Atmel Corporation (ATML) reported revenues of $343.6 million in the fourth quarter of 2009, up 8% sequentially and up 3% year over year and beats management’s expectations. The growth in revenues was driven primarily by improved demand from the industrial, communications, computing, and energy marketplaces.
Microcontroller revenues grew 16% sequentially to $139 million. 8- and 32-bit microcontrollers were both up 15% sequentially.
Touch sensing revenues were up strongly for this quarter, driven by the family of QTouch products. Volume shipments for Motorola’s next generation smartphones increased again in this quarter along with volume shipments to Samsung for some of its products.
The number of new touch screen opportunities continues to grow substantially. In addition to generating increasing maXTouch design-ends at top tier handset OEMs, demand continues to grow for touch solutions in new products and form factors such as tablets, notebooks, gaming consoles, GPS, and multifunctional peripherals.
Atmel has begun production shipments of maXTouch products to customers and now expects maXTouch to start making meaningful contribution to revenues in the second quarter of 2010, earlier than what it had previously anticipated.
The Application Specific Integrated Circuits (ASIC) business generated revenues of $84 million in the fourth quarter, up 5% sequentially. After a comprehensive review of strategic alternatives, management continues to explore the potential sale of the smart card business located in Rousset , France , and East Kilbride , United Kingdom . Management discontinued sale discussions for the customer-specific products and aerospace businesses as it now feels that shareholders’ interests are best served by Atmel retaining the customer-specific products and aerospace business segments.
For the non-volatile memory segment, revenues came in at $79 million, slightly up sequentially. RF and automotive segment generated revenues of $41 million, up 7% sequentially.
Gross margin improved to 37.0% from 31.1% in the third quarter but was down from 39.7% in the year-ago quarter. The sequential gross profit improvement was the result of increased factory utilization levels and an improved mix of higher margin microcontroller products during the quarter.
Net income came in at $17.6 million or 4 cents per share compared to a net income of $4.0 million or one cent per share in the prior quarter and a net income of $4.8 million or one cent per share in the year-ago quarter. This easily beat the Zacks Consensus Estimate of break-even earnings.
For 2009, the company reported revenues of $1.22 billion, down 22% from a year ago. Atmel reported net income of $33.1 million or 7 cents per share compared to a net income of $78.0 million or 17 cents per share in 2008.
During the quarter, the company generated approximately $55.2 million of cash from operations and used approximately $17 million in capital expenditures. In 2009, Atmel spent $32 million in capital expenditures. Atmel ended the quarter with cash and equivalents of $437.5 million, up from $408 million at the end of the year-ago quarter.
Going forward, bookings are strong for all core products. Microcontroller and touch business is expected to grow strongly in 2010. Memory and automotive products businesses are experiencing an improving business environment and revenues from these products are also expected to grow.
Revenues are expected to be flat or down 4% on a sequential basis in the first quarter of 2010. Gross margin is projected around 36% – 38%.
Atmel is aggressively marketing its new maxTouchTM 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. The company recently undertook a restructuring program wherein it disposed off its non-core wafer fabrication operations, consolidated or eliminated numerous product lines and reduced the workforce by nearly 25%.
Given the sluggish nature of the company’s growth, our long-term recommendation for Atmel is Neutral.
In after – hours trading, shares of ATML fell 0.42% to close at $4.78. (In regular hours trading, shares closed at $4.80).
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