Atmel Beats on Q1 Earnings - Analyst Blog

Atmel Corporation ATML reported first quarter 2014 non-GAAP net income (excluding one-time items) of $29.1 million or 7 cents per share compared with $13.6 million or 3 cents per share in the year-ago quarter. Adjusted earnings for the reported quarter beat the Zacks Consensus Estimate of 2 cents. The year-over-year improvement in earnings is primarily due to higher revenues and lower operating expenses.

Quarter Details

GAAP net income in first quarter 2014 was $2.2 million or 1 cent per share compared to a loss of $47.7 million or 11 cents per share in the year-earlier quarter. The year over year increase in GAAP earnings in the reported quarter was due to high restructuring and settlement charges witnessed in first quarter 2013.

Atmel reported net sales of $337.4 million in the reported quarter, up from $329.1 million in the year-ago quarter. The increase in revenues was driven by improved performance in microcontroller business and new product introductions.

However, net sales missed the Zacks Consensus Estimate of $325 million. Geographically, Asia represented 53% of total revenue, while EMEA (Europe, Middle East and Africa) contributed 30% of revenues and the Americas accounted for 17% of revenue.

GAAP gross margin improved to 41.5% in the reported quarter from 39.9% in the prior-year period. Non-GAAP gross margin also went up to 44.0% in the first quarter of 2014 from 40.5% in the first quarter of 2013.

Total operating expenses in the quarter stood at $332.6 million versus $391.5 million in the year ago quarter.

During the reported quarter, Atmel introduced new products and released a new ARM cortex-M0+ family of ultra-low power microcontroller products, which offer expanded connectivity and communications functionality for industrial, consumer and medical applications. Atmel is increasingly focusing on its core microcontroller business as it aims to target high-growth businesses. These controllers deliver high performance and lower power consumption and are also claimed to be more effective than other available variants in the market.

Balance Sheet and Cash Flow

The company ended the quarter with cash and cash equivalents of $255.5 million, down from $276.9 million as of Dec 31, 2013. Cash provided by operations totaled $46.2 million for the reported quarter versus cash utilization of $12.0 million in the year-ago period.

As part of its share repurchase program, Atmel repurchased 6.9 million shares during the reported quarter at an average price of $7.97 each. Since the inception of the share repurchase program in the second half of 2010, the company has repurchased approximately $716 million worth of stock.

Outlook

For the second quarter of 2014, the company expects revenues in the range of $348 million and $364 million. Non-GAAP gross margin is expected to increase by 25 basis points to 45.25%.

Atmel is continuously upgrading its product portfolio to fuel growth and thwart intense competition and price wars from rivals. Moving ahead, the company expects improving business conditions and new product portfolio to drive its earnings and margins.

Other Stocks to Consider

Atmel currently has a Zacks Rank #4 (Sell). Stocks that look promising in the industry and are worth a look now include Rambus Inc. RMBS, carrying a Zacks Rank #1 (Strong Buy) and Avago Technologies Ltd. AVGO and Freescale Semiconductor, Ltd. FSL, both carrying a Zacks Rank #2 (Buy).