"Help, I need somebody,
Help, not just anybody,
Help, you know I need someone, help!"
-- From "Help!," by Lennon/McCartney, 1965
I'm not exactly sure what is going on with Silicon Labs (Nasdaq: SLAB) these days. Maybe you can help out?
The microchip designer just reported mighty fine first-quarter results, with 51% year-over-year sales growth to $127 million, and GAAP earnings going up from $0.01 per share to $0.44 per share. Guidance for the second quarter points to continued strength, with sales of at least $131 million. So far, so good.
But I would have expected Silicon Labs to get there on the back of its strong media-processing solutions -- all-digital TV and FM radio receivers, media decoders, and other chips you'd expect to find in currently hot product types like set-top boxes, media-centric smartphones, and media tablets. In this scenario, Silicon Labs should be sending thank-you notes to customers like Apple (Nasdaq: AAPL), Samsung, and Nokia (NYSE: NOK). But that's not the case at all.
Instead, CEO Necip Sayiner pinned this quarter's excellent results on the much simpler and less eye-catching products in his broad-based product division -- industrial microcontrollers, digital timers, light sensors, and the like. That segment saw 11% stronger sales sequentially, while Silicon Labs as a whole flatlined from the fourth quarter to the first.
If Silicon Labs can keep shifting business into this segment, that's probably a good thing for the company; margins improved drastically amid this move, which shows better pricing power here than in the flashier product types. And that does make sense, given that rivals like Marvell Technology Group (Nasdaq: MRVL) and Broadcom (Nasdaq: BRCM) are pushing hard in those media-rich submarkets. Heavy competition between chip makers tends to drive down prices, after all.
Yet I feel like I'm missing something here. Why are digital timers and industrial process controllers suddenly on fire? I've seen lots of evidence for a consumer-level rebound, and plenty for enterprise-class computing, too. But this seems like the first harbinger of a recovery for technology investments in heavy industry -- for me, at least.
Maybe Silicon Labs really is the leading indicator here, but perhaps I missed something important. When Analog Devices (NYSE: ADI) and National Semiconductor (NYSE: NSM) report earnings over the next six weeks, I'd love to have more data in hand. So if you've seen the signs of industrial recovery elsewhere, would you please share them in the comments below?
