Atmel Matches Q2 Earnings Estimates, Revenues Rise Y/Y

Atmel Corporation ATML reported second-quarter 2014 non-GAAP net income (excluding one-time items) of $38.3 million or 9 cents per share compared with $25.3 million or 6 cents per share in the year-ago quarter. Adjusted earnings for the reported quarter with employee stock option adjustments matched the Zacks Consensus Estimate of 6 cents.

Quarter Details

GAAP net income in second-quarter 2014 was $19.2 million or 5 cents per share compared with $13.0 million or 3 cents per share in the year-earlier quarter.

Atmel reported net sales of $355.5 million in the reported quarter, up from $347.8 million in the year-ago quarter. The increase in revenues was driven by improved performance in the microcontroller business and new product introductions. However, net sales missed the Zacks Consensus Estimate of $357 million.

Geographically, Asia represented 59% of total revenue, while EMEA (Europe, Middle East and Africa) and the Americas contributed 25% and 16% of revenues, respectively.

GAAP gross margin improved to 45.4% in the reported quarter from 42.5% in the prior-year period. Non-GAAP gross margin also went up to 45.3% in the second quarter of 2014 from 42.6% in the second quarter of 2013.

Total operating expenses in the quarter stood at $329.1 million versus $328.4 million in the year-ago quarter.

During the reported quarter, Atmel introduced new products and released Atmel SMART- a new brand of ARM-based microcontrollers for Internet of Things (IoT) applications. Atmel is increasingly focusing on its core microcontroller products 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 $264.0 million, down from $276.9 million as of Dec 31, 2013. Cash provided by operations totaled $52.5 million for the reported quarter versus $8.6 million in the year-ago period.

As part of its share repurchase program, Atmel repurchased 3.6 million shares during the reported quarter at an average price of $8.00 each. Since the inception of the share repurchase program in the second half of 2010, the company has repurchased approximately $744 million worth of stock.

Outlook

For the third quarter of 2014, the company expects revenues in the range of $364 million and $382 million. Non-GAAP gross margin is expected to increase by 170 basis points to 47.0 %.

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. The recent acquisition of Newport Media is expected to strengthen its leadership position in the IoT market.

Atmel currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth considering in the industry include AXT Inc AXTI, NVE Corp NVEC and Silicon Motion Technology Corp SIMO, each carrying a Zacks Rank #1 (Strong Buy).