I'll try and paste an analysts report on ATMEL titled First Quarter a Little Light, But Still on The Road To Recovery...
ATMEL (ATML: 23) reported 1Q
EPS of $0.08 from continuing operations, or $0.02 below
consensus-level estimate. Revenue and
gross margin were lower than expected. New orders
were strong, visibility improved, and the book-to-bill
ratio was 1.1. Given Atmel's expanding product line,
potential for significant margin expansion as the
company's product mix richens, and expectations
for a more benign pricing environment, continues to
believe that Atmel is on the road to recovery. He
maintains his Outperform rating on ATML shares, and
his $26 price target.
DETAILS:
First-quarter revenues of $290 million were $10 million
below our estimate and flat sequentially. Gross margins
declined about 140 basis points sequentially to 36%
reflecting the adverse impact of currency and lower
microcontroller sales. About one-third of the shortfall was
due to currency (Euro and Yen) and the remainder was due
to a less rich product mix. During the quarter, Atmel took
charges of $29 million (net of tax affect) for a change in
accounting principle for start-up activities at their new 0.18-
micron Fab 7, and a gain of $14.5 million (pre-tax) on the
sale of excess semiconductor manufacturing equipment
from Fab 6. Net of these charges, first quarter operating
EPS was $0.08.
New orders were strong, visibility has improved, and the
book-to-bill ratio was 1.1. Atmel saw strength in wireless
communication and computer end markets, and North
American distribution sales have started to recover.
Business was strong in March, and the momentum is
continuing in April.
Overall, non-volatile memory accounted for about 42% of
Atmel's first quarter revenues, and revenue from these
products increased 8% sequentially. Atmel is seeing strong
demand for its Flash products and prices have firmed,
although Flash revenues were flat sequentially due to mix.
As anticipated, Atmel plans to ramp its high density (8Mb
and 16Mb) Flash products during the second quarter, which
should result in a better product mix, accelerating revenues
and improved profitability into the second half of the year.
Demand was also strong for EEPROMs, with serial
EEPROMs showing the strongest sequential revenue growth
of approximately 20%. EPROM revenues were up slightly
on a sequential basis.
Although first-quarter results came in a little light and
ATML may be under pressure in the near term, we believe
Atmel is on the road to recovery. Given the potential for
significant margin expansion as its product mix richens,
combined with our expectations for a more benign pricing
environment during the next couple of years, we believe
Atmel should be able to enjoy significant earnings leverage
as it exits 1999 and enters 2000. Thus, we reiterate our
Outperform rating and $26 price-target on ATML.
Hope this helps. I also think is is useful to focus on operating income for comparative purposes. |
