Silicon Labs (NASDAQ:SLAB) Weighed by Slowing FM Tuner, CPE Modem Businesses

Silicon Labs (NASDAQ:SLAB) struggled with their declining sales in their FM tuner and CPE modem businesses, dragging revenue down in the second half of 2010.

FBR says, "Clearly, Silicon Labs has been hit by shrinkage in its handset FM tuner and CPE modem businesses, driving 2H10 revenue underperformance. That said, SLAB's video products should grow from $20M of revenues in 2010 to $60M in 2011 (eight points of 2011 top-line growth), clock and timing revenues should grow in the high-double-digit range again (with SpectraLinear contributing), and other broadbased areas like MCUs, sensors, and capacitive touch should also grow solidly. So, yes, the stock is still expensive when looking at 2011 EPS, but still seems reasonably attractive longer term when considering Silicon Labs could grow toward $1B in annual revenues over the next three to five years (driving EPS of $3.50 including stock compensation expense) and arguing for an $85 stock at a 20x P/E. While this scenario is not near term, we do believe the firm is a true innovator with attractive products set to roll out for years to come, and thus valuing the firm only on 2011 EPS can seem quaint. While the stock is too expensive in the near term (and thus with downside to our $42 target), we await a more attractive entry point closer to $38–$40."

FBR Capital maintains a "Market Perform" on Silicon Labs (SLAB), which closed Thursday at $44.64, gaining $0.44, or 1.00 percent. FBR has a price target of $42 on SLAB.