In semiconductor-investing land, twin titans AMD (NYSE:AMD) and Intel (NASDAQ:INTC) get all the press. But has either of those companies beaten Wall Street's estimates in every quarter since Q3 2001? Hardly. To find a chip company that can make that boast, you need to shift your attention from the big names, and refocus it on little Silicon Labs (NASDAQ:SLAB).

Better focus quick, though. This Motley Fool Stock Advisor pick reports its Q2 2006 earnings on Monday.

What analysts say:

  • Buy, sell, or waffle? A baker's dozen of analysts follow SL. Five of them rate the stock a buy, while the other eight call it a hold.
  • Revenues. Analysts are looking for an 11% rise in quarterly revenues, to $118.7 million.
  • Earnings. Profits, however, are only predicted to grow 3% to $0.33 per share.

What management says:
The big news at Silicon Labs this quarter is sad news. CFO Russ Brennan, battling cancer since 2003, took a leave of absence to continue his treatment in May, and passed away shortly thereafter. The company named corporate controller Paul Walsh interim CFO, and is conducting a search for a permanent replacement.

What management does:
Management at Silicon Labs takes equal care to protect the interests of shareholders and employees alike. In the announcement of Brennan's taking leave, Silicon Labs made clear that although it would secure its investors' interests by seeking out and installing a full-time, permanent replacement for Mr. Brennan as CFO, "Mr. Brennan [was] expected to return and play an active role in the company's strategic financial planning when his health allow[ed]." You have to admire the company for its actions on both counts.

Like most companies in the semiconductor industry these days, Silicon Labs is struggling. Gross margins are holding firm, sitting today right where they were 18 months ago. But operating margins are declining sharply as the company continues to make sizeable investments in research and development. Naturally, those costs show up in lower net margins as well.

Margins %




























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

The Fool says:
A few months ago, Fool co-founder and Stock Advisor co-lead analyst Tom Gardner conducted his review of all stock holdings in his column of the Stock Advisor portfolio, as he does twice a year. (You can read the entire rundown for no charge if you sign up for a free trial of the service.)

For reasons having nothing to do with Mr. Brennan's illness, Tom found the shares unattractively priced at present. Then again, his thoughts on the company might not fit most investors' definitions of "unattractive" -- Tom thinks they'll generate a return of roughly 15% per annum over the next five years, or about half again as well as the market has historically returned. Investors today, therefore, are in the happy circumstance of getting a chance to buy a better-than-average company . at a price that's 25% cheaper than it was when Tom found it unattractive.


  • Agere (NYSE:AGR)
  • Broadcom (NASDAQ:BRCM)
  • Infineon (NYSE:IFX)
  • Texas Instruments (NYSE:TXN).

I know what you're thinking: If 15% per annum is an "unattractive" return in Tom's book, what stocks does he think will do even better than Silicon Labs? Take that free trial I mentioned above, and you'll have full access to the list of stock Tom thinks will beat even Silicon Labs' superb prospects.

Fool contributor Rich Smith owns shares of Intel, a Motley Fool Inside Value pick. The Fool has a disclosure policy.