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Friday, January 25, 2008

Synaptics loses its touch

Synaptics briefly became a proxy for Apple in that they were designed into a couple of iPod models (not the nano or the iPhone/iTouch) and they make a nifty touch screen product that's incorporated into LG's Voyager phone offered by Verizon -- an iPhonish product.

After peaking at $60 in November, Synaptics bled a straight line to the high 20s before rebounding to 31 and reporting earnings. A number of analysts defended it on the way down, suggesting rumors of market share losses in the notebook market to Alps were unfounded.

Last night, Synaptics reported an in line number and guided well below street consensus for next quarter.

Russ Knittel, Synaptics' Chief Financial Officer, added, "It is clear that
issues concerning the economy are impacting the general business outlook and
the behavior of our customers. Given the 34% decline in our backlog exiting
the December quarter to $37.5 million and recent reductions in customers'
forecasts, our current revenue outlook for the March quarter is in the range
of $76 to $82 million, representing an 18% to 27% increase over the comparable
period last year. Looking out to the June quarter, we currently anticipate
sequential revenue growth in the range of 11% to 19% relative to the mid-point
of our March quarter outlook. Despite uncertainty in the market, Synaptics is
on track to exceed the 25-30% revenue growth outlook for fiscal 2008 that we
provided entering the fiscal year, along with record profitability."

So backlog down 34% sequentially, revenue outlook of ~79mm with consensus of 85mm and guiding to roughly 85-92mm for June with street pretty much right there. They stated almost all of the incremental cutback to their outlook was related to the mp3 market, which has severe seasonality, especially when Apple yaks a quarter. They didn't confirm or deny the market share losses in notebook touchpads but they acknowledged a more cautious customer environment overall.

The stock responded by plunging to $24. I'm kind of surprised. I'd put it more in the low/mid 30s but I was appalled when it was at $50 and got run over being short it up to $60 so maybe I'm wrong again.

The world is not ending. It's just changing.

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