Tickers in this Article: BRCM, SLAB, LLTC, AAPL, TXN, INTC
Once again, the semiconductor sector offers a remedial lesson that not every company in a sector is inexorably bound to the fate of its brothers. While semiconductor stocks from Linear (Nasdaq:LLTC) to Texas Instruments (NYSE:TXN) to Intel (Nasdaq:INTC) have had their issues with near-term growth outlooks, Broadcom (Nasdaq:BRCM) seems to be rolling on without many worries. In contrast, Silicon Labs (Nasdaq:SLAB) seems mired in a miss-and-lower cycle that is punishing patient shareholders.

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The Quarters That Were
Broadcom certainly is not suffering its prime exposure to Apple's (Nasdaq:AAPL) iPhone/iPad, nor its decision to focus on high-performance "combo" chips. Revenue for this third quarter jumped 44% from last year, and 13% sequentially. Better still, the company actually raised its guidance for the next quarter, and is looking for modest sequential growth (where most companies are forecasting sequential declines). Broadcom also benefited by holding reported operating expense growth to 26% - meaning that the company saw significant operating leverage and operating income growth.

On the flip side, Silicon Labs had a rough quarter. Revenue dropped 5% from last year (and 11% sequentially) and just barely missed the consensus guess. Management was candid about at least part of the problem stemming from inventory misalignment, but that is a good news/bad news situation (good that they are candid, bad that they made the mistake). More concerning, though, was the company's 11% reduction in fourth quarter revenue relative to the preexisting estimate.

The Road Ahead
For Broadcom, it is difficult to see what the company could be doing better at the moment. The wireless business is hot (up 27% sequentially) and Broadcom is even squeezing some growth out of the sluggish enterprise market. The company should be able to ramp up business with Nokia (NYSE:NOK) in smartphones, and is taking a very focused approach to a cellular baseband business that may end up getting lucratively split with Qualcomm (Nasdaq:QCOM), Intel and ST-Ericsson.

For Silicon Labs, investors need to hope that management can stanch the bleeding and reposition itself with an eye toward better growth. There is an urban legend on Wall Street that companies miss-and-lower three times before resuming growth, and Silicon Labs should be at (or near) the end of that cycle. Moreover, this is a company that has shown the ability to innovate and position itself strategically in the past, so it would seem unfair to just assume management has lost its mojo.

The Bottom Line
It should surprise no one that Broadcom carries hefty multiples today. With arguably the best near-term growth prospects, Broadcom is likely going to be a darling of both the growth and momentum crowds so investors waiting to buy a real dip could be waiting a while.

By comparison, Silicon Labs looks cheaper, but it has been getting cheaper for most of the summer. It arguably is not enough of a bargain to qualify as a value trap, but it does highlight the risk of shopping for tech stocks on the basis of relative valuation - often the relatively cheaper stocks have great near-term growth risk. All that said, Silicon Labs could still pay off for patient investors who can stomach a company with above-average earnings volatility and some meaningful near-term challenges. (For more, see Atheros And Texas Instruments Chips Ahoy.)

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