Why OmniVision Investors Didn't Like What They Saw

OmniVision Technologies' (NASDAQ: OVTI  ) shareholders did not have a happy hump day. The company reported second-quarter earnings yesterday evening, and while results did beat the Street's expectations, OmniVision's guidance for the third quarter disappointed investors.

OmniVision said it now expects revenue of $310 million to $340 million for Q3, with adjusted EPS of $0.28 to $0.44. Analysts wanted revenue of $402 million and EPS of $0.43. The company partly blamed a "slowing smartphone market and intensifying competition," but the fact is, OmniVision has never really recovered since losing its coveted spot in Apple's (NASDAQ: AAPL  ) iPhone to Sony.

OmniVision's bread-and-butter product -- backside-illuminated sensors -- has become a commoditized component, and competition from larger rivals like Samsung (NASDAQOTH: SSNLF  ) and Sony has put pressure on pricing. OmniVision's margins have subsequently cratered, making the company's future look rather dim.

In this segment of Tech Teardown, Erin Kennedy discusses OmniVision's future with Evan Niu, CFA, our tech and telecom bureau chief.

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