OmniVision Technologies Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of camera chip specialist OmniVision Technologies (Nasdaq: OVTI  ) hit the skids this morning, falling as much as 11.6% on tremendous volume before making a partial recovery.

So what: Analyst firm Robert W. Baird downgraded OmniVision from "buy" to "hold" this morning, citing the high likelihood that Apple (Nasdaq: AAPL  ) might seek a second supplier of camera chips for the coming iPhone 5. Sony (NYSE: SNE  ) seems poised to steal at least a share of that attractive contract from OmniVision.

Now what: The high-quality backside illumination (BSI) chips Apple requires for its phones are a point of pride and technical superiority for OmniVision, though Sony is supposedly increasing its investment in BSI technology as well. I can't agree with Baird's conclusion that chip foundries might price OmniVision out of the iPhone opportunity; the foundries know full well that the end customer is Apple, which feeds demand for lots of the chips they manufacture for various semiconductor designers. If Sony makes it into the iPhone, I'd expect it to happen in 2012 when the company gets its BSI act together. This is still OmniVision's time to shine.

Interested in more info on OmniVision Technologies? Add it to your watchlist.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Apple is a Motley Fool Stock Advisor recommendation. The Fool has written puts on Apple. The Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.

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  • Report this Comment On January 24, 2011, at 1:06 PM, raidtheparade wrote:

    Per Sony's own forecast, the $1.2 billion USD they are spending to increase CMOS production capacity will bring them up to 50K units per month by March 2012.

    Apple sold 16.2 million iPhones and 10 million iPod Touch units (i.e. also featuring the OVTI CMOS) in the last THREE MONTHS of 2010. And that's without a Verizon iPhone of course.

    Do the math people. Sony is 3-5 years away from having anything close to a meaningful CMOS capacity. And that assumes 1) Sony doesn't walk away from the technology again, as they did in 2008 and 2) OTVI chooses to stand absolutely still in regards to their technology and production capacity, which they most assuredly will not.

    Short interest in OVTI represents 10% of outstanding shares -- anybody who falls into the rumor pit and dumps OVTI based on unfounded 'information' such as today's has been fleeced by the shorts, plain and simple.

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