Standard Microsystems (Nasdaq: SMSC) just reported blowout earnings. The 23% year-over-year sales growth landed the chip designer at a record $107 million of revenue, comfortably ahead of the $105.6 million consensus estimate. Likewise, $0.52 of non-generally accepted accounting principles earnings per share beat the $0.42 per-share target to a pulp. Every segment reported healthy gains, a recently closed acquisition improved Standard's portfolio of USB solutions, and management shared a rosy view of the future.

So why is the stock 10% cheaper after this fine report?

Oh right, I almost forgot: Standard also announced another acquisition. I think it's fair to say that the market hates it.

While last quarter's catch was a member of the relatively healthy USB market, the target this time is Conexant Systems (Nasdaq: CNXT). Conexant's claim to fame is in a portfolio of audio controllers (yeah, not too shabby) and -- fax modems. What is this, 1997?

Standard will pay about $2.25 per Conexant share while also shouldering the company's $100 million of net debt. Me, I think it's a waste of 280 million perfectly good dollars. Standard could have spent less than $280 million on AuthenTec (Nasdaq: AUTH), thus building its core competencies instead of branching out to musty old pastures. Or spend just a little bit more and pick up Mindspeed Technologies (Nasdaq: MSPD) while it's cheap. Networking is still hot, you know.

So Standard Microsystems is trying its hand at growth by acquisition, but I think it picked a terrible target this time. See how this sordid saga plays out by adding Standard to your Foolish watchlist.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.