Atmel Corporation

Target: US$9.00

Atmel Corporation designs, develops, manufactures and sells a broad range of advanced logic, microcontroller,
nonvolatile memory, radio frequency (RF), and capacitive touch solutions. The company’s products are designed for
use in the automotive, communications, computing/storage/printing, consumer electronics , industrial/military/aerospace, and security end markets

Investment recommendation
We reiterate a BUY ahead of what we believe is likely to be strong gross margin expansion. Q4 gross margins are guided up Q/Q due to higher utilization rates and continued cost reduction efforts. Management expects gross margins to continue to improve in 2014 as utilization improves; they control operating costs and use up the higher cost inventory from the take or pay foundry agreements. We are slightly adjusting our estimates and maintain a $9 target.
Investment highlights
 ATML reported Q3/13A (Sep) after the close. Revenues and non- GAAP EPS were $356.3 million (+2% Q/Q) and $0.09, compared to our inline estimates of $357 million and $0.09. Revenue was slightly below the mid-point of guidance ($348M to $365M)
 Management guided revenue to be in the range of $340 million to $364 million ($357 million mid-point), compared to consensus estimate of $365 million and our estimate of $359 million. Management expects MCU to be flat Q/Q with maxTouch down low single digits and core MCU up single digits, ASIC to be down low double digits, Memory down mid to high single digits and RF & Automotive up low single digits.
 Atmel’s board authorized an additional $300M to the existing $700M stock repurchase program, of which ATML has repurchased approximately $636.3M (72.1M shares) of its common stock


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