Can new products make the difference?
As noted, there’s always been a lot of potential with this company. This is despite the Street’s love affair with QUALCOMM, Inc. (NASDAQ:QCOM) and Broadcom Corporation (NASDAQ:BRCM) and their claim in the mobile devices market. Nevertheless, Atmel’s been steadily investing in its fast-growing touch-sensing technology business.
To that end, the company recently posted a 6% year-over-year growth in the microcontroller business, marking the fourth consecutive quarter of growth. This is despite what has been a brutal chip industry. That overall revenue arrived 10% lower was not much a concern. In fact, it was a 15% improvement when compared to the year-over-year growth of Q3. Plus, when adjusted for the sale of the serial flash business, the decline was only 8%.
However, Atmel Corporation (NASDAQ:ATML) continues to be a story about touch and a renewed focus on higher-growth business. To that end, Atmel recently unveiled several new products such as the maXTouch mXT450S aimed at generating higher margins. Likewise, the company’s latest maXTouch solutions have picked up new design wins and continue to gain momentum in “non-traditional” touch devices/products such as automotive applications.
Even more impressive, the new touch controllers have a strong focus on the end-user experience, including passive stylus support. And according to Stephen Cumming, Atmel’s CFO, these investments are likely to pay good dividends this year. In a recent interview with Reuters, Cumming seems more confident thanks to increased orders from smartphone and ultrabook customers like Samsung and Hewlett-Packard Company (NYSE:HPQ).
Is there a new focus?
In the phone interview, Cumming said:
Overall, 2013 is definitely going to shape up as a better year. I do feel that our maxTouch business will grow, our core microcontroller business would grow. Our other product lines should overall be doing better.
It’s hard to say what Cumming meant by his optimism for growth. If you recall, Atmel Corporation (NASDAQ:ATML) posted a 10% decline in revenue in the recent quarter.
While part of the revenue decline might have been macro-related, given Atmel’s recent focus on higher-margin business, it is likely that the company passed on sales opportunities that didn’t meet its margin criteria. While Cumming stopped short of saying numerically the extent of these growth projections, his words carried plenty of assurance.
The company understands that it has superior technology to rivals like Synaptics, Incorporated (NASDAQ:SYNA) and Cypress Semiconductor Corporation (NASDAQ:CY), which means its products tend to cost more. Consequently, Atmel may have lost out on some bids. It stands to reason that the company may have developed a change in strategy. Is Atmel willing to now sacrifice some margin for growth?
How much growth can we bank on?
Despite the vote of confidence, analysts have not begun to alter their models. According to Thomson Reuters, the Street expects Atmel’s 2013 revenue to remain flat at $1.43 billion. Cumming placed Microsoft Corporation (NASDAQ:MSFT) , and more specifically, the response to Windows 8 as one of the key drivers of Atmel Corporation (NASDAQ:ATML)’s anticipated growth, while stating: “I really think that Windows 8 is going to gain more and more momentum as we go into 2013 and beyond.”
Perhaps investors should start focusing on Microsoft’s numbers to gauge how well Atmel is likely to perform in the coming quarters. It’s also worth noting that Atmel didn’t comment on Samsung’s new phone, the Galaxy SIV, which is said to be due out this month. It is likely that Atmel didn’t win the design and likely lost out to Synaptics, Incorporated (NASDAQ:SYNA), which was said to be its biggest rival. If this is true, cost could have played a key role in Samsung’s decision. But management could just be overly secretive. But we’ll find out soon enough.
The article Can Atmel Balance Revenue and Margin? originally appeared on Fool.com and is written by Richard Saintvilus.
Fool contributor Richard Saintvilus owns shares of Apple. The Motley Fool recommends Apple and Cypress Semiconductor (NASDAQ:CY). The Motley Fool owns shares of Apple, Microsoft, and Qualcomm.
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