Atmel Corporation (ATML) reported revenues of $348.6 million in the first quarter of 2010, up 28.4% year over year and up 1.4% sequentially.
The sequential revenue improvement came primarily from increased demand in the consumer, industrial and automotive markets. The growth in revenues was broad-based with particular upside in consumer, automotive and industrial.
Based in San Jose, CA, Atmel designs, develops, manufactures and sells integrated circuit products. The company operates in four segments: Application-Specific Integrated Circuit (ASIC), Microcontrollers, Nonvolatile Memories, Radio Frequency (RF) and Automotives.
Microcontroller revenues were up 8% sequentially and up 56% year over year and accounted for 43% of total revenues. In particular, 32-bit microcontrollers achieved record growth this quarter and were up 9% sequentially and 93% year-over-year. The strong microcontroller growth came from the consumer, automotive, computing, industrial and smart energy segments.
MaxTouch products continue to ramp well for Atmel as it experiences continued strong design wins in a variety of high-volume handset applications. Management stated that the proliferation of touchscreen solutions beyond handsets has begun and the company is engaged in new design opportunities for MaxTouch products in such areas as netbooks, tablets, gaming consoles, GPS devices and other multifunctional peripherals. Atmel expects that some of the customers to introduce some products before 2010.
The ramp-up of MaxTouch revenues is ahead of schedule and Atmel expects meaningful revenue growth beginning this quarter and to continue throughout the year.
Revenues from the ASIC business segment were down 12% sequentially and down 5.5% compared to the first quarter of 2009. Revenues from the Non-volatile memory segment were down 2% sequentially but up 21%. RF and automotive segments were up 12% sequentially and up 43% compared to the first quarter of 2009.
Gross margin came in at 38.4%, up from 37% in the previous quarter and beat management’s guidance of 38%. The sequential improvement in gross margin was due to increased factory utilization levels and an improved mix of higher margin microcontroller products during the quarter.
Operating profit margin came in at 4.3% compared to operating losses in both the year-ago quarter and previous quarter.
Net income came in at $17 million or 4 cents per share compared to a net loss of $83 million or 18 cents per share in the previous quarter and a net income of $4 million or one cent per share in the year-ago quarter. Excluding one-time items, net income came in at 3 cents per share easily beating the Zacks Consensus Estimate of one cent per share.
During the quarter, Atmel generated $70 million in the first quarter compared to $55.2 million in the fourth quarter of 2009 and $5.6 million in the first quarter of 2009. Capital expenditures were $17 million.
As of March 31, 2010, Atmel had cash and cash equivalents of $483.2 million, down from $437.5 million at the end of the previous quarter. The company had debt of $84.1 million.
Proposed Sale of SMS Business
Meanwhile, Atmel also announced that it has received an offer from privately-held INSIDE Contactless to purchase its Secure Microcontroller Solutions (also known as the smartcard business) based in Rousset, France, and East Kilbride, the U.K.
As part of the proposed transaction, Atmel would make a minority investment in INSIDE. In addition, INSIDE would enter into a multi-year supply agreement to continue sourcing wafers from the fabrication operation in Rousset that Atmel recently agreed to sell to LFoundry GmbH.
The transaction is expected to close in the second half of 2010.
Guidance
Going forward, bookings are strong for all the products from all major geographies and from a wide variety of end-markets. Microcontroller and touch business is expected to grow strongly in 2010. Management expects revenues to be up 5% – 9% sequentially in the second quarter of 2010.
This implies a revenue guidance of $366.0 million – $379.9 million. Gross margins are projected around 39% – 41% driven by improved utilization of manufacturing assets and an increasing mix of microcontroller revenues.
Atmel is aggressively marketing its new MaxTouch technology. Touch-sensing technology is the fastest growing area in Atmel’s microcontroller business and it is expected to remain a major growth driver in the coming quarters.
Last year, the company undertook a restructuring program wherein it disposed its non-core wafer fabrication operations, consolidated or eliminated numerous product lines and reduced its workforce. This in turn has led to an improvement in margins.
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