Atmel Corporation (ATML) reported a net income of $223.1 million or 47 cents per share compared to a net income of $219.8 million or 47 cents in the third quarter of 2010 and a net loss of $83.3 million or 18 cents in the year-ago quarter.
Excluding one-time items but including stock-based compensation expense, net income came in at 22 cents per share, easily beating the Zacks Consensus Estimate of 16 cents.
Revenues came in at $457.8 million, up 3% sequentially and up 33% from the year-ago quarter, beating the Zacks Consensus Estimate of $436 million. This was in line with management’s expectation of 2%−6% growth on a sequential basis.
The results for the fourth quarter exclude the Smart Card business which was divested at the end of the third quarter of 2010. Adjusting for the Smart Card divestiture, fourth quarter revenues increased 10% sequentially and 44% from the fourth quarter of the prior year.
For 2010, revenues increased 35% to $1.64 billion. Net income came in at $423.1 million or 90 cents per share compared to a net loss of $109.5 million or 24 cents per share in 2009. Excluding one-time items but including stock-based compensation expense, net income came in at 47 cents per share.
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 Memory, Radio Frequency (RF) and Automotives.
On a segment basis, revenues from the Microcontroller business unit − accounting for approximately 63% of total revenues − grew 13% sequentially and 107% year over year to $288 million. 8-bit microcontrollers were up 10% sequentially and up 111% year over year while 32-bit micros were up 27% sequentially and 93% year over year. Atmel saw strength across a broad cross-section of end markets, particularly the consumer and industrial markets.
Atmel stated that many of its large customers are anticipating substantial increases in smart phone volumes in 2011.
Atmel experienced rapid growth in areas such as capacitive touch, smart meters, battery powered applications, home and building automation markets, point-of-sale terminals and many other consumer and industrial applications which use the 8-bit and 32-bit microcontrollers. Atmel’s leading touch screen solution – maxTouch − recorded strong growth, primarily driven by four largest smartphone customers.
The ASIC business segment generated revenues of $59 million in the fourth quarter, down 24% sequentially and down 30% year over year.
The Nonvolatile Memory segment posted revenues of $60 million, down 10% sequentially and down 84% from the year-ago quarter.
Management stated that the company had lower unit shipments of memory products with higher ASPs for most products due to supply constraints. Atmel has allocated wafer supply to support the growth of its microcontroller business, which would otherwise have been used to support the memory business. This has adversely impacted the memory business revenues.
Atmel expects to increase supply for memory products during the second half of 2011 as it expands production with existing foundry partners and qualify new ones.
The Radio Frequency (RF) and Automotives segment generated revenues of $51 million, up 13% from the previous quarter and up 24% year over year driven by worldwide demand, particularly in China.
Asia accounted for 59% of revenues, compared to 58% in the prior quarter. Europe contributed 24% of revenues, down from 28% in the prior quarter while Americas accounted for 17% of total revenues.
Moving onto margins, gross margin increased to 49.5% in the quarter from 46.8% in the previous quarter and 37% in the year-earlier quarter, surpassing management’s guidance of 48%−49%. The sequential improvement was due to increased volumes and improved mix of higher margin products and the divestiture of the Smart Card business.
For 2010, gross margin increased to 44.3% from 33.9% in 2009.
Atmel generated $84.6 million of cash from operating activities in the quarter compared to $95.3 million in the third quarter of 2010 and $55.2 million in the fourth quarter of 2009. Capital expenditures of $44 million in the quarter were up from $27 million in the previous quarter and within the management’s guidance range of $35 million–$40 million.
During the quarter, the company repurchased 4.7 million shares for $48 million (at an average price of $10.31). As of December 31, 2010, Atmel had cash and cash equivalents of $501.5 million, down from $597.4 million at the end of the previous quarter.
Guidance
In anticipation of significant growth in the microcrontroller business, Atmel decided to procure substantial additional wafer and back-end capacity to support its customers’ requirements.
Atmel has turned into a purely microcontroller-based company and continues to focus on its core microcontroller and touch products. Management believes that this move will improve its cost structure and unlock value. Atmel is aggressively marketing its new maxTouch technology. Touch-sensing technology is the fastest growing area in the company’s microcontroller business and is expected to remain a major growth driver in the coming quarters.
Atmel expects Asia to be its fastest growing region, driven by the growth of local electronics companies in Asia and the continued outsourcing of production by large North American and European OEMs, particularly by microcontroller customers.
As expected by management, Atmel continues to see touch-sensing market expand rapidly beyond smartphones into new applications such as tablets, netbooks, cameras, printers, automotive and other areas. Samsung, one of Atmel’s smartphone customers, is expected to begin shipments of their recently announced mobile tablet devices.
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