UPDATE: FBR Capital Markets Reiterates on Atmel as XSense Secures HP Omni Touch Sensor

In a report published Wednesday, FBR Capital Markets analyst Christopher Rolland reiterated an Outperform rating on

, but removed the $8.25 price target. In the report, FBR Capital Markets noted, “Atmel's XSense has secured the touch sensor in the HP Omni 10.1. While we do not expect this to be a high volume SKU, we believe it's meaningful as it indicates HP has tested and validated Atmel's metal mesh technology. We believe this opens the door to a growing partnership and may indicate penetration beyond just tablets and into HP's mainstream PC line. Furthermore, we believe Atmel's Windows 8 certification, announced a few weeks ago, will help the company secure a meaningful percentage of Bay Trail tablets coming to market over the next few months. Additionally, Atmel has secured the touch controller in Sony's PS4 game paddles, a socket that we believe could provide $15 million annually. Overall for Atmel, we think the Street underestimates all, or a portion, of the following: (1) new sensor hub opportunities; (2) a strong cyclical recovery in the core MCU business, also benefiting the ASIC and RF units; (3) Win8 touch PC wins; and (4) XSense demand that we believe is growing in late 2013 and, more importantly, in 2014. Additionally, the unwinding of the take-or-pay LFoundry agreement and higher utilizations should drive gross margin expansion of approximately 400 bps over the next six quarters, benefiting the bottom line. We reiterate our Outperform rating.” Atmel closed on Tuesday at $7.53.