Thursday, August 02, 2007

Wipeout: SiRF's Down

SiRF Tech (SIRF) reported earnings the other day that were a bit disappointing. And the ensuing reaction by the stock was even more disappointing.

The company reported in-line earnings, but they were aided by a lower tax rate. The big disappointment was that they lowered revenue guidance, citing a slower than expected ramp in wireless.

This had been one of the areas that made me the most bullish. There is talk that much of the weakness stemmed from problems at Motorola (MOT), as opposed to the company losing market share or carriers losing interest in LBS.

So the bullish thesis is that wireless growth will still kick in at some point, and that the attractive growth profile for the company warrants sticking with the investment. The bearish argument is that the last few earnings reports have been disappointing, and thta brings into questions management's ability to execute.

I have traded SIRF very profitably over the last couple of years. This trade was looking good, adding to the position in the low 20s, and watching it rise into the mid 20s. At that point, I hedged my risk. But going forward, I think SIRF is going to be in the penalty box for a while, and I might use any bounce to exit positions and deploy the proceeds elsewhere.

long SIRF


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