Silicon Image: Stock Slides Over 6% On Weak Outlook

Silicon Image (SIMG), which makes chips used for HDMI output in flat-panel televisions and other video products, was off more than 6% Friday after the company issued disappointing guidance for the June quarter and for all of 2007.

The company reported first quarter revenue of $69.1 million, and pro forma profit of 7 cents a share, roughly in line with Street expectations. But the company also said it expects Q2 revenue of $75 million to $79 million, with gross margins of 50%-53%, which would be down from 56% in the previous quarter; for the full year, the company trimmed revenue guidance to a range of $325 million to $345 million, from $340 million to $360 million previously.

The Street is not impressed with the path Silicon Image is taking at the moment.

Adam Benjamin, an analyst at Jefferies & Co., wrote Friday morning that investors should sell the stock. He says Silicon Image continues to see price and margin erosion for HDMI products, and “faces significant challenges with its TV strategy,” among other factors.

Daniel Gelbutch, of CIBC World Markets, repeated his Sector Performer rating on the stock, citing “a murky HDMI competitive landscape, the ongoing ramp of new products and the integration of newly acquired Sci-worx."

Ruben Roy, an analyst at Pacific Crest, notes that one reason for the reduced outlook is lower expectations for PlayStation 3 sales; he says a Sony (SNE) price cut for PS 3 could prove a second half catalyst for unit sales. Nonetheless, he keeps his Sector Perform rating on the stock.

Tristan Gerra, an analyst with Robert W. Baird, says he is “very skeptical about management’s comment that gross margin will rebound going forward.” He remains Neutral on the stock, asserting that “on-chip integration, a more difficult competitive landscape and overall commoditization of HDMI technology remain primary concerns.”

Silicon Image Friday was down 54 cents at $8.41.

SIMG 1-yr chart: