A Tale of 2 Silicon Valleys


Silicon Valley is dividing itself into two distinct camps. In the red corner, we have disappointing market forecasts for coming quarters based on soft orders in June and macroeconomic issues. Here you'll find touchscreen controller specialistCypress Semiconductor (NAS: CY) and digital media expertSilicon Labs (NAS: SLAB) , among many others.

In the blue corner (or is it black?), the late summer, fall, and ensuing holiday season look much brighter with raised sales guidance and happy faces all around. Broadcom (NAS: BRCM) lives here, right next to memory makerSanDisk (NAS: SNDK) and, again, many more.

And now you can add radio chip builder RF Micro Devices (NAS: RFMD) to the happy camp.

RF Micro shares are soaring today, gaining nearly 4% in early trading on an otherwise gloomy market day. The company slid past expectations on both the top and bottom lines with earnings of $0.08 per share on $214 million in first-quarter sales. For the second quarter, management sees revenue in line with Street estimates.

Backing up the positive forecast, the company expects to widen gross margins slightly while growing sales among a more diverse customer base. That includes stealing market share in 3G and 4G tablets and smartphones, where the main competition comes from other RF players like Skyworks (NAS: SWKS) , which also recently posted its own earnings beat. Maybe the radio frequency industry is all-in-all just a lot stronger market than analysts have given it credit for.

CEO Bob Bruggeworth talked himself warm over increasing demand and plans to capitalize on strong markets; not once did he use the words "challenging," "macroeconomic," "cautious," or "wildebeest." (Just checking if you're paying attention.)

So which Valley is the real deal? Your answer will determine how you feel about buying chip stocks in this environment. My opinion should be obvious when you consider that I bought shares of memory-chip guru Micron Technology (NAS: MU) a couple of weeks ago. Deep-discount deals in the chip sector are plentiful, and I think you'd be smart to pay more attention to the RF Micro Pollyannas than the Cypress gang of Cassandras.

That's my two cents. What do you think about semiconductor stocks in this market? Share your thoughts in the comments section below.

At the time thisarticle was published Fool contributor Anders Bylund owns shares of Micron Technology, but he holds no other position in any company mentioned. Motley Fool newsletter services have recommended buying shares of Cypress Semiconductor and Silicon Laboratories. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio, follow him on Twitter or Google+, or peruse our Foolish disclosure policy.

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