Shares of chip designer Silicon Motion
The Taiwanese company beat Wall Street estimates on both the top and bottom lines, albeit with a strand of cooked spaghetti and a careful hand. The midpoint of management's third-quarter guidance pointed to about $74.2 million in revenue, well above the current consensus at $72.1 million. A back-of-the-envelope rundown of guided expenses, then, points to adjusted earnings of about $0.48 per ADS. That's also better than your average analyst had expected.
CEO Wallace Kou said that "new growth products" are driving Silicon Motion's results these days. Demand is high -- and rising -- for its solid-state storage controllers and LTE radio solutions. The company ships LTE chips in the hot-selling Samsung Galaxy S3 smartphone in certain markets, and Sammy is bringing Silicon Motion's LTE chips to America next year. Given that Samsung outsells even Apple in head-to-head smartphone battles right now, that's not a bad feather to stick in your corporate cap.
It's not all wine and roses, of course. The core products segment, which includes controller chips for USB drives and flash-based memory cards, has stalled, due to plunging prices on flash memory chips. Investors in Micron Technology
Moreover, demand for mobile TV tuners in the Chinese market is weak, thanks to rising competition.
So the core products division is becoming less "core" with every passing quarter. The new products segment already accounts for 32% of sales, and Kou expects that share to rise above 40% in 2013. The future for this company lies in LTE controllers and solid-state drive products, led by an expected 50% rise in LTE orders from Samsung next year.
"We believe we are gaining market share [in LTE transceivers] from the competition," Kou said. That competition includes Qualcomm
Silicon Motion is betting hard on mobile computing. Maybe you should, too. Click below to find out why investors are so excited about this exploding trillion-dollar revolution.
Fool contributor Anders Bylund owns shares in Micron (and is keeping a close eye on the flash pricing situation), but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Apple and QUALCOMM. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
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