PREVIEW-Smartphones to give magic touch to Synaptics' Q4

* WHAT: Q4 results

* WHEN: Thursday, July 30

* Analysts looking at handset, PC shipments

* Q4 likely to be strong, weakness seen in FY'2010

By Shrutika Verma

BANGALORE, July 29 (Reuters) - Slowdown or no slowdown, the irresistible allure of touchscreen devices, and strong growth in netbook sales is expected to help touchscreen technology maker Synaptics Inc's (SYNA.O) results beat Wall Street expectations.

Both smartphones and netbooks have been sweet spots for the technology sector even as lower discretionary spending kills demand for consumer electronics products.

"We believe Synaptics should beat consensus estimates for fourth quarter owing to continued strength in the handset market, and greater stability in the PC/notebook market," said Paul Coster of J.P. Morgan Securities.

Wall Street analysts on average expect earnings of 44 cents, before special items, on revenue of $112.1 million, according to Reuters Estimates.

Thinkequity analyst Vijay Rakesh said he is estimating a 10 percent year-over-year growth for Synaptics in the smartphone market, where the company counts the likes of Samsung Electronics Co Ltd (005930.KS) and LG Electronics Inc (066570.KS) as customers.

Lazard Capital Markets analyst Daniel Amir expects netbooks in the quarter sales for the industry to more than double and expects Synaptics to track a similar growth on the netbook side.

Netbooks -- stripped-down PCs customised for Internet use -- took off in a big way last year after their launch in 2007, with shipments expected to double to 21 million units this year.

Slower rate of decline in PC shipments will also benefit the company since the segment accounts for more than half of total revenue.

ALL EYES ON OUTLOOK

However, analysts sounded a cautious note for the current fiscal year as competition snaps close on the heels of the company, which counts BlackBerry maker Research in Motion Ltd (RIM.TO) among its customers.

The benefit for Synaptics from Microsoft Corp's (MSFT.O) Windows 7, which features an array of new touchscreen functions, could push out well into fiscal 2010, Capstone Investments analyst Jeff Schreiner said.

Design losses in the smartphone segment also bring into focus the company's outlook for fiscal 2010. Wall Street will not just look out for units of touchscreens shipped in the June quarter but will be more keen on what they are guiding to ship in the September quarter.

Schreiner said that Synaptics lost the new Samsung's Omnia 2 and Research in Motion's Storm 2 designs to Cypress Semiconductor Corp CY.N.

Other chipmakers like Atmel Corp (ATML.O), Silicon Laboratories (SLAB.O) and Taiwan's Elan Microelectronics (2458.TW) have also forayed into the touchscreen technology business

"September is potentially a guide lower... the company has tougher year-over-year comparables, and their dominant position a year ago in touch screen smartphones has begun to fade," Schreiner said.

However, some analysts believe that even as the market gets more competitive, there's enough room for growth as the appetite for smartphones is here to stay. Currently, only about 1 percent of the more than one billion cellphones sold worldwide are smartphones. (Editing by Jarshad Kakkrakandy)