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Miscommunication?
Earlier this week, shares of OmniVision Technologies (OVTI) traded significantly lower following a poorly communicated article from The Wall Street Journal, in which Sony (SNE) CEO Howard Stringer was quoted making a curious comment regarding Apple (AAPL). Stringer reportedly said, "It always puzzles me. Why would I make Apple the best camera?"

The article specifically points out that Stringer references Apple and Steve Jobs several times during his interview with Walt Mossberg of The Wall Street Journal. Between the article's various Apple references and the peculiar Stringer quote, OmniVision shareholders were sufficiently spooked by Sony's persistent spectre. Even as the popularity of Apple's products has ensured prosperity for OmniVision shareholders, the market has been easily spooked by frequent rumors of Sony replacing OmniVision as Apple's primary supplier of camera components.

Not So Fast
We continue to believe that Sony is unlikely to overtake OmniVision's relationship with Apple in the near future. Sony continues to face production issues related to the recent earthquake. In addition, Sony and Apple are still natural competitors and, as such, it would be hard to envision Sony assuming a major role in Apple's chief products.

Its recent deal with Eastman Kodak (EK) to purchase 850 image-sensor related patents for $65 million only highlights the company's growing value as a cutting edge designer and manufacturer that should continue to benefit from the global secular growth of smartphones.

OmniVision Technologies trades with a forward P/E of 11.92 and a PEG ratio of 0.91. This appears to be an inexpensive valuation for an Apple derivative play. Considering the expanded opportunities that come with the iPhone's addition to the Verizon (VZ) network, we think OmniVision's prospects remain positive. Investors should give OmniVision a closer look, they may like what they see.

Source: OmniVision: Profit From Apple/Sony Paranoia