Investors caught in the steady mobile-devices battle between Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) will likely never look to Atmel Corporation (NASDAQ:ATML) as a solid derivative play in chips. While this company is often overlooked in favor of names such as QUALCOMM, Inc. (NASDAQ:QCOM), Atmel’s been steadily investing in its fast-growing touch-sensing technology, positioning itself for long-term dominance. And if Q4 results were any indication, the rest of the sector better take notice.
The company’s been focusing on its higher-growth business. To that end, Atmel recently unveiled several new products, such as the maXTouch and mXT450S, aimed at generating better margins. As a result, that revenue arrived lower by 10% year over year was not much a concern. In fact, it was a 15% improvement when compared to the year-over-year growth in Q3. Plus, when adjusted for the sale of the serial flash business, the decline was only 8%.
Amid the brutal conditions of the chip industry, the microcontroller business advanced 6% year over year. This marks the fourth consecutive quarter of growth. That’s all well and good, but this continues to be a story about touch. The company’s latest maXTouch solutions has picked up new design wins and continues 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. As the market adapts, these are features that consumers will realize they can’t do without, especially since it uses much thinner sensors with advanced noise resistance. With all of this attention to detail, the fact that Apple Inc. (NASDAQ:AAPL) has not figured out a way to partner with Atmel is astounding.
At one point, I made the case that Atmel does not need Apple Inc. (NASDAQ:AAPL) to survive. The basis was that Qualcomm and Broadcom Corporation (NASDAQ:BRCM) continue to get the lion’s share of the press, which helps their respective stock performances. However, this time, a case can be made that Apple is the one that needs Atmel, especially since word is coming out that the tech giant is working on a so-called iWatch.
Apple Inc. (NASDAQ:AAPL) has yet to comment in these rumors, but according to published reports, the iWatch could be used in conjunction with Bluetooth, with the iPhone serving a “wireless portal.” If this is true, Atmel’s industry-leading radio frequency or RF chips are the perfect choice for Apple, in my opinion. Whether Apple sees this or not, knowing how this industry works, an iWatch won’t be the only one on the market. Not if Google and Samsung has anything to do with it.
This means that Atmel should be highly coveted for its expertise in this area. Plus, at some point, Atmel will get to enjoy the same “double-agent” status that Qualcomm and Broadcom boast about today, since they both have partnerships to competing platforms in Apple Inc. (NASDAQ:AAPL) and Samsung. In the meantime, it’s encouraging that amid a sluggish environment, Atmel’s touch controller revenue is growing on target with company projections.
How much is Atmel willing to bend?
This is the main question that management must answer. Revenue was down year over year, but only part of this was macro related. Without question, Atmel has superior technology to rivals like Synaptics, Incorporated (NASDAQ:SYNA) and Cypress Semiconductor Corporation (NASDAQ:CY). And Atmel knows this. Therefore, its products tend to cost more. With Atmel’s focus on driving higher-margin revenue, it’s not uncommon for companies to let sales that don’t meet this criteria slip away.
