Novice Investing - Let's Envision OmniVision

Date: Monday 13th 2008f October 2008 10:37:19 AM

Let's Envision OmniVision - 12/10/2006

By: Novice Investing Staff

OmniVision Technologies Inc. (OVTI) shares had been pumelled recently, dropping as much as 15% in the day that it announced earning result to shareholders. Share price has traded low enough for us to start researching them as potential investment for our sample portfolio selection. Our research hereby start with OmniVision's 2005 annual report, which shall be discussed below.

OmniVision considers itself as the developer of high performance, highly integrated and cost efficient semiconductor image sensor devices. If this sounds geeky, image sensor device is basically camera that you can find on your cellular phones, digital camera and security camera. Nowadays, some toys are also equipped with such devices, to enhance its functionality. Image sensor devices can be separated into two categories; Charge-coupled devices (CCD) and multiple chip CMOS image sensors CMOS are less expensive and consume significantly less power than CCD. Until recently, CMOS image sensor's quality lags behind CCD. As a result, it was used mainly for lower cost applications such as PC video cameras. With recent improvement in semiconductor manufacturing process, CMOS experience a significant improvement in their image quality. Thus, understandably more and more applications are tilted towards CMOS. OmniVision too, experienced a large spurt of revenue growth from the CMOS segment.

OmniVision offers a better solution for companies for the need of a CMOS products in several different fashions which include: 1) High Image Quality and Resolution, 2) Lower Cost:, 3) Smaller Size and Lower Power Consumption, 4) Accelerated Time to Market, 5) Streamlined Manufacturing and Production, and 6) Ease of use. OmniVision also elaborated their business strategy in the future. Each point was explained briefly on its annual report. The strategies employed include the following: 1) Maintain and Extend Technology Leadership, 2) Leverage Expertise Across Multiple Mass-Market Applications, 3) Further Develop Close Customer Relationships, 4) Continue to Develop Our Proprietary Technology to Maintain Competitive Advantage, 5) Increase our Market Presence

As for sales, OmniVision derives almost 99% of its revenue outside of America. This does not mean that you will not see its product used in the US. Primarily, this is due to the trend of outsourcing. As most manufacturers outsource its products overseas, OmniVision needs to ship this product overseas to be assembled. Thus, the high percentage of overseas sales.

And finally competitors; OmniVision compete amongst the very best in the industry which includes Agilent, Canon, Fujitsu, Kodak and Micron technology in the CMOS segment and Fuji, Matsushita, NEC, Sharp, Toshiba in the CCD segment. Recent development points to Micron gaining ground in the CMOS segment against OmniVision. As most of the industry growth is coming from CMOS, this is not an encouraging sign for OmniVision. Meanwhile, the rest of the annual report talks about OmniVision's financial statement, which you can find on other financial publication such as Yahoo! Finance. Therefore, we would not go any further.

In general, OmniVision's annual report is not as helpful as we expect. However, as most of OmniVision's competitive advantage is its technology, we understand that it should describe its strategy without having to reveal its trade secret.

END

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding OmniVision Technologies Inc. (OVTI) or any other securities.

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