Silicon Labs Continues To Underperform (SLAB)

| About: Silicon Laboratories, (SLAB)

Silicon Laboratories Inc.'s stock dropped further yesterday. Silicon Labs (NASD:SLAB) engages in the design and development of analog-intensive mixed-signal integrated circuits. Revenue for Q1 06 came in at $114.5 million. Last year, the number was $104.7 million and in Q4 05, revenue was $109.9. Guidance for Q2 06 is $116 to $120 million.

There was not much movement in the revenue numbers as the company moved quarter-to-quarter in 2005, and the 2005 top line was actually below 2004. Operating income did not move much in the 2005 quarters either with the exception of a sharp drop in Q3, due to high R&D costs.

Operating income in Q1 06 was $11 million. A year ago, it was $19.8 million. With stock-based compensation backed out, operating income would have been flat at $20.8 million.

The company's mixed-signal ProSLIC business grew 60% from the same quarter a year ago. The company also said that its mobile handset business improved. But, based on overall growth, that means there must have been some lines of business that did not do particularly well. The company did not waste any ink on those issues.

The open question about Silicon Labs is how it is possible that the stock has been doing so well? Last May, the stock was at $24.62 and it rose to $60 in April, an extraordinary run given the mediocre financial performance of the company. The Q1 06 news was viewed as negative, but the stock is still above $50 and still trades at 7.3 times sales.

You can't fight gravity forever.

SLAB 1-yr Chart

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of and Edgar Online. He does not own securities in companies he writes about. He can be reached at

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Tagged: , Semiconductor - Specialized
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