If you are looking for a semiconductor stock that's focus on an area that's not so cyclical, mid cap microcontroller (MCU) stock Atmel Corporation (NASDAQ: ATML) could be a good choice – meaning its worth taking a closer look at the stock along with other microcontroller players like Microchip Technology Inc (NASDAQ: MCHP), STMicroelectronics N.V. (NYSE: STM) and Cypress Semiconductor Corporation (NASDAQ: CY). Microcontrollers are programmable and embedded chips that are increasingly hidden inside a all sorts of products these days e.g. if you have an appliance with a LED or LCD screen and a keypad, it contains some kind of microcontroller plus all new automobiles contain at least one and often several. I should mention that we have also recently added Atmel Corporation to our SmallCap Network Elite Opportunity (SCN EO) portfolio and we are down about 5.6% mostly due to the recent market volatility.
What is Atmel Corporation?Mid cap Atmel Corporation calls itself a worldwide leader in the design and manufacture of microcontrollers, capacitive touch solutions, advanced logic, mixed-signal, nonvolatile memory and radio frequency (RF) components. Thanks to having one of the industry's broadest intellectual property (IP) technology portfolios, the company is able to provide the electronics industry with a complete system solutions focused on industrial, consumer, security, communications, computing and automotive markets.
As for other players or potential peers in the microcontroller space, mid cap Microchip Technology is a leading provider of microcontroller and analog semiconductors; mid cap STMicroelectronics N.V. is among the world's largest semiconductor companies whose key strengths are in Sense and Power, Automotive and Embedded Processing Solutions; and small cap Cypress Semiconductor Corporation offers high-performance, mixed-signal and programmable solutions.
What You Need to Know or Be Warned About Atmel CorporationAtmel Corporation made a good splash at the 2014 Consumer Electronics Show in Las Vegas earlier this year, with press releases highlighting the following new or improved products:
The Atmel SAM G family of ARM® Cortex-M4-based MCUs that integrate high performance and ultra-low power in a small form factor - ideal for sensor hub and battery-operated consumer applications including sensor hubs for smartphones, tablets and Ultrabooks as well as wearables, healthcare, gateways, bridges and audio devices. Atmel AvantCar™, a next-generation automotive center console concept with curved touch screens, demonstrating the future of human machine interface in upcoming automobiles.
The at the end of last October, Atmel Corporation reported a 2% sequential revenue increase and a 1% year-over-year revenue decrease to $356.3 million for the second quarter of 2013 while the microcontroller business generated revenue of $227 million, down 2% sequentially (due to a sharp reduction in sensor hub revenue) and up slightly year over year. GAAP net income totaled $5.4 million verses $13.0 million and non-GAAP net income of $37.7 million verses $25.3 million. In the earnings call (the transcript is available on Seeking Alpha here), the CEO commented:
Communications and networking had a double-digit percentage uptick in sales and automotive recorded another quarter of steady growth.
As anticipated, revenue from handsets and tablets was down sequentially due to the previously forecasted decline in sensor hub shipments. Sales in computing was soft as anticipated ramp of new PC form factors remains sluggish. The military aerospace market softened and after a strong second quarter.
For the fourth quarter (traditionally is a seasonally slow quarter), Atmel Corporation expects revenue to be between $350 million and $364 million plus the company expects further gross margin expansion as it continues to execute on improvement plans. In the earnings call Q&A, one analyst commented that:
If you take the midpoint of your guidance, you basically are looking at flat sequential growth, which, in the broader context of the earnings cycle so far, is very good relative to other semiconductor companies who are guiding down for Q4.
It should be mentioned that at the end of the third quarter, Atmel Corporation had $270.9 million in cash for an increase of $44.3 million from the immediately preceding quarter and no long term debt. In addition, Atmel Corporation announced an additional $300 million allocation of funds to its existing $700 million common stock repurchase program.
Otherwise, it should be mentioned that Atmel Corporation is scheduled to hold its next earnings call on Wednesday, February 5, 2014 at 2 pm to discuss its fourth quarter 2013 financial results.
Share Performance: Atmel Corporation vs. MCHP, STM and CYOn Tuesday, mid cap Atmel Corporation rose 1.47% to $8.27 (ATML has a 52 week trading range of $5.89 to $8.91 a share) for a market cap of $3.52 billion plus the stock is up 5.6% since the start of the year, up 20.7% over the past year and up 140.4% over the past five years. Here is a look at the long term performance of Atmel Corporation verses other microcontroller stocks Microchip Technology, STMicroelectronics N.V. and Cypress Semiconductor Corporation:
As you can see from the above performance chart, all four stocks spiked in 2011 with all except for STMicroelectronics giving close to the same rate of return to investors over the past five years.
Finally, here are the latest technical charts for all four microcontroller stocks:
The Bottom Line. If you are looking for a less volatile play in the semiconductor space, a mid cap microcontroller stock like Atmel Corporation along with Microchip Technology, STMicroelectronics N.V. and Cypress Semiconductor Corporation could be worth at least a closer look at.
SmallCap Network Elite Opportunity (SCN EO) has an open position in ATML. To find out what other open positions SCN EO currently has, and to learn why so many traders and investors are relying on this premium subscription service, click here to find out more.
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