There's a quote out there, apocryphally quoted to former NFL player Randy White, that “potential is a fancy French word that means you haven't done anything yet”. Although that is arguably a harsh introduction to semiconductor company Microsemi (Nasdaq: MSCC), there is an element of truth to it – Microsemi could indeed be an attractive semiconductor stock to hold at these prices, but the company needs to begin delivering on the growth and margin potential that bulls have long seen in the name.
Come Hell Or High Water
There were multiples concerns that set these shares back in 2011, but it is worth noting that Microsemi's performance was not that bad in the context of a generally poor year for semiconductor stocks.
For starters, the near-constant wrangling over the federal budget and the concern over the government's debt and deficit situation has led investors to assume significant cutbacks in defense spending. With roughly one-third of Microsemi's business coming from selling to defense contractors like Lockheed (NYSE: LMT), Raytheon (NYSE: RTN), and L-3 (NYSE: LLL), that's no trivial concern. Fortunately for the company, the recent defense budget was not as bad as initially feared and the company stands to benefit from smart warefare retrofit projects (like GPS-equipped mortars).
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Microsemi Needs To Start Delivering On Its Potential
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