You Haven't Missed the Silicon Image Boat

The numbers are in for Silicon Image (Nasdaq: SIMG  ) , and the buy-in opportunity I've been talking about is still there. The share price dropped more than 25% after the earnings announcement. Silicon Image now trades at about 10.3 times the updated, lower trailing earnings, and the stock appears underpriced at those multiples.

The high-definition expert delivered on a 10.2% year-over-year sales boost. However, GAAP net income dropped 50% from last year. That was just about what the Street expected, and the profit take was very close to last quarter's haul.

It's as if the HD market didn't matter to Mr. Market. According to the latest data from Nielsen, only 11.3% of American households have the equipment and get the signal required for a high-def experience today. Best Buy (NYSE: BBY  ) has already stopped selling standard-tuner TV sets in favor of digital TVs, and other mass retailers like Target (NYSE: TGT  ) and Circuit City (NYSE: CC  ) can't be far behind. There's a federally mandated cutoff date for analog signals coming up in early 2009, after all. Digital tuners and high definition go hand in hand, so the upswing is inevitable. It's just that the "massive growth" phase hasn't quite kicked in yet, but TVs break every day, and the new, fancy ones get cheaper and cheaper.

And if you thought that Silicon Image only sells the image-processing chips in HDTV sets, think again. Every HDMI and DVI connection means license revenue for this spunky little innovator, which sits on a fat load of patents. So let Texas Instruments (NYSE: TXN  ) , Analog Devices (NYSE: ADI  ) , and Conexant (Nasdaq: CNXT  ) fight over HDMI connector market share -- they all have to share the loot with Silicon Image anyhow.

The company has very little debt and about $131 million in cash, which is plenty to see it through any short-term rough spots -- like this one. Now if you'll excuse me, I have to go and shut up about this stock for a few weeks. I have my reasons.

Further Foolishness:


Read/Post Comments (0) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 539643, ~/Articles/ArticleHandler.aspx, 8/22/2014 12:41:49 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement