Sunday, February 12, 2006

Synaptics Not Part of the iPod Equation

Shares of digital solutions provider Synaptics (SYNA) could take another beating this week after disappointing news related to a negated contract with consumer electronics colossus Apple (AAPL) surfaced Sunday night.

And we thought we were obsessed with stocks -- some very aggressive analysts who don't take their vocation lightly cracked the case over the weekend:

Bear Stearns analysts Andrew J. Neff, Bill Hand, and Ted Chung have cracked open a new 1GB iPod nano to see whose user interface solution was inside. They found some bad news for Synaptics and continued good news for Cypress Semi (CY), as their note to clients describes: Cracking open the new 1GB iPod nano (kids — do not try this at home), we discovered that the unit we purchased still incorporated the CY chipset (CY8C14) for the user interface solution. While this discovery does not exclude the possibility that SYNA could still have won back some of the AAPL iPod business or that the business is dual sourced and we opened up a non-SYNA unit, we see it as a negative since investor expectations are that the new 1 GB nano would contain SYNA’s solution. (via SeekingAlpha)

So, Synaptics is a no-go.

Investors should be cautious with another iPod derivative, namely, PortalPlayer (PLAY). It, too, lacks a diversified revenue profile.

If Apple drops it like a hot potato, PortalPlayer will get crushed under an avalanche of sellers.

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