Silicon Labs Beats, Stock Sinks

Sales rise 33%.
By Alexei Oreskovic ,

SAN FRANCISCO --

Silicon Laboratories

(SLAB) - Get Report

beat Wall Street profit estimates by two cents in the first quarter and guided revenue above expectations.

But the stock was down 4% at $33.85 in midday trading Wednesday -- on an apparent sell-the-news reaction by investors who have seen shares rise 33% since bottoming out at a 52-week low of $25.39 in January.

Friedman, Billings, Ramsey analyst Craig Berger says the only two negative pieces of news in the chipmaker's quarterly report were projections of a higher tax rate for the remainder of the year, and lower interest income due to cash held in troubled auction rate securities.

"But that bad news is likely to be more than fully offset by the better revenue," said Berger, who has a market perform rating on Silicon Labs and whose firm makes a market in Silicon Labs shares.

Silicon Labs forecast that revenue in the current quarter will range between $98 million and $101 million, vs. the average analyst expectation of $97.6 million.

"Either people are overacting to that stuff, or potentially expectations were for more," Berger says, noting the

strong results from other chipmakers that play in the networking business

, including

Broadcom

(BRCM)

and

LSI

(LSI) - Get Report

.

Silicon Labs said sales of its radio receiver chips increased sequentially, despite what it said is typically a seasonally weak quarter.

The company said its microcontroller chip business was up 40% year-over-year, but down sequentially due to what Silicon Labs characterized as seasonal weakness in the portable navigation device market.

On Wednesday,

Garmin

(GRMN) - Get Report

, the No.1 maker of the portable navigation devices,

reported weaker-than-expected financial results and saw its stock sink 10%

.

For the three months ended April 5, Silicon Labs generated $98.2 million in sales, up 33% year over year, and above the $95 million expected by analysts.

The Austin, Texas-based chipmaker earned $10.8 million in net income, or 21 cents a share, vs. $155.6 million, or $2.84 cents a share at this time last year, when Silicon Labs benefited from $155.6 million gain from

the sale of its cell phone chip business to NXP

.

Excluding stock compensation expenses, Silicon Labs said it earned 38 cents a share in the first quarter, vs. the 36 cents expected by analysts polled by Thomson Financial.

"We have a global business, a number of new product cycles and new tier-one customers beginning to ramp," said CEO Necip Sayiner in a statement. "We're introducing products at an accelerated pace and continuing to fortify our leadership position in key markets."

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