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My thoughts on the gain on sale: First of all, I believe Atmel handled this correctly on all fronts. This information, along with the accounting change, was called out in the 10K and available to anyone who was willing to read the report. Atmel was forthright about delineating the gain from the sale of equipment in Europe in the earnings announcment, and was very direct about clearing up the obvious questions at the start of the conference call. At the end of the call, Donald Colvin talked about that sale of assets, and expressed that Atmel was delighted to have realized a profit on the sale of 6" manufacturing equipment in an 8" world. One of the realities of the Semiconductor manufacturing industry is that equipment purchasing management is indeed part of the normal course of business. Strategic acquisitions of manufacturing lines, and of other companies in Atmel's case, must occur many months in advance, and play out over a period of five to ten years. A company like Atmel, which has such a large capital base, is as strategically equipment dependent as they are product reliant. Without the right mix of products AND manufacturing processes and equipment there can be no profitability. Atmel's stock has been absolutely hammered these last couple of years based significantly on writedowns for acquired assets, and for impairment of equipment values based on obsolescence. The markets give absolutely to slack to companies that have to write down factory equipment for whatever reason, so why shouldn't we give credit where credit is due when Atmel actually makes money on a portion of their strategic equipment purchase and sale profile? Atmel is a company that historically has acquired between $25 and $100MM worth of equipment per quarter, with all of the enormous installation, maintenance, upgrade, repair, and tax costs that go with such acquisitions. This was a gain on sale accomplished by a talented purchasing group into a market laden with excess capacity and surplus equipment. It is also part of the ordinary course of business for Atmel and, as such, was justifiably included in ordinary income. If anything, Atmel deserves credit for calling out the gain on sale for all of us to see, and not burying the information somewhere in the 10Q a few weeks from now. |
