Motley Fool Hidden Gems recommendation Atheros Communications (Nasdaq: ATHR) looked like a supremely focused Wi-Fi expert once upon a time, but those days are long gone -- by at least six months or so. These days, the company is doing well with a more diversified strategy that still looks like a laser beam to those who don't follow tech stocks very closely.

Only weeks after buying GPS chip specialist u-Nav and thus entering yet another product area that is related to, but not quite the same as, its own core competency, Atheros gave us more evidence that the new direction is working. Solid profits and 8% sequential revenue growth capped a pretty good year that nevertheless fell a bit short of my hopes for Atheros in 2007.

The stock price increased by 20% in the past year. That's far behind dark horses such as information security specialist Zix (Nasdaq: ZIXI), which more than doubled in price, but it's still ahead of 13 out of 14 other hopeful small caps my fellow Fools have championed. The exception is Todd Wenning's pick, Pan American Silver (Nasdaq: PAAS), which pulled off a 30% gain.

In the traditional conference call, management boasted that its diversification strategy was getting results, with the company's additional inroads into six product categories that range from Bluetooth technology to Wi-Fi and GPS. CEO Craig Barratt estimates that his company faces a total addressable market of more than $5 billion in 2008.

There's plenty of competition for slices of that $5 billion pie, from tiny Metalink (Nasdaq: MTLK) to massive Texas Instruments (NYSE: TXN), with focused communications specialists such as Broadcom (Nasdaq: BRCM) nestled in between. But Atheros has a solid history of innovation, and I don't think the company has yet fulfilled the potential it showed a year ago.

Move aside, guys. Atheros wants some pie.

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Fool contributor Anders Bylund holds no position in any company discussed here, although he wishes he had owned some last year. You can check out Anders' holdings if you like. Foolish disclosure has an impressive range, from a solid baritone to glass-shattering falsetto.