OmniVision (NASDAQ:OVTI) must certainly qualify as the stock market version of "Days of Our Lives" -- there's always drama surrounding this company. From its numerous CFOs in recent years, to troubling management disclosures regarding an SEC investigation in 2004, to Micron (NYSE:MU) quietly overtaking the company as the leader in CMOS sensor market, the company has never been short on surprises.

Unfortunately for Wall Street and shareholders, the semiconductor image-sensor device maker's recent results surprised everyone yet again. Revenues and earnings missed analysts' estimates, coming in a few million shy on revenues, at $137.7 million, and a few pennies short on profit, at $0.28 a share (if you exclude various stock options charges and legal settlements). This places top-line growth at 9% year over year, and 23% year to date. Gross margins continued their decline, dropping to 33.1%, or 320 basis points sequentially -- one of the largest drops in gross margins over the past several quarters.

I suggest reviewing fellow Fool Anders Bylund's Foolish Forecast to see the pummeling that margins have taken over the past few quarters. It's not a pretty picture. Micron has effectively eaten OmniVision's lunch over the past few years, growing from $16 million in CMOS revenues in 2003 to $749 million in 2006. That number alone was a 147% increase over 2005 revenues.

Micron's results substantially surpass the $562 million that analysts expect for OmniVision's current fiscal year, making OmniVision's estimated 14% year-over-year growth look relatively pathetic. Gross margins for Micron have gone from 25% in 2004 to 43% in 2006, while OmniVision's has declined from 40% to 33% over the same time frame.

Bulls argue that as long as the company remains on the bleeding edge of technology, it has a chance to remain relevant in the marketplace, but I think with the stunning growth from Micron -- and tough competition from Sony (NYSE:SNE), National Semiconductor (NYSE:NSM), and Matsushita Electric (NYSE:MC) -- that thesis has to be called into serious question. We need to consider the disruptive potential that Micron is wielding here, and assume that while OmniVision may have the most technologically advanced chips in the marketplace, Micron is obviously hitting the sweet spot in terms of pricing (margins) and volume (market share) and presumably slowly moving upmarket. That does not spell good news at all for OmniVision.

While the valuation may be dirt cheap, this type of business performance leads me to believe that OmniVision is a value trap, and that investors would be wise to watch from the sidelines. There is no evidence of any type of competitive moat here. I, for one, will be flipping my OmniVision outperform rating (in Motley Fool CAPS) to underperform as soon as I can.

For more CMOS Foolishness:

Fool contributor Stephen Ellis does not own shares in any companies mentioned. You can view the stocks he owns and check out his 99th-percentile ranking in Motley Fool CAPS, the Fool's new stock-rating community. The Motley Fool has a disclosure policy.