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Wednesday, July 16, 2008

More trouble in store for OmniVision?

OmniVision (OVTI) is a California semiconductor company that makes solid state image sensor devices, or camera chips, for cell phones and other consumer products. Though design is carried out in the United States, chip fabrication occurs in Taiwan.

DigiTimes has reported news of "CMOS image sensor supplier OmniVision planning on reducing its order volumes to Taiwan Semiconductor Manufacturing Company (TSMC) in the third quarter". Instead of increasing orders by 10% it will reduce orders by 10%.

A weakening in the handset market is said to be the cause of the reduction in orders. OmniVision apparently increased inventory too rapidly based on overly optimistic expectations for cell phone orders.

This comes after the company disappointed investors last quarter, missing analyst expectations for both sales and earnings. In the company's fiscal fourth quarter ending in April, sales fell 25%. EPS came in at $0.27, shy of analyst estimates of $0.32. The stock has fallen from over $19 in April to under $12 today.

This may add a question mark to a recent bullish recommendation by Caris chip analyst Betsy Van Hees who recently came out favorably on the company based on long-term strength in the image sensor market and a higher margin product mix.

On a side note, OmniVision's higher margin products will increasingly put it in more direct competition with Aptina Imaging, a spin off from Micron Technology and a company that has been successful targeting the mid-range to high-end of the CMOS image sensor space.

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