The last year has been a doozy for OmniVision Technologies (Nasdaq: OVTI) shareholders, myself included. What can we shareholders look forward to next year?

I'm the first to admit that I was absolutely wrong when I predicted OmniVision would remain the sole supplier of the Apple (Nasdaq: AAPL) iPhone 4S with its second-generation backside illuminated 8-megapixel OV8830. I ate my words with a fork and knife (and a side of tears) when a Sony (NYSE: SNE) sensor was found inside as the primary shooter. It was a small consolation that the secondary iPhone 4S camera comes from OmniVision.

When OmniVision cut its guidance, it also offered up that the OV8830 had begun to ship in "very limited quantities" as its fiscal second quarter came to a close. The second-generation sensor will hopefully propel OmniVision ahead of rivals like Sony, STMicroelectronics (NYSE: STM), and ex-Micron (NYSE: MU) division Aptina.

As of right now, signs are that OmniVision may have lost the lead it once enjoyed, allowing OEM customers like HTC and Motorola Mobility (NYSE: MMI) to shop around. OmniVision's business relies on its ability to stay ahead of the curve, which would drive not only revenue growth, but also pricing power and margins.

There are two ways that 2012 will pan out.

Bull case
In the best-case scenario, the OV8830 and its second-generation brethren will reclaim a lead and represent the cream of the image sensor crop. Mobile device makers, including Apple, will swoop back in and order up a storm, paying premium prices for the premium sensor.

The past couple of rough quarters would be a speed bump, and OmniVision could resume its upward trajectory on the back of its technological lead. Manufacturing partner Taiwan Semiconductor (NYSE: TSM) ramps up production, revenue growth reaccelerates, margins tick higher, competitors scramble to catch up, and I host a cocktail party complete with hors d'oeuvres.

Bear case
The flip side of that scenario is if OmniVision has lost its lead for good, and rivals have reached technological parity. If competitors have caught up, they may even be able to pull ahead in the arms race and steal design wins from the company.

The image sensor market would become flooded with commoditized offerings, and everyone loses bargaining power to hardware vendors as image sensor makers race to the bottom on price to win market share. As it begins to resemble other commoditized components, revenue starts falling, margins follow accordingly, and I invite no one to my cocktail party, hogging the refreshments for myself as I wallow as the world's worst investor.

Party like it's 2012
Next year will be pivotal for OmniVision as it will determine whether the past couple of quarters were just a blip or the beginning of the end. I, for one, would prefer to have guests at my party.

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