It's the Calm Before the Storm for 1 Chip Maker

There are many ways to skin a cat. You'll also find plenty of methods for hooking a business into the smartphone explosion.

Radio chip designer RF Micro Devices (NAS: RFMD) is doing it by stuffing more expensive signal processors into each handset. Discussing this week's third-quarter report, CEO Bob Bruggeworth said that RF Micro is "increasing its dollar content across the world's leading smartphones."

For example, the CES show earlier this month featured flagship phones for the Google (NAS: GOOG) Android and Microsoft (NAS: MSFT) Windows smartphone platforms, each containing RF Micro chips to handle multiple power bands. The company loves LTE 4G connections and can't wait for that technology to become widely available. Those next-generation radio chips are vey profitable.

The PowerSmart chip family for advanced networks is RF Micro's favorite son right now. "We have frankly more than we can handle in terms of baseband integration projects right now for LTE with PowerSmart," says Cellular Products VP Steven Creviston.

Nevertheless, RF Micro's 4G opportunity is somewhat hidden from investors. New products aimed at freshly broken market ground often take some time to develop, and RF Micro doesn't expect to take off in a cloud of rubber smoke right away.

The just-completed third quarter saw earnings of $0.02 per share on $225 million in sales, roughly in line with analyst estimates. Sales for the next quarter will fall to about $185 million -- a steep sequential drop and far below Street targets.

China represents more than one-third of RF Micro's sales. The large customers in the world's most populous nation are changing their logistics models right now and the Chinese New Year puts an additional damper on order visibility. So in an effort to support the changes in China, the chip maker's own inventories will balloon next quarter while sales come in a bit weak.

These are decidedly short-term issues, though. If LTE networks are half the kingmakers they've been presented as, RF Micro will soar once those new chips gain traction. This stock is a mildly speculative long-term play today, comparable to head-to-head rivals Skyworks Solutions (NAS: SWKS) and Avago Technologies (NAS: AVGO) . I've got bullish CAPScalls going on all three stocks, mainly thanks to the looming 4G opportunities they share. Each has a near-perfect four-star CAPS rating (out of five), showing that my fellow investors pretty much agree with my conclusions.

RF Micro Devices is one of the unsung heroes of the mobile computing revolution, but not the only one by a long shot. In 2012, these three industry neighbors look poised to crush the market. Find out which other stocks will benefit from this same dynamic by clicking here to access our free report about the mobile revolution just getting under way.

At the time thisarticle was published Fool contributor Anders Bylund owns shares of Google, but holds no other position in any of the companies mentioned. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and Google, and also creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.

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