What Atmel does not need to do
by: nightly_atml_report (M/East Rutherford, NJ)
Long-Term Sentiment: Strong Buy 07/08/03 01:14 am
Msg: 143796 of 143979
I spent some time tonight trying to find answers to one question, namely, What makes MCHP profitable(and have a P/S ratio of 8.5!) when they are in similar businesses to Atmel?(8 bit uC's with NVM). I spent about 2 hours on this, and the answer came as something of a surprise. First, let's talk about what the answer is NOT.
1.) The answer is NOT that MCHP is fabless. Other than a couple of % of their products that are made by an outside vendor, MCHP makes their chips at their own fabs.
2.) The answer is NOT that MCHP has their fabs situated in lower cost areas, such as Asia. MCHP's "4 fabs"(not to be confused with the Fab Four) are all in the US. MCHP is in the process of shuttering one fab, which is a 6 inch fab. Another fab is an 8 inch fab that was never put into service that they have put up for sale. The 3rd fab is an operational 8 inch fab. The 4th fab is an 8 inch fab that will be put into service later this year.(Any of this sound familiar?)
3.) The answer is NOT that MCHP uses more advanced mfg processes than Atmel. In fact, MCHP is considerably behind Atmel in this area. Whereas Atmel produces chips right now with 0.18 um linewidths, MCHP produces nothing more advanced than 0.35 um linewidths, and has no plans to produce anything more advanced this year.
4.) The answer is NOT that MCHP has lower corporate overhead. In fact, Atmel beats MCHP handily in this area. In the latest quarter, Atmel's SGA(selling, general, and administrative costs) were 10.7% of sales, whereas MCHP had SGA that were 14.5% of sales.
Well, that covers some areas that are NOT the answer. I'll discuss what the answer is in another post, perhaps tomorrow. I trust that Atmel's new CFO has looked into this matter in great detail and has developed a plan to correct the situation. It is probably being implemented as we speak.
Nightly
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