Free Annual Reports
Atmel Lives Up To Expectations, And Then Some
What is the best thing a company can do when its shares look overvalued? Deliver excellent quarters with better-than-expected performance and grow into that valuation. That seems to be the theme for microcontroller maven Atmel (Nasdaq:ATML), as a great earnings report should help maintain what has been torrid momentum in the second half of this year.
IN PICTURES: 9 Simple Investing Ratios You Need To Know
Nothing "Micro" About The Quarter
Despite plenty of evidence from analog giants like Linear Technology (Nasdaq:LLTC) and Texas Instruments (NYSE:TXN) that ship-ahead risks may prove real in many sectors (especially computers, but also industrial and automotive to some extent), Atmel logged a fine quarter and guided toward sequential growth.
Revenue jumped 40% this quarter on an annual basis, and 13% sequentially. The microcontroller business was even stronger, with 29% sequential growth and nearly $256 million in revenue contributions. All in all, it was good enough for a 4% beat, relative to analysts' expectations. (For more, see Strategies For Quarterly Earnings Season.)
Margins were an even more encouraging story. Gross margin rose to 47% (up from 41% in the second quarter and 31% a year ago), helped not only by a corporate restructuring, but also by the increasing contribution of the maxTouch product line. At the bottom line, and after adjustments, Atmel beat the average analysts' guess by 50%.
The Road Ahead
Unlike many other chip companies, Atmel sounded relatively positive about the near-term future of the business. Some of this is almost certainly a product of the company's size and upcoming launches - Atmel is still small enough that a big launch moves the needle. To that end, Samsung is going to be launching tablets with maxTouch chips in the fourth quarter, and Atmel continues to do well with smartphone developers like Motorola (NYSE:MOT) and Apple (Nasdaq:AAPL).
Of course, no story is perfect or bulletproof. Rivals like Cypress (NYSE:CY) and Synaptics (Nasdaq:SYNA) target the same customers and markets as Atmel, and they also want to get as many of their chips into as many phones and gadgets as possible. Atmel seems to have the winning formula in terms of footprint, power consumption, functionality and price, but rapid development cycles in the chip space make any lead tenuous and some companies are happy to compete on price.
The Bottom Line
It is tough to argue with the basic idea that if the Samsung Galaxy tablet is a big hit, Atmel will have a pretty strong tailwind for the next couple of quarters. It also seems reasonably true that analyst expectations for Atmel's near-term performance are not all that aggressive. So, if Atmel can rely upon the maxTouch to help it sail through this dip in the semiconductor cycle, the company may continue to outperform in the financials and in the market. (For more, see A Tale Of Two Cities In The Chip Space?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: 9 Simple Investing Ratios You Need To Know
Nothing "Micro" About The Quarter
Despite plenty of evidence from analog giants like Linear Technology (Nasdaq:LLTC) and Texas Instruments (NYSE:TXN) that ship-ahead risks may prove real in many sectors (especially computers, but also industrial and automotive to some extent), Atmel logged a fine quarter and guided toward sequential growth.
Revenue jumped 40% this quarter on an annual basis, and 13% sequentially. The microcontroller business was even stronger, with 29% sequential growth and nearly $256 million in revenue contributions. All in all, it was good enough for a 4% beat, relative to analysts' expectations. (For more, see Strategies For Quarterly Earnings Season.)
Margins were an even more encouraging story. Gross margin rose to 47% (up from 41% in the second quarter and 31% a year ago), helped not only by a corporate restructuring, but also by the increasing contribution of the maxTouch product line. At the bottom line, and after adjustments, Atmel beat the average analysts' guess by 50%.
The Road Ahead
Unlike many other chip companies, Atmel sounded relatively positive about the near-term future of the business. Some of this is almost certainly a product of the company's size and upcoming launches - Atmel is still small enough that a big launch moves the needle. To that end, Samsung is going to be launching tablets with maxTouch chips in the fourth quarter, and Atmel continues to do well with smartphone developers like Motorola (NYSE:MOT) and Apple (Nasdaq:AAPL).
Of course, no story is perfect or bulletproof. Rivals like Cypress (NYSE:CY) and Synaptics (Nasdaq:SYNA) target the same customers and markets as Atmel, and they also want to get as many of their chips into as many phones and gadgets as possible. Atmel seems to have the winning formula in terms of footprint, power consumption, functionality and price, but rapid development cycles in the chip space make any lead tenuous and some companies are happy to compete on price.
The Bottom Line
It is tough to argue with the basic idea that if the Samsung Galaxy tablet is a big hit, Atmel will have a pretty strong tailwind for the next couple of quarters. It also seems reasonably true that analyst expectations for Atmel's near-term performance are not all that aggressive. So, if Atmel can rely upon the maxTouch to help it sail through this dip in the semiconductor cycle, the company may continue to outperform in the financials and in the market. (For more, see A Tale Of Two Cities In The Chip Space?)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Stephen D. Simpson, CFA
Stephen D. Simpson, CFA, is a freelance financial writer, investor, and consultant. He has worked as an equity analyst for both sell-side and buy-side investment companies in both equities and fixed income. Stephen's consulting work has focused primarily upon the healthcare sector, while he has also written extensively for publication on topics pertaining to investments, security analysis, and healthcare. Simpson operates the Kratisto Investing blog, and can be reached there.
Free Annual Reports
