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A BIR Research Provider Report

May 29, 2009 Page 1 of 4

billion joint-takeover bid by rivals Microchip and O


Atmel Corp. HOLD N Semiconductor on the grounds that the value
NASDAQ: ATML, $3.81 Downgraded 5/9/09 offered was inadequate, conditions were
United States unfavorable, and deal structure was complex.
Columbine Capital’s Investment Conclusion Microchip, however, is very keen on the acquisition
The Columbine research team projects that Atmel will perform in line with the market over the next 6 to 12 as it believes that the deal will add to its scale, trim
months. The team has ranked it Neutral and recommends that investors maintain any existing position, but do not costs, and increase its share of the global
add to it. microcontroller (MCU) market. Moreover, Atmel's
microcontroller unit, which generates annual sales of
approximately $513 million, will inflate Microchip's
Buy
Most Favorable May 15, 2009 -- Best Independent Research -- Atmel revenues over 50% a year. Therefore, though O N
Favorable Corp. (ATML) designs, develops, manufactures and Semiconductor has backed out of the deal,
Hold Neutral
markets a range of semiconductor devices. Its
Unfavorable
Microchip refuses to budge. Instead, Microchip has
Sell Most Unfavorable
portfolio includes microcontrollers, programmable launched a proxy battle against Atmel’s management
Current Recommendation (5/9/09) Neutral
logic devices (PLDs), application-specific integrated and revealed that it owns a 4.1% stake in the
Previous Recommendation (3/14/09) Favorable circuits (ASSICs), non-volatile memory, as well as California firm. It also claims that it has clearance to
mixed-signal and radio frequency components. acquire its smaller rival under the Hart-Scott-Rodino
BIR Stock Classifications These are sold directly to original equipment Antitrust Improvements Act. However, Atmel seems
Region North American manufacturers and indirectly to distributors in the to be safe for the time being given O N’s U-turn and
Sector Technology consumer, industrial, automotive, medical, the fact that Microchip may find it tough to raise
Industry Semiconductors computers, networking, communications and money for the buyout in these conditions.
Asset Class Large-Cap aerospace industries. The San Jose, CA-based firm
Investment Style Blend competes with Microchip Technology, O N In Restructuring Mode
Risk Profile Rank Above Average Risk Semiconductor and Freescale for its share of the The semiconductor company is doing its best to trim
Financial Quality Below Average Quality market. operating costs amid deteriorating market
conditions. Moreover, with various market research
Tax Benefit Saves Atmel from Plunging into Loss firms forecasting a dull year in 2009 — iSuppli
Company Fundamentals
The firm’s net income for the first quarter of fiscal projects 20% year-over-year drop in the
Market Capitalization (Billions) $1.7
year 2009, ended March, dived to $3.6 million or 1 semiconductor industry’s revenues this year — it is
Price/Earnings Ratio (MRFY) NA
cent per share from $6.8 million or 2 cents per share imperative for Atmel to streamline its operations. In
Price/Cash Flow Ratio (TTM) 18.7x
in the year-ago period. The results, however, beat tune with this scenario, the firm has announced the
Price/Book Ratio (MRQ) 2.12x
analyst estimates. Revenues plummeted 34% to elimination of 180 and 30 jobs at its Rousset and
Dividend Yield (Indicated) Nil
$271.5 million as the global economic downturn Nantes manufacturing plants, respectively. The
Net Profit Margin (TTM) NEG
Return on Equity (TTM) NEG
adversely impacted sales of semiconductor chips and facility in Nantes, France, will eventually focus on
Debt/Equity (MRQ) 17%
equipment. As a result, gross margin shrank 37 basis only R&D functions. In addition to the job cuts,
Beta 0.92
points to 35.1%. At the operating level, Atmel Atmel is consolidating its manufacturing footprint
incurred a loss of $20.5 million, unlike an income of and has even found a buyer for its wafer fabrication
$15.4 million in the prior-year quarter, on account of facility in Heilbronn, Germany. The company has
Revenues ($ in Millions)
hefty charges. Apart from higher acquisition related been restructuring itself since August 2006 when it
FY Ends: 2006 2007 2008 2009 2010 charges, the firm recorded a grant payment expense first adopted the fab-lite manufacturing strategy.
Mar. 31 400.8 391.3 411.2 271.5 -- in the current quarter. Nevertheless, the bottom line
Jun. 30 429.5 404.2 420.9 279.3 -- remained in the red, thanks to the $27.7 million tax Modest Growth Anticipated
Sep. 30 431.7 418.1 400.0 295.4 -- benefit. Atmel forecasts revenues for the second quarter
Dec. 31 408.9 425.6 334.6 309.9 -- ranging between $274.2 million and $282.4 million
Full FY 1,670.9 1,639.2 1,566.8 1,156.1 1,308.9 Microchip Determined to Buy Out Atmel — slightly lower than analyst estimates of $296.8
GAAP revenues; BIR consensus estimates in italics. The fiscal year In October, Atmel’s management rejected a $2.3 million.
consensus BIR estimates are not the sum of individual quarters.

Earnings Per Share ($ diluted)


5-Year Monthly Price Range and 52-Week Moving Average logarithmic scale December FY
FY Ends: 2006 2007 2008 2009 2010 $10

Mar. 31 0.00 0.06 0.02 0.01 --


Jun. 30 0.01 0.00 -0.01 -0.05 -- $5
Sep. 30 0.05 0.03 -0.01 -0.03 --
Dec. 31 -0.25 0.00 -0.05 -0.01 --
Full FY -0.20 0.10 -0.06 -0.08 0.12
$2
GAAP EPS; BIR consensus estimates in italics. The fiscal year
consensus BIR estimates are not the sum of individual quarters.
52-Week Moving Average
$1
Prices: CY, Financials: FY 2004 2005 2006 2007 2008 2009
Price Range 3-8 2-4 3-6 4-6 3-5 3-4
Revenues (M) 1,552.4 1,561.1 1,670.9 1,639.2 1,566.8 1,156.1
EPS (Diluted) -0.01 -0.10 -0.20 0.10 -0.06 -0.08
Dividend Declared Nil Nil Nil Nil Nil --
Book Value/Share 2.14 1.90 2.06 1.94 1.92 1.79
BIR consensus estimates in italics

Best Independent Research LLC • A consortium of five top-performing independent research providers. • www.bestindependentresearch.com
©2009 Best Independent Research LLC PLEASE SEE PAGE 4 FOR IMPORTANT DISCLAIMER INFORMATION AND DEFINITIONS OF TERMS USED IN THIS REPORT.
A BIR Research Provider Report
May 29, 2009 Page 2 of 4

Atmel Corp. company may be even better than expected. Falling


NASDAQ: ATML short of the expectation (a negative “disappointment”) is
often punished by investors. Atmel’s EPS
announcement for the latest quarter matched the
Columbine Recommendation consensus expectation.
Median Return Expected
Most Favorable
Buy Cash Flow is Neutral
Favorable Columbine evaluated Atmel by comparing the company Positive cash flow gives a company funds for internal
Hold Neutral to its peers on a series of individual analytical tools that
Unfavorable
expansion, acquisitions, dividend payments, etc. Our
Sell represent proven measures of a firm’s business value, evaluation looks at a company’s cash flow over the past
Most Unfavorable its long-term growth characteristics, and the behavior of
Current Recommendation (5/9/09) Neutral
four quarters. Stocks favored by this measure have the
its investors. These criteria are the building blocks we highest cash flow available for their price. Atmel, with a
Previous Recommendation (3/14/09) Favorable
use to construct our decisions. The particular measures price-to-cash flow ratio of 8.3 is about the same as the
reported below are some of those that Columbine’s median company.
Investment Philosophy
Columbine Capital Services believes that winning
historical studies show to have the greatest impact on
investment strategies are based on facts, not theories. this company’s future market performance. We present Recent EPS Change is Neutral
Columbine has been conducting original studies into the individual measures in order of their significance to Many investors in this sector react strongly to short-
the historical sources of stock returns for decades. This our recommendation. The conclusions from each of the term changes in company earnings. We relate a
hard-earned knowledge provides the foundation for a criteria are synthesized into an overall ranking of company’s change in EPS over the last quarter to its
disciplined, step-by-step analytical process that allows
direct comparisons between one company and
Atmel’s return potential relative to the rest of the current stock price. This measure favors companies that
another, the key to superior investment results. market according to an analytic framework that is have produced recent advances in earnings at
specific to this economic sector. This disciplined, reasonable stock prices. Over the last quarter, Atmel’s
Research Process consistent evaluation process has a proven track record earnings declined by $0.33, about the same as the
The analytical measures on the right represent the of investment success. median company on this measure.
criteria that our historical studies have identified as
having the greatest impact on the future market
performance of companies in this sector. (Additional
Recommendation Decision: Hold Reported Earnings Yield is Unattractive
measures included in our analysis are omitted here for Based on its current status on all the criteria for this Undervalued companies, with relatively high earnings
reasons of space.) We evaluate each company’s sector, Columbine ranks Atmel Neutral and for their market price, represent profit opportunities in
current status on all of these criteria and compare the recommends that investors maintain any existing this sector. We compute an earnings yield by dividing
company to its peers. A sector-specific analytical position, but do not add to it. the company’s most recent four quarters of reported
framework defines how much importance we attach
to each component in assessing the company’s earnings by its current stock price. With an earnings
Price Action is Neutral yield of 4.2%, we consider Atmel to be slightly over-
market potential. A stock may be attractive enough
on some components to outweigh neutral or negative
The Columbine methodology likes to see confirmation valued on this measure.
ratings on others. from relative strength when buying in any sector. As
long as other measures are in accord, these companies Forecast Earnings Yield is Very Unattractive
should continue to perform well over the next year. The The expected return (in earnings per share) for the
Columbine measure makes a risk-adjusted comparison purchase price of a company’s stock is one of the most
of a stock’s performance with that of the market. Over basic measures of a firm’s intrinsic value. By comparing
the past twelve months Atmel has experienced a price the consensus earnings estimates from Wall Street’s
change of -13%, versus the market’s return of -34%. analysts with the current stock price we can focus our
evaluation on the firm’s potential earning power. This is
Estimate Revisions are Neutral the most important valuation measure in this sector. At
In this sector companies that are the subject of its current price of $3.81, we consider Atmel greatly
increasingly improving earnings forecasts tend to find over-valued.
favor with investors. We evaluate recent changes in
Wall Street analysts’ estimates of a company’s future
earnings on three different metrics. Over the past sixty
days the changes in the estimates of Atmel’s future EPS
have been about the same as the median company.

Recent Earnings were Neutral


Exceeding Wall Street’s earnings expectations (a
positive “surprise”) suggests that prospects for the

Relative Strength Rank (RS Rank): ATML & the BIR Semiconductors Industry
ATML RS Rank in BIR USETS Universe
Top Quartile
BIR Semiconductors Industry: Average RS Rank

Average

Bottom Quartile

ATML is a
Large-Cap Stock, A rising line means large-cap stocks are outperforming small-cap stocks.
with a Blend
investment style. A rising line means value stocks are outperforming growth stocks.
2005 2006 2007 2008 2009

Best Independent Research LLC • A consortium of five top-performing independent research providers. • www.bestindependentresearch.com
©2009 Best Independent Research LLC PLEASE SEE PAGE 4 FOR IMPORTANT DISCLAIMER INFORMATION AND DEFINITIONS OF TERMS USED IN THIS REPORT.
A BIR Research Provider Report
May 29, 2009 Page 3 of 4

Atmel Corp. elimination of 21% of its workforce. Similarly,


NASDAQ: ATML National Semiconductor announced a 25% job cut
over the next three months. Other moves to contain
costs included business unit mergers, salary cuts,
BIR Stock Classifications Semiconductors Industry suspension of hikes and incentives, facility closures,
Region North American and reductions in capex budgets. For instance,
Sector Technology Apr. 5, 2009 -- Best Independent Research -- The Brooks Automation consolidated its vacuum pump
Industry Semiconductors semiconductor industry has one basic principle — and robotics product groups into a single division,
Sub-Industry Semi Diversified "smaller, faster, and cheaper." Industry players vie National Semi permanently closed an assembly and
to develop the most advanced technology at the test plant in China and a wafer fabrication plant in
lowest possible cost. The industry, which traces its Texas, and Micron lowered its capex budget for
52-Week Sector Performance Order
origins to 1947 when Bell Labs first invented a fiscal year 2009 to $650-$700 million from its
Past Order Median
(Mos. Ago) Price Rel. St. transistor, has four segments — memory, earlier estimate of $1 billion. On a similar note,
Current 3 6 12 BIR Sector Return Rank microprocessor, commodity integrated circuit (IC), Micron and Nanya are eyeing a share in the Taiwan
1 1 3 9 Utilities -27% 33 and System-on-Chip (SoC). These are used in a Government’s bailout package. Meanwhile, despite
2 2 1 7 Consumer Staples -27% 34 wide range of products such as electronic, their attempts, Qimonda and Spansion succumbed
3 13 10 19 Retail -31% 38 telecommunication, computer, industrial to their operational woes and filed for bankruptcy
4 4 6 13 Healthcare -32% 40 equipment, medical, and automotive system. The protection.
5 5 5 10 Insurance -35% 44 global semiconductor industry — dominated by
6 8 17 14 Technology -36% 46 Taiwan, Korea, China, Japan, and the U.S. — Growth Uninterrupted
posted sales of $256 billion in 2007. The two biggest solar-industry research bodies —
7 3 4 3 Aerospace -37% 47
the European Photovoltaic Industry Association
8 6 14 8 Telecom -38% 48
Poor Results on Consumer Market Slump (EPIA) and the Solar Energy Industries Association
9 12 16 15 Services -40% 51 As the sales of electronics and consumer goods fell (SEIA) — paint a sunny outlook for the solar cell
10 16 15 20 Building -41% 52 drastically amid the recession, OEMs tightened industry in 2009. In fact, the EPIA forecasts that
11 7 7 4 Chemicals -42% 55 their capex budgets, which hurt the top lines of the global PV installed capacity will reach 22 GW
12 11 11 6 Industrial -44% 57 semiconductor equipment makers. While Intel by 2013 — way above 2008’s 15 GW. However,
13 20 19 18 Consumer Durables -46% 59 slipped on dwindling demand from the computer Spain and Germany might lose their leadership
14 14 2 12 Banking -47% 61 market, Texas Instruments suffered on the sharp positions due to their recent restrictions on
15 10 9 11 Transport -47% 61 decline in its wireless products arm. Orders for incentive programs. On the other hand, the U.S.
16 9 8 2 Energy -49% 65 toolmakers — including Applied Material, Verigy, Government has extended its solar Investment Tax
17 17 13 5 Capital Goods -51% 66 and Advantest— dived primarily because of the Credit for eight more years and eliminated
18 18 12 17 Finance -51% 66 memory market weakness. Hefty restructuring prohibitions on the use of the Credit. Additionally,
19 19 18 16 Forest Products -52% 67 expenses added to the industry’s woes. As a result, under its American Recovery and Reinvestment
20 15 20 1 Metals -53% 69 bottom lines either slipped in high-double digits or Act, the U.S. is boosting renewable energy projects
lurked in the red. PV cell producers were the only — especially solar PV conversion to electricity.
bright spot as they prospered on robust demand
from the solar products market. ADRs too Markets Unlikely to Recuperate in 2009
performed well, with Infineon narrowing its losses Semiconductor bigwigs anticipate no respite from
and ARM Holdings flourishing on robust markets. the downturn before 2010. However, they are
optimistic that their cost-cutting and inventory
Battling the Downturn in Their Own Ways management measures will minimize the impact of
The recent quarter saw semiconductor companies the slowdown. While most chipmakers are
scrambling to realign their costs in sync with forecasting losses in the coming quarter, solar cell
changing market dynamics. While Asyst slashed its companies believe programs like the Green
workforce 15%, Advantest announced the Revolution will buoy growth.

Comparing Atmel to its Sub-Industry Peers Sources: BIR consensus estimates; Reuters
(Medians) BIR USETS Universe: Over 3,000 52-Week Price Estimated PE Ratios Estimated EPS Growth EPS Revisions (3 mos) Estimated P/Sales Ratios
Market Price U.S. exchange-traded stocks, both Return & Rel. & Relative Rankings & Relative Rankings & Relative Rankings & Relative Rankings
Cap. ($) ($) domestic & international Strength Rank Cur. Year Next Year Cur. Year Next Year Cur. Year Next Year Cur. Year Next Year
864.34M BIR USETS UNIVERSE -37% 51 15.1 51 13.4 51 -4% 51 16% 51 -2% 51 -2% 51 1.0 51 0.9 51
570.29M BIR Semiconductors -41% 57 35.0 87 25.0 85 -71% 84 71% 19 7% 22 9% 17 1.8 70 1.5 68
1.03B Peer Group -32% 43 25.0 79 39.5 93 -66% 83 83% 17 43% 7 12% 14 1.7 69 1.5 69
1.72B 3.81 ATML Atmel Corp. -13% 18 NA NA 31.8 90 -33% 71 199% 7 -5% 58 -6% 61 1.5 65 1.3 63
874.27M 7.06 FCS Fairchild Semiconductor Int'l -52% 71 NA NA 235.3 100 -99% 100 105% 13 45% 7 123% 3 0.8 45 0.7 43
1.14B 23.48 TSRA Tessera Technologies Inc 14% 5 25.0 79 21.0 79 199% 6 19% 46 82% 4 -1% 45 4.1 90 4.4 93
4.67B 7.40 SPIL Siliconware Precision (ADR) -12% 17 37.0 88 23.1 83 199% 6 60% 22 429% 1 25% 9 3.2 86 2.7 84
606.92M 15.15 CHRTD Chartered Semicondr (ADR) -63% 83 NA NA NA NA -99% 100 40% 29 41% 7 45% 5 0.5 28 0.4 24
1.23B 8.60 CY Cypress Semiconductor 103% 1 NA NA 45.3 94 -99% 100 163% 8 49% 6 194% 2 2.0 73 1.8 73
177.18M 2.37 SIMG Silicon Image Inc -66% 86 NA NA 39.5 93 -99% 100 150% 9 -16% 74 -312% 99 1.0 50 1.0 52
925.68M 5.60 IDTI Integrated Device Tech -52% 71 8.8 13 62.2 96 -33% 71 -86% 99 -73% 91 -56% 93 2.0 73 1.8 73

Best Independent Research LLC • A consortium of five top-performing independent research providers. • www.bestindependentresearch.com
©2009 Best Independent Research LLC PLEASE SEE PAGE 4 FOR IMPORTANT DISCLAIMER INFORMATION AND DEFINITIONS OF TERMS USED IN THIS REPORT.
A BIR Research Provider Report
May 29, 2009 Page 4 of 4

Atmel Corp. Disclosures


NASDAQ: ATML
This report offers equity recommendations and
related return estimates from Columbine Capital
Columbine uses the BIR Report Format to Glossary Services, Inc. to investors and their advisors. It
communicate its research uses a three-class Buy-Hold-Sell rating system.
recommendations. Glossary
Columbine Capital Services, Inc. delivers its This is a consolidated version of the firm’s five-
investment advice using an effecient research report BIR Stock Coverage and Market Indices The class rating system: most favorable and favorable
designed and maintained by Best Independent BIR USETS© (US exchange-traded stocks) ratings are buys; neutral ratings are holds and the
Research. This report building environment enables universe and indexes include over 3000 of the
Columbine to document the logic supporting its categories unfavorable and most unfavorable are
recommendations with clear explanations of the largest domestic and international stocks that sells.
decisions made at each step of its analytical process. trade in the United States. BIR’s stock
BIR has no influence on Columbine’s classifications (BIR’s GIC) reflect their Stock Ratings
recommendations.
membership in the firm’s industry and country The firm uses the terms below to rate a stock’s
Best Independent Research LLC
This BIR report format is a joint effort of five veteran indices. relative 12-month performance:
equity research firms to create a state-of-the-art
research report. Each firm uses this report format BIR Asset Class and Investment Style large-caps Buy: Expected to outperform the S&P 500
when issuing their individual research are the largest 1000 US stocks by capitalization; producing above average returns.
recommendations.
the remainder are small-caps. Non-US stocks are Hold: Expected to perform in line with the S&P
BIR is not a research organization and does not make
recommendations. Its role is to provide innovative
separated using the same breakpoint. Value, 500 with average returns.
ways to highlight the research firm’s message with a blend and growth styles are set using a blend of
report investors enjoy and find valuable. BIR valuation ratios and growth rates. Sell: Expected to underperform the S&P 500
professionals maintain proprietary stock risk ranks,
financial quality ratings, company and industry
producing below-average returns.
BIR Risk Profile Rank This rank reflects the
descriptions and consensus revenue and earnings
estimates. None of the five research firms utilize this stability of the company’s business and its stock’s As of March 31, 2009, Columbine Capital
data in making their recommendation decisions. price volatility. Risk ranks do not project price Services had Buy ratings on 36.2% of their
Columbine Capital Services, Inc. direction. recommendations, Hold ratings on 39.2% and
Columbine has been conducting original studies into Sell ratings on 24.6%.
the historical sources of stock return for decades. This BIR Financial Quality This measure of a
provides the foundation for a disciplined, step-by-step All investment conclusions and the discussions
analytical process that allows direct comparisons
company’s creditworthiness reflects BIR’s
between companies. The analytical measures assessment of its working capital, debt ratios, explaining these decisions are from Columbine
presented in this report represent the criteria that our business risk and potential legal liabilities. Capital Services, Inc. They accurately reflect the
historical studies identified as having the greatest responsible research professional’s personal views
impact on the future market performance of stocks in BIR Consensus Sales & Earnings Estimates
their sector. A sector-specific analytical framework regarding any and all the subject securities or
defines the importance we attach to each measure in These are complied by BIR weekly using fresh issuers. No part of analyst compensation was, is,
assessing the company’s return potential. A stock’s estimates from a select number of Wall Street or will be directly or indirectly, related to the
attractiveness in some areas often outweighs neutral security analysts.
or negative ratings in others. specific views or recommendations expressed in
Chart pg 2: Relative Strength Rank A stock’s RS this research report.
Rank is its 52-week return ranked from 1 (best) to Columbine and BIR prohibit their employees
99 within the BIR USETS universe. This chart from buying equity securities and from being
shows that a stock’s price may be influenced by officers or directors of listed companies.
the popularity of its industry, asset class or Columbine employees do not advise any
investment style. An industry RS Rank is the investment companies or investment advisory
average RS Rank of the stocks in that industry. accounts. Neither Columbine nor BIR offer
Large vs. Small and Value vs. Growth brokerage or investment banking services. They
performance is presented to enable observation both adhere to professional standards and abide
of their influence. by formal codes of ethics that put the interests of
clients ahead of their own. Their compliance
officers monitor adherence to these standards.

Disclaimer
Past performance is not a guarantee of future results. The material is based upon information Columbine and BIR considers reliable, but neither
warrant its completeness or accuracy, and it should not be relied upon as such. Assumptions, opinions, and estimates constitute our judgment as of
the date of this report, and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of
securities mentioned herein. The material does not take into account your particular financial situations, objectives, or needs, and is not intended as a
personal recommendation. Before acting on recommendations in this material, you should consider whether it is appropriate for your particular
situation, and, if necessary, seek professional advice.
©2005 Best Independent Research LLC Certain additional market and financial data is provided by Ford Equity
Research, San Diego, CA and Reuters.

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©2009 Best Independent Research LLC

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