When your company is at the bleeding edge of technology leadership, it doesn't really matter whether it's still a small operation. The market will expect great things from you in each and every quarter, and when you slip and miss a target, look out below -- it's a long way down.

That's what happened to digital-display specialist Silicon Image (NASDAQ:SIMG) over the past couple of days. The company had the nerve to outperform the upper end of its revenue guidance by less than a million dollars, at a gross margin only 0.7 percentage points above the top of that guidance item. And the forward guidance this time was ... well, you be the judge. Below are CEO Steve Tirado's comments on the quarter.

We expect to see another quarter of double-digit growth in our unit demand. ... We also expect to see average selling price pressures begin to moderate given our expected product mix with a focus on product margin improvements in the second half of 2007. We believe that our second-half 2007 product gross margin will experience a modest improvement relative to our second-quarter 2007 product gross margin.

To recap, then, Silicon Image beat its internal targets and guided to double-digit revenue growth and continued margin improvement in the next quarter. And for this, the stock price took a 31% fall in just two days.

This is a small cap that runs with the big boys. As the inventor behind the signaling standard that powers both DVI (for computer screens) and HDMI (for high-def home theaters) transmissions, little Silicon Image stands shoulder to shoulder with giants like Sony (NYSE:SNE) and Philips (NYSE:PHG) in the HDMI consortium, and with even bigger names like Intel (NASDAQ:INTC), IBM (NYSE:IBM), and Hewlett Packard (NYSE:HPQ) in the DVI camp.

Any growth in digital image transmission markets stands to enrich Silicon Image through license payments and encoder/decoder hardware sales, but some myopic traders wanted it all today. The long-term investors among us should take this for what it is: the company hit its own targets and missed the unrealistic ones set up by others. It's a buying opportunity par excellence in my mind, but do your own homework before plunking down those hard-earned dollars. It's the Foolish Way.

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Intel is a Motley Fool Inside Value recommendation.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, though some of them do look tempting. You can check out Anders' holdings if you like, and Foolish disclosure looks great in full 1080p glory over an HDMI link.