A Brighter Cell-Phone Picture For OmniVision

By Gene G. Marcial

Omnivision Technologies (OVTI ) had been riding the wave in digital cameras and cell phones that take pictures. OmniVision makes single-chip sensors for capturing images in such devices, which account for 83% of its revenues. In early 2003, its stock was at 8; by Dec. 1 it hit 33 and, despite profit-taking, traded at 29 in early April. But then skeptics began to argue that sales growth would slow.

Depressed By Dire Forecasts
On June 9, OmniVision delayed reporting earnings for fiscal 2004 ended Apr. 30 -- it had to restate financial results for the first three quarters of that year. By August, the stock had fallen to 9 and it has since trudged up to 14. The restatement, caused in part by delayed bookings of revenues, actually resulted in higher earnings, says Chris Hackett, who heads Greenwich Investments and calls the skeptics wrong. He predicts that OmniVision's customers, who account for half the cell-phone camera business, are likely to ship 142 million units this year vs. 29 million last year. Given the company's clean balance sheet, lack of debt, and cash of $3.15 a share, its stock is cheap, he says.

Paul Coster of J.P. Morgan Securities (JPM ), which has done banking for OmniVision, rates it "overweight" and sees profits of $1.21 a share on sales of $399 million for fiscal 2005, and $1.59 a share on $472.59 million in sales for fiscal 2006.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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