Tickers in this Article: ATML, CY, LSI, MCHP, TXN, ONNN, MOT
Some investors want nothing to do with companies that are in the midst of turning around their business and repositioning themselves for future growth. Well, that is their loss. Not all companies succeed in self-improvement to the extent that Atmel (Nasdaq:ATML) has, but this not-so-little semiconductor company is a good example of the rewards that can accrue when patient shareholders and committed management intersect.
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A Strong End to a Strong Year
Atmel has been doing better for a little while now, but the fourth quarter put something of a finer point on that. Revenue rose 3% sequentially and 33% from last year, which is not only above what analysts had projected, but rather compelling in comparison to rivals like Cypress (NYSE:CY), LSI Logic (NYSE:LSI) and Microchip Technology (Nasdaq:MCHP). Better still, that growth rate is somewhat inaccurate on an as-reported basis; subtracting the Smart Card business (which the company divested) shows sequential growth of 10% and year-on-year growth of 44%.

Clearly, then, thing are going well for this company. The company's microcontroller business is doing well, and Atmel is gaining share in the non-Apple gadget market with its line of maXTouch controllers (which basically run the touch-screen interfaces). Atmel is already on board with devices from Nokia (NYSE:NOK), Motorola (NYSE:MOT), and HTC and although it has a formidable competitor in the likes of Texas Instruments (NYSE:TXN) (as well as Cypress to some extent), these chips are gaining share and impressing designers. (For more, See Texas Instruments Suggests A Soft Landing In The Works.)

Atmel also continues to do well with its profitability. Gross margin was more than 10 full points higher than in the year-ago period; a testament to the benefits of not only boosting revenue, but restructuring operations. Sadly, the company does not offer a cash flow statement with its earnings - a sour note in an otherwise encouraging report.

The Road Ahead
Atmel is perhaps something of a testament to what can be accomplished when management stops listening to the Street and instead focuses on doing those things that make the most long-term sense for the business. Atmel encountered more than a little skepticism back when it acquired most of what has become its touchscreen controller business, and some analysts and investors clearly thought the company should have sold its microcontroller business when it had the chance.

Investors may remember that Microchip and ON Semiconductor (Nasdaq:ONNN) offered to dismember Atmel back in late 2008, when there was still a lot of doubt about Atmel's restructuring plan. The deal would have been worth about $5 per share (or over $2.3 billion in total equity value) at the time; now Atmel sits at over $15 per share and sports an enterprise value of nearly $7 billion. (For a quick refresher on this topic, check out The Curious Bid For Atmel.)

So what can Atmel do from here on out? Clearly touchscreens are not going away any time soon, and there is any number of potential applications and expansion opportunities for Atmel's broader microcontroller line. In other words, in an environment where a lot of analysts and investors are a bit queasy on chip stocks and the near-term outlook for the semiconductor market, Atmel is growing, gaining share and getting stronger.

The Bottom Line
I am an unabashed cheerleader of Atmel as a company, if not the stock. Unfortunately, at today's price, even I would not be terribly excited to buy these shares. If the stock would pull back into the low teens, it could be more interesting, but chasing growth is a tough way to build long-term investment wealth. Investors looking for better bargains might want to consider ideas like ON Semiconductor, but for Atmel it looks like a case of "hurry up and wait" - current shareholders should be in no rush to sell, but outsiders should probably wait in the hopes of a better price. (For more, see 3 Secrets Of Successful Companies.)

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