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Management urged analysts not to panic, because the balance sheet is still strong, with $283 million in liquid assets and only $38 million in debt. And while OmniVision's customers "are being conservative, people are watching their own channels and inventories," according to sales Vice President Ray Cisneros, and the company's top-of-the-line chips with all-digital autofocus seem to be gaining traction in the market.
That's important, because it's a nifty feature that other camera sensor makers apparently haven't quite figured out yet. Not Kodak (NYSE: EK), nor Micron Technology (NYSE: MU), or even Texas Instruments (NYSE: TXN). That's what we call a competitive advantage here at the Fool.
Of course, you can have all the technology advantages you want and still lose money if nobody is buying camera phones. If I ran Nokia (NYSE: NOK) or Motorola (NYSE: MOT) these days, I'd certainly slow down my production lines until the recession is over. Given that OmniVision still bought back $13 million of its own shares last quarter and has that solid cash balance to fall back on, it seems like the company can survive a couple of lean years.
The buyback sort of makes sense. OmniVision's stock hasn't been this affordable since 2002, in the wake of the dot-com bubble. But, that doesn't mean you should buy it right now. Management gave guidance for a loss next quarter on slower sales. Add in a recession affecting the entire food chain -- consumer, phone producer, chip maker -- and investors buying today could be in for a bumpy, drawn-out ride. Ideal buying opportunity, this is not. (Did I just channel Yoda?)
Copyright © 2008 Universal Press Syndicate.