Apple (NASDAQ:AAPL) supplier Cirrus Logic (NASDAQ:CRUS) has been on shaky ground for the past few months, and it looks like the situation isn't going to improve anytime soon. The audio-chip specialist's latest quarterly results turned out to be a huge disappointment thanks to its heavy dependence on Cupertino for the lion's share of its revenue.

The prospects of a turnaround at Cirrus appear bleak, as it doesn't have any substantial catalysts in sight. Still, some investors might think of holding on to this chipmaker thanks to the promises management made over the latest earnings call, as well as a cheap valuation. But doing so could be inviting trouble. Here's why.

Person holding a smartphone.

Image source: Getty Images.

A lean patch ahead

Cirrus got 86% of its revenue from Apple during the recently reported third quarter, an increase of 4% sequentially. This is almost in line with Apple's contribution toward the chipmaker's top line in the year-ago period, indicating that Cirrus has failed to make headway toward diversifying its business.

The company's latest results also indicate that its Apple relationship isn't paying off anymore. Cirrus' revenue during the quarter that includes December fell close to 8% year over year despite the fact that iPhone production was in full swing. In fact, the company blamed the "unanticipated weakness in smartphone demand" for its weak showing. But many other Apple suppliers saw an uptick in their revenue and earnings last quarter despite relying on Apple for a big part of their top line.

So, Cirrus' clout at Apple is declining. But investors were already warned, as the company wasn't expected to land any new content in the latest generation iPhones. As a result, the chipmaker's sales have been totally dependent on the number of the previous generation of iPhones Apple makes, and it hasn't received much of a boost on this front.

Apple's iPhone sales during the December quarter fell 1% year over year. Much of its sales gains were driven by higher average selling prices of the iPhone X, which allowed it to make up for the drop in unit sales. Apple will probably wind down production of the current generation iPhones over the next couple of quarters before it begins the production ramp of this year's devices.

This means that Cirrus doesn't have any concrete catalysts to drive growth over the next couple of quarters, as clearly indicated by its outlook. The company's fourth-quarter revenue will drop 2% at the midpoint of its guidance range, and no rebound is expected in the next fiscal year, either. The company's long-term prospects look bleak because its efforts to diversify the business have fallen flat.

A turnaround looks like a long shot

Cirrus management has been betting on voice biometrics to help it get back on track, and the company seems to be finally making some headway. Last quarter, Cirrus delivered its first voice biometric evaluation kit to a customer that will test the technology in its smartphones.

This could be a big market in the future thanks to applications in crucial areas like banking -- Citi is already using voice biometrics on a big scale in its Asia-Pacific consumer banking operations. TechNavio estimates that this market could expand at an annual pace of 19% over the next four years, with healthcare being one of the prime areas where voice biometrics will be deployed.

Cirrus, however, doesn't seem to be targeting any of these areas. The company has made it clear that it is aiming at the smartphone market because of the huge addressable opportunity there. But targeting the smartphone market might not be a good idea as there are competing technologies already present.

For instance, the smartphone market seems to be moving toward facial recognition, with Business Insider forecasting that 58% of smartphones will have this feature in 2020, as compared to 32% last year. And advances in fingerprint sensing technology could be another hurdle for the adoption of voice biometrics. Synaptics recently showcased a chip that can integrate fingerprint sensing within the display of a smartphone.

Betting on a turnaround at Cirrus Logic doesn't look like a good idea -- the company is short on catalysts, and whether its future bets will pay off is uncertain.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.