Will OmniVision Technologies Share in Apple's Recovery?

OmniVision Technologies (NASDAQ: OVTI) will release its quarterly report on Tuesday. Investors have remained uncertain for years about whether the camera-chip maker will continue to share in the overall success of the smartphone revolution. Even though Apple's (AAPL -1.22%) latest success with its iPhone 5s and 5c models should arguably give OmniVision some reason to be confident about its own future, OmniVision is no longer the sole supplier for the iPhone line, and, more broadly, strong competition looms over it and other mobile-device suppliers as their makers start paying increasing attention to margins, clamping down on supply chain costs.

OmniVision once had a much firmer hold over Apple, riding the success of iPhone releases for years. Yet with Sony (SONY -0.71%) having stepped in to supply part of the demand for imaging chips for the iPhone line, including the most recent high-end iPhone 5s, OmniVision has had to look beyond Apple to find new opportunities for its chips. Can the company move beyond its reliance on Apple once and for all with a 10.5-megapixel unit for Google's Moto X? Let's take an early look at what's been happening with OmniVision Technologies over the past quarter and what we're likely to see in its report.

Stats on OmniVision Technologies

Source: Yahoo! Finance.

How well can OmniVision earnings grow?
Analysts have kept their views steady on OmniVision earnings recently, with no changes to short-range or long-range forecasts. The stock has been anything but stable, though, falling 11% since late August.

Just about all of OmniVision's share-price plunge came immediately after its July quarter earnings report. Even a 45% jump in revenue wasn't enough to satisfy investors looking for more, and while adjusted earnings more than doubled, disappointing guidance for the October quarter reflected what CEO Shaw Hong characterized as a "slowdown in the smartphone market during the second half of the [July] quarter." The lack of visibility on future results is clearly making investors nervous despite solid financial results.

The main problem is that device manufacturers have a huge amount of leverage over OmniVision and its rivals. For instance, reports that Apple's new iPad Air model uses image sensors from OmniVision both in the front and the rear of the device are one reason why OmniVision's stock rebounded last month. Yet with investors having to sit on the edge of their seats with every new release, it's hard to focus on OmniVision's technological advances.

Yet OmniVision has been working hard to deliver new groundbreaking offerings in imaging. Last month, the company announced a new 13-megapixel chip sensor for high-end mobile devices. With expectations that the 13-megapixel area will be the sweet spot for mobile-device growth next year, OmniVision hopes that it will be able to command the market and get companies like Apple and Google to consider it for their future designs. At the same time, OmniVision is also working on lower-cost offerings, such as its new 2-megapixel chip for those manufacturers seeking to reduce component costs without sacrificing too much performance.

In the OmniVision earnings report, watch to see what comments the company makes about the iPhone release and OmniVision's efforts to diversify its book of business to become less reliant on single suppliers. As long as Sony is an effective competitor, it could be difficult for OmniVision to get enough traction to stand up to Apple and Google and make a lasting recovery.

Click here to add OmniVision Technologies to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.