Atmel Corp (ATML)

Atmel Corporation is the leading company in the world which engages in research, designing, manufacturing and marketing of advanced semiconductors, including microcontroller, nonvolatile memory, mixed analog and digital, radio frequency and sensor integrated circuits. Its products are used in diverse end markets such as Communications, PC, consumer electronics, automotive, security and imaging.

In the recently concluded quarter company reported an 8% decline in the revenues on a quarter on quarter basis but on a year on year basis the revenue grew by 5%. The recent fall in the revenues is attributable to overall inventory correction in the general market for the quarter. The company is adopting a conservative approach for the first quarter of 2007 due to lower base of shipments driven by seasonality, cyclicality, and QUALCOMM.

However in the longer run, the company is expected to perform well with the announcement of management’s new restructuring plan. This plan includes selling of two European fabs, eliminating about 1300 employees, and disinvesting or exiting low margin businesses. The plan is expected to be a big positive for the investors as the firm expects cost savings of $70-80 million in 2007 and $80-95 million in 2008 and add about $0.05-0.07 of annual cash EPS savings.

The microcontrollers are the biggest contributor to the company’s revenue pie with over 35% share, with higher profit margins. Despite the slow down in overall business environment the microcontroller segment grew by 33% in 2006, with the majority of this increase coming from AVR products, its proprietary 8-bit and now 32-bit microcontroller product families, which expanded over 60% year-over- year. The company was the fastest growing among the 8-bit microcontroller supplier in 2006 and this bull-run is expected to continue in 2007 also.