The collateral damage from the raging success of Apple's (Nasdaq: AAPL) iPad extends beyond weakening sales of notebooks at Dell (Nasdaq: DELL), Hewlett-Packard (NYSE: HPQ), and Acer. Synaptics (Nasdaq: SYNA) investors learned that when the company reported first-quarter earnings.

First, some good news. Revenue and EPS were both better than expected and grew 23% and 31% year-over-year, respectively. Non-GAAP EPS of $0.55 nicely beat the consensus estimate of $0.48.

But the outlook for the current quarter was disappointing. The company offers revenue guidance only and expects between $138 million and $146 million. That means revenue may decline from the $145.8 million Synaptics reported in the year-earlier quarter and come in below analysts' then-consensus forecast of $146.5 million.

The company is suffering from weak revenue for its flagship TouchPad, which is built into a majority of notebook PCs. There's also been talk that Synaptics has lost some smartphone touchscreen customers. Put all that together with margin declines in the company's most recent quarter and it's no wonder the consensus EPS estimate for the second quarter is now $0.55 -- 21% below EPS in the year-earlier quarter.

 On a more positive note, management said demand for Synaptics' lower-priced touchscreen sensors was "strong," an anticipated mix shift from TouchPads to touchscreen solutions should improve gross margin, and its PC-related revenue should increase sequentially this quarter. Management appears to be pinning its hopes on getting its touchscreens into iPad competitors that gain meaningful market share. With that in mind, management indicated during the earnings call that the tablet market is still dominated by Apple.

A whopping 38.7% of the stock's float is sold short. The shorts are likely betting that Synaptics will suffer from (1) losses of smartphone touchscreen business, and/or (2) continued weakness in notebook TouchPad demand as buyers continue to favor the iPad.

But management noted that demand for touchscreen sensors was strong in the most recent quarter, which suggests the shorts are betting on the iPad.

Foolish takeaway
The large short bet on Synaptics' stock is likely a bet on the continued success of Apple's iPad as well as risks to Synaptics' outlook. Only time will tell if Synaptics' adjusted P/E ratio of 10.8 makes it a good value or a value trap. To help you stay ahead of the curve, The Motley Fool recently introduced a free My Watchlist feature. You can get up-to-date news and analysis on your stocks by adding them to your watchlist now: