Cell-Phone Guts Do the Talking

BOSTON (TheStreet) -- The big cell-phone makers get more media coverage than Tiger Woods' extracurricular activities. Apple(AAPL), Research in Motion(RIMM), Palm(PALM) and Motorola(MOT) have cool new phones that are flying off the shelves. But the companies' shares may not be the best way to profit from high-tech devices.

It's easy to forget that the name stamped on the front of a gadget didn't make everything buried beneath the shiny touchscreen. The guts of most phones are an amalgam of chips and circuit boards from smaller companies around the world that are better suited to produce the nuts and bolts of technology than the finished product. Companies like Marvell Technologies(MRVL), a supplier of connectivity chips for Research in Motion, and Texas Instruments(TXN), which makes the Palm Pre's processor, are examples of the auxiliary beneficiaries of the smart-phone boom. While they may not enjoy the same sort of margins or name recognition that the designers of the phones do, they bolster revenue by landing major smart-phone-chip deals.

The effect of smart-phone sales on those companies is difficult to determine due to the hush-hush nature of the orders demanded by cell-phone companies. Many times, suppliers are identified only when a phone is torn apart by research companies.

Other chip makers, like Qualcomm(QCOM) and Samsung, which is the envy of many since it supplies Apple with chips for the iPhone, are attractive derivative bets on the smart-phone market, but a broader type of technology probably offers greater opportunities for growth due to its universal applications.