More Upside: Cypress or Synaptics?

Touchscreen and touchpad technologist Synaptics (Nasdaq: SYNA) is sending some mixed messages right now. Sales are great as touchscreens invade every corner of the modern home, but the quickest rise isn't happening where you might expect. I think that's a sign of weakness -- for the company and not for any particular industry.

Earnings jumped from $0.34 per share a year ago to $0.54 per share this time. Synaptics' revenue increased by 26% year over year to $145.8 million, led by a 29% rise in the PC products division. Growth for the mobile phone segment wasn't explicitly stated, but signs clearly pointed to a lower growth rate than the PC division.

Even if you count tablet computers as PCs, that burgeoning product category isn't helping Synaptics any today. Taiwanese screen builder Wintek made the touchscreen assembly for the only realistic tablet choice on the market today; Synaptics didn't even get a foot in the door with controller chips on the iPad because that business went to Broadcom (Nasdaq: BRCM) and Texas Instruments (NYSE: TXN). In fact, Synaptics just announced its first large touchscreen product, and I wouldn't expect it to make a difference to the top and bottom lines until perhaps two quarters from now.

Synaptics is between a rock and a hard place in these newfangled smartphone and tablet markets. Cheap screens and touch interfaces are available from a multitude of Far Eastern suppliers while TI, Broadcom, Cypress Semiconductor (NYSE: CY), and Atmel (Nasdaq: ATML) are jockeying with Synaptics for supremacy in the semiconductor part of those touchscreen assemblies.

Synaptics is a veteran of the touch-control game and will always be a threat to come up with some game-changing new technology. Right now, though, the better investment opportunity lies with Cypress, in my opinion. That company is growing faster than Synaptics, is probably not valued correctly today, and is doing it all thanks to the rampant touchscreen trend.

Would you bet on Synaptics over Cypress, or would you play the touchscreen opportunity in some other way? Share your thoughts in the comments below, if you please.