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The global consumer electronics giants -- Sony, Philips Electronics, Hitachi, Matsushita Electric, Zenith and SGS Thomson -- are salivating over the next explosive technology, which they hope will pervade every home and business on the planet. It's called digital versatile disc (DVD). With a DVD player, you can watch full-length movies with screen quality twice that of a high-quality VHS tape --for example, if you do a "freeze frame" of the scene in "Eraser" when Arnold Schwarzenegger jumps out of an airplane, you will see it is not him but his stunt body double -- and Dolby digital sound.

DVD movies also allow viewers to see scenes from different angles, and include parental ratings and interviews with movie directors.

So far, DVD has proven popular. Time Warner recently announced that its home video division generated more than $110 million in revenue from its DVD titles for its first year of sales.

But DVD technology offers more than home entertainment. According to Geoff Ballew, a senior analyst with Dataquest, DVD will eventually replace CD-ROM drives in computers. He believes that this will occur by the turn of the century and says that next year, DVD-ROM shipments will start growing exponentially.

There are many reasons why DVD is the logical next step after CD-ROMs. DVDs store eight times more data than a CD but is roughly the same size, and DVD-ROM drives fit easily into in the CD-ROM drive slot, thus making it easy for manufacturers to upgrade.

One company that stands to benefit from the DVD revolution is Sigma Designs [SIGM], based in Fremont, Calif. The company's stock trades on the Nasdaq, at around 3. The 52-week high is 9 5/8.

Sigma Designs was founded in 1982, the early days of the PC revolution. The company's founders came from mainframe companies like Trilogy and Amdahl. "We applied what we knew about mainframes to the PC," says Thinh Tran, cofounder and CEO. The company's debut product was a memory card, the first one for the IBM PC.

In the mid-1980s, the company shifted its product line into graphics, so that by the end of the decade, the company was the largest seller of VGA cards.

It was in 1993 that Sigma Designs turned its sights on digital video technologies, creating the Realmagic card, the first affordable MPEG playback card for the PC. The Realmagic card transformed the PC into a multimedia machine, allowing for CD-quality stereo sound and full-motion digital video.

The company eventually developed its own chip sets, which made it easier for manufacturers to integrate MPEG technology in their systems.

Digital video applications are far-reaching, from computer-based video training to real-time video conferencing, kiosk applications and of course, very cool video games.

Sigma Designs sells only to board manufacturers, high-volume OEM customers and systems integrators, most of whom are located in the Far East. To service that market, the company has offices in Hong Kong and Taiwan.

"Digital technology will be everywhere," says Tran. "The technology will be in set-top boxes, on the intranet and Internet and in telephones."

To be successful in the digital video space, Tran has two goals: make the technology cheaper and add more features.

Chaos in DVDville But could Sigma Design's reliance on DVD be problematic? After all, aren't there many competing standards?

The most notable alternative to DVD is Divx, backed by $100 million from electronics retailer Circuit City (CC). With Divx, you can pay $5 to view a movie in a 48 hour time period. If you still want to watch the film after the period has ended, you can renew it ­ for an extra fee, of course. However, there is an unlimited play form of Divx, known as Divx Gold.

If it sounds a bit complicated, that's because it is. Imagine a Circuit City salesperson -- who is making minimum wage plus a meager commission -- explaining the Divx concept to customers. Add to that the fact that although DVD ROMs can be viewed on Divx players, existing DVD players cannot handle Divx discs.

And there's another major problem: "Since Divx uses a modem to retrieve a movie," says Tran, "there is much concern about your privacy."

Despite all this, Divx is being test-marketed in two cities: San Francisco, California and Richmond, Va. The test launch was delayed twice because of the lack of content. Currently there are 50 Divx titles but they can only be purchased at Circuit City or The Good Guys.

The estimated price of a Divx player will be $499; DVD players run about $100 less, while older versions cost less than $300.

But the DVD-Divx squabble is actually a positive sign. After all, it shows that the big boys see tremendous profits in DVD and want to get as much money as possible, which is very good news for Sigma Designs.

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