3 Stocks at Apple's iPhone Core

Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's James Rogers appeared on NBR to highlight the lesser-known companies riding Apple's iPhone success. (Watch video and view transcript here.)

NEW YORK ( TheStreet) -- All eyes will be on Apple ( AAPL) this week, with the tech giant expected to launch its new iPad on Wednesday, hot on the heels of the Verizon ( VZ) iPhone.

While the precise iPad 2 specs are still unknown, Verizon iPhone 'teardowns' have shone a light on some of the less well-known stocks, such as Skyworks Solutions ( SWKS), Qualcomm ( QCOM), and Cirrus Logic ( CRUS), that are currently riding the Apple wave.

Verizon CEO Dan Mead has described the iPhone's debut as the most successful product launch in the company's history, and there has been speculation that Verizon has already sold more than a million of the iconic phones.
Word on the Street

The new iPhone marked the end of AT&T's ( T) exclusive deal to sell the device within the U.S. and capped months of intense speculation about its arrival on Verizon's network. Verizon is expected to sell around 11 million iPhones this year, although that figure may even prove conservative if recent iPhone sales at AT&T ( T) are anything to go by.

Read on for more details on how the Verizon iPhone is helping Skyworks, Qualcomm and Cirrus Logic spell upside for investors.

Skyworks Solutions

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One of TheStreet's Breakout Stocks, Skyworks gained share in the Verizon iPhone at the expense of TriQuint ( TQNT). Skyworks added an additional chip to the three power amplifiers it had in the original iPhone 4, further fueling the company's reputation as a big winner in the mobile Internet explosion.

The Woburn, Mass.-based firm recently hit a new 52-week high and has also received its share of analyst upgrades.

Skyworks also posted impressive first-quarter results recently, doubling its profit and continuing the company's recent momentum. The wireless-chip specialist expanded its gross margin and gave bullish second-quarter guidance, highlighting the potential for further growth.

It is not just the iPhone, though, where Skyworks has real estate. Other teardowns have also revealed a Skyworks power amplifier lurking inside the current Apple iPad, and the company is rumored to be in the next version of the iPhone.

In addition to Apple, Skyworks also provides chip technology for a slew of other technology heavyweights, including HTC, Samsung and LG Electronics and is well positioned for the push towards 4G networks.

The Skyworks story, however, is already getting out, pushing the company's stock up more than 133% in the last 12 months, although its stock dipped with the rest of the tech sector last week. Investors would be wise to look out for another pullback.

Qualcomm

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Qualcomm ousted Infineon ( IFX) to provide a 3G wireless chip within the new iPhone, a move that has placed the chipmaker firmly in the spotlight.

Although widely anticipated, the company's iPhone debut has already proved popular on Wall Street. Analyst firm Gleacher & Co. estimates that the San Diego-based firm is providing around $12 worth of content for the new Verizon phone.

It should come as no surprise, then, that Qualcomm, along with Apple itself, ARM Holdings ( ARMH) and Google ( GOOG) was one of the leaders of a recent tech sector rally.

In addition to the Verizon iPhone, though, there are plenty of other positives looming on the horizon for Qualcomm, whose stock has risen more than 61% over the last 12 months. Nokia's ( NOK) decision to ally itself with Microsoft's ( MSFT) Windows Phone software, for example, could bode well for Qualcomm's Microsoft-friendly chips.

There has also been speculation that the Verizon iPhone chip could serve as a springboard for Qualcomm to sell its technology into foreign telecom markets such as China.

Cirrus Logic

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Cirrus Logic is another chipmaker in Apple's inner sanctum. Its audio technology features within the new Verizon iPhone, as well as the current iPad and the iPhone 4.

Like Skyworks, the Austin, Texas-based firm also hit a new 52-week high on the strength of the Verizon iPhone, and the firm's stock has climbed more than 222% over the last 12 months.

In keeping with other Apple partners, Cirrus makes no reference to its illustrious customer, although the company is clearly enjoying its relationship with the iPhone maker.

During its recent fiscal third quarter, Cirrus Logic grew its revenue 47% compared to the same period last year, and the company said that it expects to grow sales faster than the broader semiconductor industry.

Cirrus also said that revenue from the firm's largest customer accounted for 54% of its total sales, up from 44% in the prior quarter.

"Our biggest problems are that our largest customer is the best company in the world," added Cirrus CEO Jason Rhode, during the firm's third-quarter conference call. "And it will be a challenge to hire enough engineers that meet our standards in order to staff everything we want to do going forward."

Tellingly, however, Cirrus is planning to expand its work force with 150 new hires within the next 12 to 15 months, most of whom will be chip engineers.

Cirrus Logic is rated as a buy by TheStreet Ratings on the strength of its robust revenue, cash flow and earnings per share growth. The company also has reasonable debt levels and a decent return on equity, offering investors a solid financial story.

--Written by James Rogers in New York.

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