In the tech industry, communication matters a lot. It partly defines the line between the losers and the winners in the industry. That should explain why Silicon Image, Inc. (NASDAQ:SIMG) has taken an early opportunity to warn its shareholders that visibility is not very good down the road. Although the company sounded the alarm over its top-line that would likely be under pressure in 2015, the management remains optimistic that they have good products to offer.
Analyst help identify trailing stop-losses for both long and short position in SIMG.
10% revenue decline
On December 18, Silicon Image, Inc. (NASDAQ:SIMG) became very honest with investors and said that they shouldn’t expect much from the company in 2015 in terms of revenue growth. In fact, instead of an increase in revenue next year, the company anticipates 10% top-line decline in the year. The company cited various reasons revenue will be problematic in 2015, but one that quickly grabs the attention is that one of its largest customers was facing a slowdown in mobile design contracts.
Expenses reduction
To adjust to the new revenue reality, Silicon Image, Inc. (NASDAQ:SIMG) intends to make some tweaks within its system. Such will ensure that its profits are not eroded even when revenue is expected to decline. According to the company’s CEO, Camillo Martino, 2015 is a year during which they are committed to cutting operating expenses. As such, Martino anticipates that their operating margin in the year will either go up slightly or remain flat in 2015, which should keep them as a profitable company even during the hard revenue times.
It is worth recalling at this juncture that Silicon Image, Inc. (NASDAQ:SIMG) operates in several segments. As such, the company anticipates serious revenue headache in its mobile business. However, there is hope that the strength in the other segments, especially the consumer electronic business, will help offset the trouble in the mobile segment.
Financial outlook
Silicon Image, Inc. (NASDAQ:SIMG)’s revenue has been up and down for the past three quarters of 2014. The company had revenue of $70.33 million in the most recent quarter. It earned a net income of $10.30 million in the quarter and had $102.54 million in cash at the end of the quarter.
Technicals
Silicon Image, Inc. (NASDAQ:SIMG) traded to create a huge Saucer pattern on the charts in the year 2014. The area around $7 rejected the first rally of the year in March-April and the price crashed to $4.75 and then to $4.50 levels before it found the bottom. Now the stock has faced very strong supply from the same resistance near $7 after the steep rally for the last 2 months. The sharp drop yesterday has resulted in a failure of the 50 DMA to cross above 200 DMA, and that may keep the prices below $7 levels for a few months now.
