OmniVision: Rumored Kodak Deal Not Likely

OmniVision (OVTI) shares have been creeping higher on revived rumors that the company might be an acquisition target for Kodak (EK). But Jefferies & Co.’s Adam Benjamin wrote yesterday that the “chatter is likely misplaced,” since Kodak already has a portfolio of CMOS sensors and manufacturing.

He adds that buying OVTI for any other buyer “will be very challenging due to OVTI’s deteriorating margins and slow topline growth.”

Meanwhile, he sees a potential negative catalyst for the stock in today’s earnings report from Micron (MU). Micron is a prime competitor with OmniVision in the market for image sensors used in digital cameras and camera phones.

“We expect weak results from Micron’s image sensor business when it reports earnings…Although Micron has a higher concentration with Motorola (MOT) than OVTI, we believe the likely weak results will still be viewed negatively for OVTI,” he contends. Benjamin says he thinks Motorola accounted for 5%-10% of OVTI’s revenue in the January quarter, and says there is increased risk to his estimates for the company’s fiscal fourth quarter ending April. (He is looking for the company to break-even in the quarter on revenue of $104 million.)

Concludes Benjamin: the takeover rumors and expected weak sensor results from Micron “provide a short-term trading opportunity to the downside for OVTI.”

Yesterday, Omnivision was up 26 cents at $12.90.

Yesterday: Micron: Baird Upgrades, Others Trims Estimates Ahead Of Feb Qtr Results Wednesday

OVTI 1-yr chart