---------
Comprehensive loss..........                                                                                             ($5,073)
                                                                                                                        =========
Common stock issued under
  stock plans...............      --        --      150,220       239       --       --        --        --        239
Amortization of deferred
  stock compensation........      --        --          --        --         25      --        --        --         25
Cancellation of stock
  options...................      --        --          --        (75)       75      --        --        --        --
Issuance of Series A
  preferred stock, net of
  issuance costs of $368....   45,000     4,132      10,000        44       --       --        --        --      4,176
Accretion of discount for
  Series A preferred
  stock.....................      --        500         --        --        --       --        --       (500)      --
Conversion of Series A
  preferred stock...........  (18,450)   (1,917)    445,745     1,917       --       --        --        --        --
Dividends on Series A
  preferred stock...........      --        --          --        --        --       --        --        (72)      (72)
Cancellation of Active
  Designs shares............      --        --      (51,151)      (17)      --        17       --        --        --
                              -------- --------- ----------- --------- --------- -------- -------- ---------- ---------
Balances, January 31, 1998..   26,550     2,715  11,645,876    56,419       --       (63)       3    (38,762)   20,312

Net loss....................      --        --          --        --        --       --        --       (151)     (151)    ($151)
Unrealized loss on
  short-term investments....      --        --          --        --        --       --        (3)       --         (3)       (3)
                                                                                                                        ---------
Comprehensive loss..........                                                                                               ($154)
                                                                                                                        =========
Common stock issued under
  stock plans...............      --        --      111,057       237       --       --        --        --        237
Issuance of Series B
  preferred stock, net of
  issuance costs of $390....    5,000     4,610       5,000        18       --       --        --        --      4,628
Issuance of Series C
  preferred stock, and
  common stock warrants,
  net of issuance costs
  of $364...................    1,900     1,536         --        259       --       --        --        --      1,795
Conversion of Series A
  preferred stock...........  (24,550)   (2,489)  1,417,984     2,489       --       --        --        --        --
Conversion of Series B
  preferred stock...........   (3,400)   (3,143)  2,325,241     5,293       --       --        --     (2,150)      --
Repurchase of Series A
  preferred stock...........   (2,000)     (215)        --        --        --       --        --        --       (215)
Repurchase of Series B
  preferred stock...........   (1,600)   (1,478)        --        --        --       --        --       (322)   (1,800)
Dividends on Series A
  preferred stock...........      --        --          --        --        --       --        --        (63)      (63)
Dividends on Series C
  preferred stock...........      --        --          --        --        --       --        --         (4)       (4)
Cancellation of Active
  Designs shares............      --        --      (70,064)      (16)      --        16       --        --        --
Forgiveness of shareholder
  notes receivable..........      --        --          --        --        --        35       --        --         35
                              -------- --------- ----------- --------- --------- -------- -------- ---------- ---------
Balances, January 31, 1999..    1,900    $1,536  15,435,094   $64,699      $--      ($12)     $--   ($41,452)  $24,771
                              ======== ========= =========== ========= ========= ======== ======== ========== =========
</TABLE>
See notes to financial statements.
<PAGE>














SIGMA DESIGNS, INC.                                       

CONSOLIDATED STATEMENTS OF CASH FLOWS                     
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
(In thousands)

<TABLE> 
<CAPTION> 
                                                     1999      1998      1997
                                                   --------- --------- ---------
<S>                                                <C>       <C>       <C>
CASH  FLOWS  FROM  OPERATING  ACTIVITIES:
  Net income (loss)...............................    ($151)  ($5,076)   $1,529
  Active Design net loss for the one month
    ended February 29, 1996.......................       --        --       126
  Adjustments to reconcile net income (loss)
    to net cash used for operating activities:
    Depreciation and amortization.................      571       519     1,021
    Forgiveness of shareholder notes receivable...       35        --        --
    Loss on disposal of assets....................       11        --        --
    Amortization of deferred stock compensation...       --        25        49
    Changes in assets and liabilities:
      Accounts receivable.........................   (1,253)       82    (7,688)
      Inventories.................................   (3,104)   (2,434)   (2,836)
      Prepaid expenses and other..................      (37)      (29)     (285)
      Accounts payable............................    1,095      (272)      417
      Accrued liabilities.........................     (409)   (1,160)      (22)
                                                   --------- --------- ---------
       Net cash used for operating activities.....   (3,242)   (8,345)   (7,689)
                                                   --------- --------- ---------
CASH  FLOWS  FROM  INVESTING  ACTIVITIES:
  Fixed asset additions...........................      (34)     (553)     (345)
  Proceeds from sale of equipment.................       50        --        --
  Purchases of short-term investments.............  (19,312)  (15,948)  (11,801)
  Maturity of short-term investments..............   20,148    11,801    10,947
  Other assets....................................      (17)       (6)        7
                                                   --------- --------- ---------
      Net cash provided by (used for)
        investing activities......................      835    (4,706)   (1,192)
                                                   --------- --------- ---------
CASH  FLOWS  FROM  FINANCING  ACTIVITIES:
  Bank line of credit borrowings, net.............      400     2,485     4,439
  Proceeds from sale of common stock..............      237       239     6,751
  Proceeds from sale of preferred stock and
    warrants, net of issuance costs...............    6,423     4,176        --
  Dividends paid..................................      (93)      (23)       --
  Repurchase of preferred stock...................   (2,015)       --        --
  Repayment of capital lease obligations..........     (296)      (74)      (11)
                                                   --------- --------- ---------
      Net cash provided by financing activities...    4,656     6,803    11,179
                                                   --------- --------- ---------
INCREASE  (DECREASE)  IN  CASH  AND  EQUIVALENTS..    2,249    (6,248)    2,298

CASH  AND  EQUIVALENTS:
  Beginning of year...............................      697     6,945     4,647
                                                   --------- --------- ---------
  End of year.....................................   $2,946      $697    $6,945
                                                   ========= ========= =========

CASH PAID FOR INTEREST............................     $880      $956      $511
                                                   ========= ========= =========

CASH PAID FOR INCOME TAXES........................     $ --      $ --      $ --
                                                   ========= ========= =========

NONCASH INVESTING AND FINANCING ACTIVITIES:
  Equipment acquired under capital leases.........     $668       $92      $113
                                                   ========= ========= =========

  Issuance costs for preferred stock paid in
    common stock..................................      $18      $ --      $ --
                                                   ========= ========= =========

  Accretion of discount for Series A preferred
    stock.........................................     $ --      $500      $ --
                                                   ========= ========= =========

  Adjustment of E-Motions, Inc. purchase price....     $ --      $ --       $21
                                                   ========= ========= =========

  Dividends on Series A preferred stock...........      $14       $49      $ --
                                                   ========= ========= =========

  Dividends on Series B preferred stock...........   $2,150      $ --      $ --
                                                   ========= ========= =========

  Dividends on Series C preferred stock...........       $4      $ --      $ --
                                                   ========= ========= =========

  Conversion of Series A preferred stock into
    common stock..................................   $2,489    $1,917      $ --
                                                   ========= ========= =========

  Conversion of Series B preferred stock into
    common stock..................................   $3,143      $ --      $ --
                                                   ========= ========= =========

  Cancellation of notes receivable and related
    common stock..................................      $16      $ --      $ --
                                                   ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>









SIGMA DESIGNS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
 -------------------------------------------------------------------------------

1.      NATURE  OF  OPERATIONS  AND  SIGNIFICANT  ACCOUNTING  POLICIES

     Nature of Operations - Sigma Designs, Inc. (the Company) develops, 
manufactures and markets multimedia computer devices and products.  The 
Company sells its products to computer manufacturers, distributors, 
value-added resellers and corporate customers.

     Principles of Consolidation - The consolidated financial statements 
include Sigma Designs, Inc. and subsidiaries.  Intercompany balances and 
transactions are eliminated.

     Accounting Period - The Company's fiscal year ends on the Saturday 
closest to January 31.  For convenience, the financial statements are 
shown as ending January 31, although the fiscal years ended on 
January 30, 1999, January 31, 1998 and February 1, 1997, respectively.  
Fiscal 1999, 1998 and 1997 included 52, 52 and 53 weeks, respectively.

     Pervasiveness of Estimates - The preparation of financial 
statements in conformity with generally accepted accounting principles 
requires management to make estimates and assumptions that affect the 
reported amounts of assets and liabilities and disclosure of contingent 
assets and liabilities at the date of the financial statements and the 
reported amounts of revenues and expenses during the reporting period.  
Such estimates include accruals, reserves and the valuation allowance on 
deferred tax assets.  Actual results could differ from those estimates.

     Concentration of Credit Risk - Financial instruments which 
potentially subject the Company to concentrations of credit risk consist 
primarily of cash and cash equivalents, short-term investments and 
accounts receivable.  The majority of the Company's cash and cash 
equivalents are on deposit with one financial institution.  The Company's 
short-term investments are managed by a major domestic financial 
institution, in a portfolio with defined investment objectives of 
competitive money market returns, high liquidity and safety of capital.  
Its portfolio of short-term investments typically include United States 
government obligations and corporate obligations.  From time to time, the 
Company also makes investments in certificates of deposit with financial 
institutions, outside of its third-party managed portfolio.  The Company 
performs ongoing credit evaluations of its customers and generally does 
not require collateral for sales on credit.  The Company maintains 
reserves for potential credit losses.

     Cash Equivalents - The Company considers all highly liquid debt 
instruments purchased with a maturity of three months or less to be cash 
equivalents.

     Short-Term Investments - Short-term investments represent debt 
securities which are stated at fair value.  All short-term investments 
are classified as available-for-sale.  Any temporary difference between 
an investment's cost and its market value is recorded as a separate 
component of shareholders' equity until such gains and losses are 
realized.  Gains and losses on the sale of securities are computed using 
the specific identification method.

     Inventories are stated at the lower of cost (first-in, first-out) 
or market.

     Investments in less than 20% owned companies are accounted for 
using the cost method unless the Company can exercise significant 
influence or the investee is economically dependent upon the Company, in 
which case the equity method is used.

     Equipment is stated at cost.  Depreciation and amortization are 
computed using the straight-line method based on the useful lives of the 
assets (three to five years) or the lease term if shorter.

     Long Lived Assets - The Company evaluates long-lived assets for 
impairment whenever events or changes in circumstances indicate that the 
carrying amount of an asset may not be recoverable.

     Revenue Recognition - Sales are recognized upon shipment.  

     Allowances for sales returns, price protection and warranty costs are 
recorded at the time that sales are recognized.

     Research and development expenses include costs and expenses 
associated with the design and development of new products.  To the 
extent that such costs include the development of computer software, they 
are generally incurred prior to the establishment of the technological 
feasibility of the related product that is under development.  
Accordingly, software costs incurred after the establishment of 
technological feasibility have not been material and therefore have been 
expensed.  All other research and development is expensed as incurred.

     Income Taxes - Deferred income taxes are provided for temporary 
differences between financial statement and income tax reporting.  Income 
taxes are accounted for under an asset and liability approach.  Deferred 
tax liabilities are recognized for future taxable amounts and deferred 
tax assets are recognized for future deductions net of a valuation 
allowance to reduce deferred tax assets to amounts that are more likely 
than not to be realized.

     Stock-Based Compensation - The Company accounts for stock-based 
awards to employees using the intrinsic value method in accordance with 
APB No. 25, "Accounting for Stock issued to Employees."

     Comprehensive Loss - In fiscal year 1999, the Company adopted 
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting 
Comprehensive Income," which requires an enterprise to report, by major 
components and as a single total, the change in net assets during the 
period from nonowner sources.  Statements of comprehensive income (loss) 
for fiscal 1999, 1998, and 1997 have been included with the statements of 
shareholders' equity.

     Net Income (Loss) per Share - Basic earnings per share (EPS) 
excludes dilution and is computed by dividing net income by the weighted 
average of common shares outstanding for the period.  Diluted EPS 
reflects the potential dilution that would occur if securities or other 
contracts to issue common stock were exercised or converted into common 
stock.  Common share equivalents including stock options, warrants and 
convertible preferred stock have been excluded for fiscal 1999 and 1998 
as their effect would be antidilutive.

     Fair Value of Financial Instruments - In accordance with the 
provisions of SFAS No. 107 "Disclosure About Fair Value of Financial 
Instruments," which requires the disclosure of fair value information 
about both on and off balance sheet financial instruments where it is 
practicable to estimate the value, the Company has estimated the fair 
value of its financial instruments.  The Company believes that carrying 
amounts reported in the balance sheet for cash and cash equivalents and 
short-term investments as of January 31, 1999 approximate fair market 
value.

     Geographic Operating Information - In fiscal year 1999, the Company 
adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and 
Related Information," which establishes annual and interim reporting 
standards for an enterprise's business segments and related disclosures 
about its products, services, geographical areas and major customers.  
The Company operates in one reportable segments (Note 12).

     Recently Issued Accounting Standards - In June 1998, SFAS No. 133, 
"Accounting for Derivative Instruments and Hedging Activities," was 
issued which defines derivatives, requires all derivatives be carried at 
fair value, and provides for hedging accounting when certain conditions 
are met.  This statement is effective for all fiscal quarters of fiscal 
years beginning after June 15, 1999.  Although the Company has not fully 
assessed the implications of this new statement, the Company does not 
believe adoption of this statement will have a material impact on the 
Company's financial statements.

     Reclassifications - Certain items in the 1998 and 1997 financial 
statement have been reclassified to conform with the 1999 presentation.  
Such reclassifications had no impact on net income (loss) or 
shareholders' equity.



<PAGE>














2.      SHORT-TERM  INVESTMENTS

     The fair value and the cost of short-term investments at 
January 31, 1999 and 1998 are presented below.  Fair values are based on 
quoted market prices obtained from the Company's broker.  All of the 
Company's short-term investments are classified as available-for-sale, 
since the Company intends to sell them as needed for operations.  The 
tables present the unrealized holding gains and losses related to each 
category of investment security (in thousands).

                                          Unrealized  Unrealized
                                           Loss on     Gain on
                                           Invest-     Invest-     Market
                                 Cost        ment        ment       Value
                               ---------  ----------  ----------  ---------
January 31, 1999:
  U.S. government securities.   $12,155      $ --        $ --      $12,155
  Corporate debt securities..     2,957        --          --        2,957
                               ---------  ----------  ----------  ---------
Total........................   $15,112      $ --        $ --      $15,112
                               =========  ==========  ==========  =========

January 31, 1998:
  Certificates of deposit....   $12,001      $ --        $ --      $12,001
  Corporate debt securities..     3,947        --             3      3,950
                               ---------  ----------  ----------  ---------
Total........................   $15,948      $ --        $ --      $15,951
                               =========  ==========  ==========  =========

     Certificates of deposit at January 31, 1999 includes $12,000,000 
which is restricted as to use because it is security for a bank line of 
credit (Note 7).

3.      ACQUISITION  OF  ACTIVE  DESIGN  CORPORATION

     On May 3, 1996, the Company acquired Active Design Corporation 
(Active Design) in a transaction accounted for as a pooling of interests.  
Active Design exchanged all of its outstanding common and preferred stock 
into approximately 1,124,000 shares of the Company's common stock, based 
on the exchange ratio of one share of Active Design into 0.22 share 
(exchange ratio) of the Company.  The Company also assumed all 1,042,000 
outstanding options to acquire shares of common stock of Active Design at 
the exchange ratio, resulting in 229,240 options to acquire the Company's 
common stock.  Active Design was incorporated on May 17, 1995 and was a 
development stage company in the business of developing products for the 
multimedia market.  As the merger has been accounted for as a pooling of 
interests, the consolidated financial statements have been restated to 
reflect the combined operations of the two companies.  As the Company and 
Active Design had different year ends at the time of the acquisition, the 
consolidated statements of operations combine the Company's year ended 
January 31, 1997 and January 31, 1996 with Active Design's year ended 
January 31, 1997 and the period from May 17, 1995 (inception) through 
February 29, 1996, respectively.  From its inception, through the date of 
the acquisition, Active Design did not generate any revenues and its net 
loss was $463,000 for the period from February 1, 1996 through May 3, 
1996 (the date of merger).

     The following table shows the effect on the results of operations 
for the years presented herein prior to the acquisition discussed above 
(in thousands):

                                                                     Net
                                                         Net       Income
                                                        Sales      (Loss)
                                                      ----------  ---------
Year ended January 31, 1997:
   Active Design..................................       $ --        ($463)
   Sigma Designs (year ended January 31, 1997)....       41,214      1,992
                                                      ----------  ---------
    Combined......................................      $41,214     $1,529
                                                      ==========  =========


4.      INVENTORIES

     Inventories at January 31 consist of (in thousands):

                                                        1999       1998
                                                     ---------- ----------
      Raw materials.................................    $3,604     $3,165
      Work in process...............................     3,086      2,532
      Finished goods................................     3,728      1,617
                                                     ---------- ----------
      Inventory - net...............................   $10,418     $7,314
                                                     ========== ==========


5.      EQUIPMENT

     Equipment at January 31 consists of (in thousands):

                                                        1999       1998
                                                     ---------- ----------
      Computers and equipment.......................    $2,644     $2,128
      Furniture and fixtures........................     1,279      1,240
      Other.........................................       409        390
                                                     ---------- ----------
      Total.........................................     4,332      3,758
      Accumulated depreciation and amortization.....    (3,021)    (2,517)
                                                     ---------- ----------
      Equipment - net...............................    $1,311     $1,241
                                                     ========== ==========

     At January 31, 1999 and 1998, equipment with a net book value of 
$506,000 and $83,000 (net of accumulated amortization of $162,000 and 
$30,000, respectively), has been leased under capital leases.


<PAGE>



6.      ACCRUED  LIABILITIES

     Accrued liabilities at January 31 consist of (in thousands):

                                                        1999       1998
                                                     ---------- ----------
      Accrued salary and benefits...................      $499       $485
      Facilities accrual............................       --         243
      Other accrued liabilities.....................       633        839
                                                     ---------- ----------
      Total.........................................    $1,132     $1,567
                                                     ========== ==========

     The facilities accrual of approximately $243,000 as of January 31, 
1998 related to the excess of the Company's lease commitment over the 
sublease income for the term of the lease.  The lease term ended and the 
facilities accrual was paid during fiscal 1999.

7.      BANK LINES OF CREDIT

     The Company has $12,000,000 outstanding at January 31, 1999 under a 
$12,000,000 bank line of credit that expires in October 1999, bears 
interest at the U.S. Treasury Bill rate (5.34% at January 31, 1999) plus 
1.0%, and is collateralized by funds on deposit in accounts which have 
been assigned to the lender.

     The Company also has $1,716,000 outstanding at January 31, 1999 
under a $6,000,000 bank line of credit that expires in October 1999, 
bears interest at the bank's prime rate (7.75% at January 31, 1999) plus 
1.25%, is collateralized by the Company's accounts receivable, 
inventories, equipment and intangibles.  Borrowings under this line of 
credit are generally limited to 70% of eligible accounts receivable (as 
defined).

     The lines of credit contain certain covenants that, among other 
things, require the Company to maintain tangible net worth plus 
subordinated debt of at least $15,000,000, quarterly net income, and 
certain financial ratios.  At January 31, 1999, the Company was not in 
compliance with the quarterly net income covenants and subsequently 
received a waiver for the covenant for fiscal 1999.

8.      SHAREHOLDERS'  EQUITY

     Preferred Stock

     In July 1997, the Company issued 45,000 shares of Series A 
nonvoting convertible preferred stock and warrants to purchase 64,285 
shares of the Company's common stock for net proceeds of approximately 
$4,176,000 (net of issuance costs of approximately $324,000).  The 
warrants are exercisable at $5.16 per share beginning in January 1998 and 
expire in January 2001.  In February 1998, the Company issued 5,000 
shares of Series B nonvoting convertible preferred stock for $1,000 per 
share and warrants to purchase 50,000 shares of the Company's common 
stock.  The warrants are exercisable at $5.16 per share and expire on 
April 30, 2001.

     In January 1999, the Company issued 1,900 shares of Series C 
nonvoting convertible preferred stock for $1,000 per share and warrants 
to purchase 95,000 shares of the Company's common stock.  The warrants 
are exercisable at $5.16 per share and expire on January 22, 2001.  
Subsequent to January 31, 1999, 500 shares of Series C nonvoting 
convertible preferred stock were converted into 103,225 shares of common 
stock.

     The significant terms of the Series A, Series B and Series C 
convertible preferred stock are as follows:

     o  Each share of Series A preferred stock is convertible into common 
        stock at a 10% discount from the low reported market price of the 
        Company's common stock for the five days preceding the date of 
        conversion (subject to certain limitations as defined in the 
        Agreement).  Under certain conditions, the Company may elect to 
        repurchase the Series A preferred stock for a cash amount 
        equivalent to the value of the converted common stock that would 
        have been obtained upon conversion as described above.

     o  Each share of Series B preferred stock is convertible into common 
        stock based on the average of the lowest six daily market prices 
        of the Company's common stock during the twenty-day trading period 
        preceding the date of conversion (subject to certain limitations 
        as defined in the Agreement).  Under certain conditions, the 
        Company may elect to repurchase the Series B preferred stock for a 
        cash amount equivalent to the value of the converted common stock 
        that would have been obtained upon conversion as described above.

     o  Each share of Series C preferred stock is convertible into common 
        stock based on the lesser of $7.00 and the average of the market 
        prices of the Company's common stock during the five-day trading 
        period preceding the date of conversion, but in no event less than 
        $4.00 (subject to certain limitations as defined in the 
        Agreement).  Under certain conditions, the Company may elect to 
        repurchase the Series C preferred stock for a cash amount 
        equivalent to the value of the converted common stock that would 
        have been obtained upon conversion as described above.  Any shares 
        of Series C preferred stock outstanding on the anniversary of 
        their original issuance date will automatically convert into 
        shares of the Company's common stock at the conversion rate 
        described above, except when the conversion price is below $4.00; 
        the expiration date will then be extended to such time when the 
        conversion price is equal to or greater than $4.00.

     o  The holders of Series A and C preferred stock are entitled to 
        receive quarterly dividends in cash or common stock of the Company 
        at a rate of 3% and 8% per annum of the original issuance price, 
        respectively.  Series B preferred stock does not bear dividends.

     o  In the event of any liquidation, dissolution, or winding up of the 
        Company "an Event," either voluntarily or involuntarily, the 
        holders of Series C preferred stock shall be entitled to an amount 
        equal to the original purchase price of the Series C preferred 
        stock plus eight percent per annum of the original issuance price.

     The 10% discount on conversion of Series A preferred stock into 
common stock as described above is considered a deemed preferential 
dividend to the holders of Series A preferred stock and, accordingly, a 
$500,000 deemed dividend has been accreted which for purposes of 
computing earnings per share increases the loss applicable to common 
shareholders over the minimum conversion period of seven months.

     During fiscal 1999, holders of Series A preferred stock converted 
24,550 shares of preferred stock into 1,417,984 shares of common stock.  
During fiscal 1999, holders of Series B preferred stock converted 3,400 
shares of preferred stock into 2,325,241 shares of common stock resulting 
in a deemed dividend of $2,150,000.

     During fiscal 1999, the Company repurchased 2,000 shares of 
Series A preferred stock with a carrying amount of $215,000 for $215,000.  
During fiscal 1999, the Company repurchased 1,600 shares of Series B 
preferred stock with a carrying amount of $1,478,000 for $1,800,000, 
resulting in a deemed dividend of $322,000.

     Common Stock

     Each share of common stock incorporates a purchase right which 
entitles the shareholder to buy, under certain circumstances, one newly 
issued share of the Company's common stock at an exercise price per share 
of $75.  The rights become exercisable if a person or group acquires 20% 
or more of the Company's common stock or announces a tender or exchange 
offer for 30% or more of the Company's common stock under certain 
circumstances.  In the event of certain merger or sale transactions, each 
right will then entitle the holder to acquire shares having a value of 
twice the right's exercise price.  The Company may redeem the rights at 
$.01 per right prior to the earlier of the expiration of the rights on 
November 27, 1999 or at the time that 20% or more of the Company's common 
stock has been acquired by a person or group.  Until the rights become 
exercisable, they have no dilutive effect on the earnings of the Company.













<PAGE>








     Net Income (Loss) Per Share

     The following is a reconciliation of the numerators and 
denominators of the basic and diluted EPS computations for the periods 
presented (in thousands, except per-share data):

<TABLE>
<CAPTION>
                                              Years Ended January 31,
                                         --------------------------------
                                            1999       1998       1997
                                         ---------- ---------- ----------
<S>                                      <C>        <C>        <C>
Net income (loss)(numerator)-
  Net income (loss) applicable to
    common shareholders, basic
    and diluted.........................   ($2,690)   ($5,648)    $1,529
                                         ---------- ---------- ----------
Shares (denominator):
  Weighted average common shares
     outstanding........................    12,957     11,215     10,152
  Common shares outstanding subject
     to repurchase......................       (58)      (203)      (299)
                                         ---------- ---------- ----------
Shares used in computation, basic.......    12,899     11,012      9,853

Effect of dilutive securities:
  Common shares subject to repurchase...       --         --         299
  Stock options.........................       --         --       1,107
                                         ---------- ---------- ----------
Shares used in computation, diluted.....    12,899     11,012     11,259
                                         ---------- ---------- ----------

Net income (loss) applicable to
  common shareholders per share:
  Basic.................................    ($0.21)    ($0.51)     $0.16
                                         ========== ========== ==========

  Diluted...............................    ($0.21)    ($0.51)     $0.14
                                         ========== ========== ==========
</TABLE>


     The Company excluded certain potentially dilutive securities each 
year from its dilutive EPS computation because either the exercise price 
of the securities exceeded the average fair values of the Company's 
common stock or the Company had net losses, and, therefore, these 
securities were antidilutive.


<PAGE>





     A summary of the excluded potential derivative securities as of the 
end of each fiscal year follows (in thousands):

<TABLE>
<CAPTION>
                                              Years Ended January 31,
                                         --------------------------------
                                            1999       1998       1997
                                         ---------- ---------- ----------
<S>                                      <C>        <C>        <C>
Common shares subject to repurchase.....        58        203        --
Stock options...........................     3,019      2,275        487
Stock warrants..........................       209         64        --
Convertible preferred srock..............        2         27        --
                                         ---------- ---------- ----------
                                             3,288      2,569        487
                                         ========== ========== ==========
</TABLE>

     Stock Option Plan

     The Company's 1994 stock option plan provides for the granting of 
options to purchase up to 3,400,000 shares of common stock at the fair 
market value on the date of grant.  Of this amount, 1,000,000 shares were 
authorized for grant by the Board of Directors in both fiscal year 1997 
and fiscal year 1998.  Generally, options granted under the 1994 plan 
become exercisable over a five-year period and expire no more than ten 
years from the date of grant (all options outstanding at January 31, 1999 
expire six to ten years from date of grant).  The Company repriced 
1,167,779 options to purchase common stock to $2.31, the market price on 
April 22, 1997.  The repriced options are treated as canceled and 
regranted; however, they retain their original vesting terms.







<PAGE>
















     Stock option activity under the plan is summarized as follows:

<TABLE>
<CAPTION>
                                                                     Weighted
                                                                     Average
                                                                     Exercise
                                                          Number      Price
                                                            of         Per
                                                          Shares      Share
                                                        ----------- ----------
<S>                                                     <C>         <C>
      Balances, February 1, 1996 (701,938 exercisable
        at a weighted-average price of $4.17).........   2,224,424      $3.97

      Granted (weighted-average fair value of $4.22)..     326,000       7.71
      Canceled........................................    (144,509)      4.78
      Exercised.......................................    (813,536)      4.21
                                                        -----------
      Balances, January 31, 1997 (441,362 exercisable
        at a weighted-average price of $4.17).........   1,592,379       4.57

      Granted (weighted-average fair value of $1.37)
        (includes repricing of 1,167,779 options).....   2,235,779       2.38
      Canceled........................................  (1,441,776)      5.01
      Exercised.......................................    (111,554)      0.98
                                                        -----------
      Balances, January 31, 1998 (663,709 exercisable
        at a weighted-average price of $2.34).........   2,274,828       2.34

      Granted (weighted-average fair value of $1.32)..   1,124,000       2.07
      Canceled........................................    (303,709)      2.07
      Exercised.......................................     (65,224)      1.85
                                                        -----------
      Balances, January 31, 1999......................   3,029,895      $2.25
                                                        =========== ==========
</TABLE>




<PAGE>














     At January 31, 1999, options to purchase 85,819 shares were 
available for future grant.

<TABLE>
<CAPTION>
                             Options Outstanding          Options Exercisable
                      ---------------------------------- ----------------------

                        Number                             Number
                      Outstanding  Weighted    Weighted  Exercisable  Weighted
                          at        Average    Average       at       Average
  Range of Exercise   January 31,  Remaining   Exercise  January 31,  Exercise
       Prices            1999        Life       Price       1999       Price
--------------------- ----------- ----------- ---------- ----------- ----------
<S>                   <C>         <C>         <C>        <C>         <C>
       $0.0875            14,572        3.88    $0.0875      14,572    $0.0875
       $1.0000           500,000        9.75     1.0000          --        --
  $2.3100 - $3.0600    2,471,460        8.50     2.4800   1,043,227     2.3300
  $3.5000 - $5.0200       41,363        5.48     4.4100      30,864     4.4800
       $6.3800             2,500        6.42     6.3800       1,875     6.3800
                      -----------                        -----------
  $0.0875 - $6.3800    3,029,895        8.64    $2.2500   1,090,538    $2.3600
                      ===========                        ===========
</TABLE>

     The Company uses the intrinsic value method specified by Accounting 
Principles Board Opinion No. 25 to calculate compensation expense 
associated with issuing stock options and, accordingly, has recorded no 
such expense through January 31, 1999 as such issuances have been at the 
fair value of the Company's common stock at the date of grant.

     Statement of Financial Accounting Standards No. 123, "Accounting 
for Stock-Based Compensation," (SFAS 123) requires the disclosure of 
pro forma net income and earnings per share had the Company adopted the 
fair value method as of the beginning of fiscal 1996.  Under SFAS 123, 
the fair value of stock-based awards to employees is calculated through 
the use of option pricing models, even though such models were developed 
to estimate the fair value of freely tradable, fully transferable options 
without vesting restrictions, which significantly differ from the 
Company's stock option awards.  These models also require subjective 
assumptions, including future stock price volatility and expected time to 
exercise, which greatly affect the calculated values.  The Company's 
calculations were made using the Black-Scholes option pricing model with 
the following weighted average assumptions for the years ended 
January 31, 1999, 1998 and 1997, respectively: expected life, 14, 14 and 
13 months following vesting; stock volatility, 91%, 89% and 87%; risk 
free interest rates, 5.7%, 5.6% and 5.6%; and no dividends during the 
expected term.  The Company's calculations are based on a multiple option 
valuation approach and forfeitures are recognized as they occur.  If the 
computed fair values of awards in fiscal 1999, 1998 and 1997 had been 
amortized to expense over the vesting period of the awards, pro forma net 
income (loss) applicable to common shareholders would have been 
$(3,993,000) ($0.31 per share), $(7,283,000) ($0.66 per share), and 
$347,000 ($0.03 per share).  However, the impact of outstanding non-
vested stock options granted prior to February 1, 1995 has been excluded 
from the pro forma calculation; accordingly, the pro forma adjustments 
for the years ended January 31, 1999, 1998 and 1997 are not indicative of 
future period pro forma adjustments, when the calculation will apply to 
all applicable stock options.

     Employee Stock Purchase Plan

     The Company's 1986 Employee Stock Purchase Plan (1986 ESPP) 
provides for the sale of up to 300,000 (increased by 100,000 in fiscal 
year 1999) shares of common stock.  Eligible employees may authorize 
payroll deductions of up to 10% of their regular base salaries to 
purchase common stock at 85% of the fair market value at the beginning or 
end of each six-month offering period.  During fiscal 1999, 1998 and 
1997, 45,833, 38,666 and 13,685 shares were purchased at an average price 
of $2.50, $3.35 and $7.63 per share, respectively.  At January 31, 1999, 
78,398 shares remain available for issuance under 1986 ESPP.

9.      INCOME  TAXES

     As a result of net operating loss carryforwards and net losses in 
fiscal 1999 and 1998, respectively, the Company recorded no income tax 
provision for any of the years presented.

     Deferred income taxes reflect the net tax effects of (a) temporary 
differences between the carrying amounts of assets and liabilities for 
financial reporting purposes and the amounts used for income tax 
purposes, and (b) operating losses and tax credit carryforwards.

     The tax effects of significant items comprising the Company's 
deferred taxes are as follows (in thousands):

<TABLE>
<CAPTION>
                                                               January 31,
                                                            -------------------
                                                              1999      1998
                                                            --------- ---------
<S>                                                         <C>       <C>
      Deferred tax assets:
        Net operating losses and tax credit carryforwards.   $20,913   $18,904
        Reserves not currently deductible.................     1,204     2,118
        Capitalized R&D expenditures......................       334       147
        Other.............................................       111       170
                                                            --------- ---------
                                                              22,562    21,339
      Valuation allowance.................................   (22,562)  (21,339)
                                                            --------- ---------
      Net deferred taxes..................................    $  --     $  --
                                                            ========= =========
</TABLE>

     SFAS 109 requires that the tax benefit of net operating losses, 
temporary differences and credit carryforwards be recorded as an asset to 
the extent that management assesses that realization is "more likely 
than not."  Realization of the future tax benefits is dependent on the 
Company's ability to generate sufficient taxable income within the 
carryforward period.  Because of the Company's recent history of 
operating losses, risks associated with its new product introduction 
including the dependence on rapid acceptance of new technology, the 
dependence on development of complimentary software by third parties and 
other risks, such as technological change in the industry, short product 
life cycles and reliance on a limited number of suppliers and 
manufacturing contractors, management believes that recognition of the 
deferred tax assets arising from the above-mentioned future tax benefits 
is currently not appropriate and, accordingly, has provided a valuation 
allowance.

     Net operating losses and tax credit carryforwards as of January 31, 
1999 are as follows (in thousands):

                                                          Expiration
                                           Amount           Years
                                          ---------  --------------------
      Net operating losses, federal....    $49,000       2009 - 2018
      Net operating losses, state......     24,700       1999 - 2003
      Tax credits, federal.............      1,059       2006 - 2010
      Tax credits, state...............        709       2002 - 2006
      Net operating losses, foreign....      1,311            -

     The Company's benefit from income taxes reconciled to the amount 
computed by applying the federal statutory rate to income (loss) before 
income taxes is as follows (in thousands):

                                            1999       1998       1997
                                          ---------  ---------  ---------
      Computed at 35%...................     ($165)   ($2,053)      $535
      Valuation allowance...............       446      1,895       (144)
      Other.............................      (281)       158       (391)
      Refund of state taxes from
        prior years.....................      (321)       --         --
      Benefit of net operating loss
        carryback refund................       --        (824)       --
                                          ---------  ---------  ---------
      Total.............................     ($321)     ($824)     $ --
                                          =========  =========  =========







<PAGE>










10.     COMMITMENTS  AND  LEASES

     Leases - The Company's primary facilities are leased under a 
noncancelable lease which expires through September 2002.  In addition, 
the Company leases certain equipment under capital lease arrangements.  
Future minimum annual payments under capital and operating leases are as 
follows (in thousands):

      Fiscal Year Ending                              Capital   Operating
        January 31,                                    Leases     Leases
      -------------------------------                ---------- ----------
           2000.....................................      $256       $354
           2001.....................................       222        332
           2002.....................................        74        359
           2003.....................................       --         239
                                                     ---------- ----------
      Total minimum lease payments..................       552     $1,284
      Amount representing interest at a rate                    ==========
        of 10.5%....................................       (60)
                                                     ----------
      Present value of minimum lease payments.......       492
      Current portion...............................       218
                                                     ----------
      Long-term portion.............................      $274
                                                     ==========

     Rent expense was $235,000, $266,000 and $351,000 for fiscal 1999, 
1998 and 1997, respectively.

     Royalties - The Company pays royalties for the right to sell 
certain products under various license agreements.  During the years 
ended January 31, 1999, 1998 and 1997, the Company recorded royalty 
expense of $405,000, $425,000 and $742,000, respectively.  

     Benefit Plan - The Company sponsors a 401(k) savings plan in which 
most employees are eligible to participate.  The Plan commenced in fiscal 
1994.  The Company is not obligated to make contributions to the plan and 
no contributions have been made by the Company.

11.     MAJOR  CUSTOMERS

     No domestic customer accounted for more than 10% of net sales in 
fiscal 1999 and 1998, while one domestic customer accounted for 11% of 
net sales in fiscal 1997.  In fiscal 1999, one international customer 
accounted for 28% of net sales. In fiscal 1998, one international 
customer accounted for 39% of net sales.  In fiscal 1997, two 
international customers accounted for 23% and 20% of net sales, 
respectively.

12.     SEGMENT  AND  GEOGRAPHICAL  INFORMATION

     As discussed in Note 1, the Company follows the requirements of 
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related 
Information."  The Company's operating segments consist of its 
geographically based entities in the United States and Hong Kong.  All 
such operating entities segments have similar economic characteristics, 
as defined in SFAS No. 131, and accordingly, the Company operates in one 
reportable segment: the development, manufacturing and marketing of 
multimedia computer devices and products.  For the years ended 
January 31, 1999, 1998 and 1997, the Company recorded sales from 
customers throughout the United States and Canada, Taiwan, Hong Kong, 
Singapore; Germany, Belgium, Denmark, Finland, The Netherlands, Norway, 
Sweden, The United Kingdom, France, Italy, Spain (collectively referred 
to as "Europe"); Japan, Korea, China, Thailand, New Zealand 
(collectively "Rest of Asia/New Zealand").  The following table summarizes
total net sales and long-lived assets attributed to significant countries
as of and for the years ended January 31 (in thousands):

<TABLE>
<CAPTION>
                                            1999       1998       1997
                                          ---------  ---------  ---------
<S>                                       <C>        <C>        <C>
Total net sales:
  Taiwan...............................    $18,674    $14,564    $18,400
  United States........................     12,389     13,349     11,636
  Hong Kong............................      3,659      3,497      3,852
  Singapore............................      3,384        626        733
  Europe...............................      3,926      2,429      2,400
  Rest of Asia/New Zealand.............        989      2,146      3,723
  Canada...............................        519        371        470
                                          ---------  ---------  ---------
Total net sales*.......................    $43,540    $36,982    $41,214
                                          =========  =========  =========

Long-lived assets:
  United States........................     $1,444     $1,347     $1,165
  Hong Kong............................         23         33         66
                                          ---------  ---------  ---------
Total long-lived assets................     $1,467     $1,380     $1,231
                                          =========  =========  =========
</TABLE>

* Net sales are attributed to countries based on invoicing location of customer.



13.     CONTINGENCY  (LITIGATION)

     In February 1998, two putative class action complaints were filed 
in the United States District Court for the Northern district of 
California, Romine, et al. v. Sigma Designs, Inc., et al., No. C-98-0537-
TEH (N.D.Cal.) and Shah, et al. v. Sigma Designs, Inc., et al., No C-98-
0582-MHP (N.D.Cal.).  The federal court complaints allege that Sigma 
Designs, Inc. and certain of its officers and/or directors, issued false 
or misleading statements regarding the Company's business prospects 
during the period October 24, 1995 through February 13, 1997.  The 
complaints do not specify the amount of damages sought by the plaintiffs.  
The plaintiffs have filed a consolidated complaint.  The parties have 
stipulated that defendants will not move to dismiss the complaint until 
after the United States Court of Appeals for the Ninth Circuit renders 
its decision in In re Silicon Graphic Securities Litigation, which 
decision is expected to delineate the standards for pleading a securities 
fraud action under the provision of the Private Securities Litigation 
Reform Act of 1995.  The Company believes that it has meritorious 
defenses to the allegations made in the complaint and intends to conduct 
a vigorous defense.

     The Company is also party to various claims against it.  Although 
the ultimate outcome of these matters is not presently determinable, 
management believes that the resolution of all such pending matters will 
not have a material adverse effect on the Company's financial position or 
results of operations.

                                * * * * *



<PAGE>







































                       SIGMA DESIGNS, INC.
  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>

                                Balance                Deductions:    Balance
                                   at                     Write         at
                               Beginning                 Offs of      End of
       Classification           of Year     Additions  Accounts(1)     Year
----------------------------- ------------ ----------- ------------ -----------
<S>                           <C>          <C>         <C>          <C>
Allowance for returns and
 doubtful accounts, price
 protection, and sales
 returns:
  Year ended January 31,
  1999......................   $3,332,000    $395,000     $421,000  $3,306,000
  1998......................      892,000   2,600,000      160,000   3,332,000
  1997......................      892,000     165,000      165,000     892,000

Inventory reserves:
  Year ended January 31,
  1999......................   $3,792,000    $655,000   $2,504,000  $1,943,000
  1998......................    2,455,000   1,753,000      416,000   3,792,000
  1997......................    3,454,000      41,000    1,040,000   2,455,000

<FN>
(1) Amount written off, net of recoveries.
</FN>
</TABLE>

<PAGE>
























                            INDEX TO EXHIBITS
<TABLE>
<CAPTION>
 Exhibit
 Number                      Exhibit Description
-------- -----------------------------------------------------------
<S>      <C>
2.1(7)   Agreement and Plan of Reorganization by and among the Registrant,
         Sigma Acquisition Corporation and Active Design Corp. dated as of
         April 23, 1996.

3.1(1)   Restated Articles of Incorporation, as amended.

3.2(8)   Certificate of Determination of Preferences of Series A Preferred
         Stock.

3.3(9)   Certificate of Determination of Preferences of Series B Preferred
         Stock.

3.4(10)  Certificate of Determination of Preferences of Series C Preferred
         Stock.

3.5(2)   Bylaws of Registrant, as amended.

4.1(10)  Form of Subscription Agreement by and between the Company and the
         purchasers of the Series C Preferred Stock and warrants.

4.2(10)  Form of Registration Rights Agreement by and between the Company
         and the purchasers of the Series C Preferred Stock and warrants.

4.3(10)  Form of Stock Purchase Warrant.

10.1(3)  Distribution Agreement dated September 10, 1985.

10.2(4)  Registrant's 1986 Employee Stock Purchase Plan, as amended, and
         form of Subscription Agreement.

10.6     Sublease between the Registrant and Sun Microsystems, Inc.

10.7(5)  Registrant's 1994 Stock Plan and form of Stock Option Agreement.

10.8(6)  Registrant's 1994 Director Stock Option Plan and form of Director
         Option Agreement.

10.9(11) Registrant's 1995 Business Loan Agreement with Silicon Valley
         Bank, as amended.

23.1     Independent Auditors' Consent.

24.1     Power of Attorney (See page 22).

27       Financial Data Schedule.
</TABLE>

     (1) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1988.

     (2) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1989.

     (3) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-1 (No. 33-4131) filed March 19,
         1986, Amendment No. 1 thereto filed April 28, 1986 and Amendment
         No. 2 thereto filed May 15, 1986, which Registration Statement
         became effective May 15, 1986.

     (4) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-8 (No. 333-61549) filed August
         14, 1998.

     (5) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-8 (No. 33-81914) filed July 25,
         1994.

     (6) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 33-74308) filed on January
         28, 1994, Amendment No. 1 thereto filed February 24, 1994,
         Amendment No. 2 thereto filed March 3, 1994, Amendment No. 3
         thereto filed March 4, 1994 and Amendment No. 4 thereto filed
         March 8, 1994.

     (7) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1996.

     (8) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 333-33147) filed on August
         7, 1997.

     (9) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 333-47835) filed on March
         12, 1998.

    (10) Incorporated by reference to exhibit filed with the Registrant's
         Registration Statement on Form S-3 (No. 333-_________) filed on
         May 3, 1999.

    (11) Incorporated by reference to exhibit filed with the Registrant's
         Annual Report on Form 10-K for the fiscal year ended January 31,
         1998.