To: Paul Kim who wrote (7577 ) 12/13/1997 10:59:00 PM From: jeff s Respond to
A few weeks ago I posted thoughts about Atmel's new products relative to the downturn in Flash sales announced by AMD and Intel. I also mentioned that Kris Chellam had predicted that the microprocessor side of the business for these two competitors would cause thier flash business to take a serious back seat. I suggested that resources would be pulled off of Flash by Intel and AMD to focus on Microprocessors, leaving more room in the Flash market for Atmel. Well, here we are. Remember, 35% of Atmel's late summer sales were in new products, and a book to bill of "greater then 1.2:1" could be significantly higher. The French plant is coming on-line at the same time that AMD and Intel are having fire sales. I suspect we will see great sales numbers from Atmel in January but significant margin pressure as startup costs in France coincide with pricing pressure while the competition makes a strategic pullback of sorts. Once inventories are cleared and Atmel's ramp in France (8" wafers vs. 6" in Colorado) achieves critical mass, the pricing will improve, and the margins recover to former stellar levels. Most of Atmel's Asian sales are for sellthrough back to the Western economies and both parts and end product are denominated primarily in dollars. I cannot believe that Atmel has not learned to hedge against the Yen this year. Atmel's year-end is December 29th, and I believe the Deutsche/Morgan/Grenfeld comments about earnings a few weeks ago constitute all we are going to hear in the way of a pre-announcment. If that's the case, then Atmel hits thier numbers, talks about margin pressure in the conference call, announces the scale-up of France, and continues to ramp sales on a lowering cost basis. All of the above is predicated on the theory that Atmel's new product line-up is is starting to live up to it's promise and putting heavy pressure on the competition in a rapidly growing market. If Atmel is indeed gaining market share in an expanding global market, then Asian turmoil aside, the current stock price is an unbelievable bargain.
