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Exar (NYSE:EXAR) shares fell on Wednesday following the release of the company's fiscal 2011 third quarter results. Revenues came in at $35.4 million, a scant 1.8% below the low end of Exar's guidance. The headline earnings figure was a loss of $5.0 million, or 11 cents per share, but when you exclude non-cash "expenses" such as stock-based compensation and amortization the actual cash loss in the quarter drops to $1.8 million, or 4 cents per share.

There's no question that Exar's results were on the disappointing side, and that guidance for the current quarter is also on the soft side -- but does it really matter?

If you listened to Exar's earnings call you'd get the distinct impression that something is brewing that by the end of this year will have brightened the picture considerably. Company officials played down expectation for the current quarter as their customers work down inventory, but they also talked about a high number of "design wins" and new products that will be entering the sales pipeline in the second half of calendar 2011. These products carry significantly higher profit margins in the area of 60% compared to margins in the latest quarter of around 45%. In addition, operating efficiencies and the final round of amortization expense on a large item in the quarter just ended should combine to create a better earnings picture as the year progresses.

And toward the end of the call Exar's CEO said that he is hopeful that he would soon be able to talk about some "massive design wins" with major companies.

Now, I have been around long enough to know that in almost every earnings call with a company that just reported disappointing results you'll hear the refrain that better news is just around the corner. In Exar's case, though, it just might be true.

Keep in mind that my interest in Exar stems from the fact that Soros Fund Management, one of the most successful and sophisticated institutional investors in the world, has been steadily accumulating a stake in Exar. Since I wrote my original column on Exar on December 14, 2010 Soros purchased an additional 27,761 Exar shares in late December at $6.84-$6.87 per share and now holds a total of 6,494,427 shares, or around 14.6% of the company.

In that column I wrote that, "I would bet Soros Fund Management sees something in Exar that is so far not readily apparent to the market" -- and certainly the tone of the earnings call yesterday creates the impression that some good news is coming later this year on the new-product front.

And remember: Exar ended the quarter with its massive cash position virtually intact at $4.55 per share in cash and marketable securities -- so really, with the stock trading just above $6 how much lower can the stock go unless the economy completely tanks and Exar's customers in the telecom, server and storage industries cut back their orders dramatically below Exar's already scaled-back expectations?

I am going to guess that it won't be long before we discover that Soros Fund Management added to its Exar stake once again on the current dip in the stock price. So, my advice is: Think like a Soros. Take a look at the cusion provided by Exar's cash position and buy Exar on this dip.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Exar's Stock Price Dip: Think Like a Soros