"Unsung heroes toil in twilight
Unloved chiefs of strange domains
Breakthrough comes and brings the daylight
Don't miss out on outsized gains."
-- "Find the Obscure Opportunities" by Anders Bylund, 2010
Inveterate semiconductor wrangler Cirrus Logic (Nasdaq: CRUS ) ships the audio chips inside every iPad, according to a recent teardown of parts by research firm iSuppli. Cirrus Logic is known for its high-quality audio processors, which are showing up in a plethora of consumer electronics with high-end sound ambitions -- the company's customers include Sony (NYSE: SNE ) , Samsung, and Harman International Industries' (NYSE: HAR ) Harman Kardon brand.
A year ago, Cirrus Logic reported audio chip sales of a measly $18.8 million, but the haul is up to $40.5 million, according to a preliminary fourth-quarter revenue report. Because Apple was ramping production last quarter, the iPad contributes a chunk of that 115% jump. It's a deliberate strategy of listening to customer demands that is paying off for Cirrus Logic. The company kept designing audio parts to meet and exceed customer specifications, and then some big names like Apple started building products featuring them. "Three or four years later, you've got an overnight success," as Cirrus Logic CEO Jason Rhode puts it.
Sure, some other chip designers gain more per iPad sale than Cirrus Logic does, but that would be giants like Broadcom (Nasdaq: BRCM ) and Texas Instruments (NYSE: TXN ) . It takes a lot of iPad sales to move their very large needles, while Cirrus Logic is small enough to feel the effects of a hit product immediately. Besides, Apple likes to pull some parts from multiple, commoditized sources -- early iPad teardowns contain memory from Samsung or Toshiba and screens from LG Display (NYSE: LPL ) or someone else, but the audio solutions from Cirrus Logic are not commodities and are not easy to swap out.
So there's one unsung hero for you inside the iPad. You know that small and obscure companies can jump higher and faster than their heavier brothers, and I believe that Cirrus Logic will follow that track. I'm heading over to Motley Fool CAPS to rate this stock to outperform right now, and it would be great if you could follow my example.
The world needs to know this unsung hero of the audio chip.