Yep, Linear Technology (Nasdaq: LLTC) lost its supporting role in the Apple (Nasdaq: AAPL) iPad line, just like the tea leaves told us three months ago. And yes, it hurts.

Linear's sales just crawled over the midpoint of already-lowered expectations with $353 million in sales, and missed analyst consensus by $1 million. On the earnings call, CFO Paul Coghlan told analysts that the company is looking for tablet contracts outside the botched iPad opportunity, but not with too much enthusiasm. "We still got our whiplash collar on over the last fight," he said, "and so I don't think we're actively looking for that type of business."

So that's the bad news. On the upside, a tax benefit from Uncle Sam drove non-GAAP earnings up to $0.69 per share, significantly above the Street target. Moreover, there might be further tax reductions in the quarters ahead as tax bills from 2002 and 2006 are still under review -- and the window to argue those years could be closing soon.

Other than tax breaks, Linear sees some positive business trends going on:

  • Customers have been clearing their warehouses of chips for a while, but that inventory correction should be coming to an end.
  • When Texas Instruments (NYSE: TXN) decided to buy National Semiconductor (NYSE: NSM), which is a close rival to Linear, it shone a spotlight on the possibility that Linear might get picked up by one of TI's large-scale rivals. In my eyes, Broadcom (Nasdaq: BRCM) and Analog Devices (NYSE: ADI) look like the most likely suitors for an analog designer of Linear's size and skill.
  • And the specter of the Japanese quake and tsunami does hover over Linear and its 15% revenue exposure to Japan-based customers, mainly in the automotive and industrial sectors. But management expects Japan to rebuild quickly and sees demand from other markets making up for any direct weakness in Japanese orders.

Will this three-year resident of our Stock Advisor scorecard recover from the whiplash of losing the iPad account, or is that setback plus Japanese concerns enough to keep the company down in 2011? Add the stock to your Foolish watchlist so you'll know what happens next.