However, execution remains an issue, since there are significant hurdles between securing a design win and generating revenue from it. The company has $6.45 of net cash per share, which limits downside risk. We continue to rate shares of Exar a Hold and reiterate our target price of $9.00.

EXAR's revenue continues to grow, with Alcatel (ALU) making a 14.2% contribution in the last quarter. Networking and transmission products grew very strongly, increasing nearly 24% sequentially. SONET was the major driver within this segment, while T/E carrier devices were a mixed bag.

Design win activity was strong in the last quarter. There were 19 new products in the September quarter. The company has no long-term debt and net cash-per-share of $9.60. This provides management with operating flexibility and the option to consider share repurchases.

The communications business continues to be highly competitive, although the pricing environment has stabilized. End-user demand for telecommunications and networking equipment is still soft. The company launched several clocking products in the June quarter; however, sales continue to languish in the $20K-30K-a-quarter range. Although the recent ON business acquisition brings a potentially new growth product, this will have production ramp-up costs, which will be a drag on near-term margins.

The near-term visibility does not show promise, but longer-term growth prospects are looming. We view the softness at serial communications as temporary. Telecommunications service providers have raised capital spending budgets by roughly 5-10% for 2008, which should trickle down to the semiconductor component and device providers such as EXAR.

Texas Capital Misses Target

Texas Capital Bancshares, Inc.'s (TCBI) 2Q08 operating results were $0.22 per share versus $0.31 per share recorded in the prior-year period. Results came in well below our expectation, even though 2Q08 average portfolio loans expanded 21.3% year-over-year. The miss from expectations resulted from significantly higher-than-expected provisions for loan losses and nonperforming assets recorded for the quarter.

Within the press release, the company's guidance is now $30-33 million, or $1.12-1.23 per share. Therefore prior to the conference call, we are lowering our 2008 and 2009 earnings expectations to $1.18 per share and $1.40 per share, respectively, from $1.26 per share and $1.45 per share. We continue to view the shares of TCBI as a Hold.

Currently, the shares of TCBI trade at 1.16x its 2Q08 book value of $11.76 per share and 11.5x our new 2008 EPS target. Our new six-month target of $14.40 per share equates to 1.15x our projected 4Q08 book value of $12.45 per share. This target price also equates to 12.5x of our 2008 projected earnings per share. With no dividend to supplement the return, this equates to a 5.9% expected return over that period.