Texas Instruments Incorporated (TXN), Atmel Corporation (ATML): A Semiconductor Stock to Consider

Competitors
Some other semiconductor players in the U.S. are Atmel Corporation (NASDAQ:ATML) and Freescale Semiconductor Ltd (NYSE:FSL).

Atmel Corporation (NASDAQ:ATML) is attempting to grow its business by concentrating on touch sensors in mobile, but this has not gone according to plan. Though Atmel Corporation (NASDAQ:ATML) has seen design wins from Sony, Lenovo, and Asus, slow adoption of touch-enabled computers has held it back. The company’s lack of diversification hasn’t helped either, as the majority of revenue comes from supplying microcontrollers. Depending on touch-enabled Windows PCs is certainly not a good idea for growth.

Weakness was evident in the previous quarter, as revenue dropped 6% from the year-ago period. Also, excluding one-time items, non-GAAP earnings were $0.06 per share compared to $0.08 per share last year.

At a beta of 2.9, Atmel Corporation (NASDAQ:ATML) is riskier than Texas Instruments, with a beta of 1.35. Even though it appears as if Atmel Corporation (NASDAQ:ATML) may profit from Android tablets with customers such as Samsung, Texas Instruments has a more diversified business and is where investors should put their money.

Freescale Semiconductor Ltd (NYSE:FSL) has also been struggling, operating in the red for most of the last three years, but the company now appears to be in turnaround mode. Management hired former Texas Instruments executive, Gregg Lowe, as CEO last year, and the stock’s 35% appreciation indicates that the turnaround strategy is working.

In the recent quarter, Freescale beat estimates on both revenue and earnings, as revenue rose 1% from last year. Analysts expect the company to benefit from sales of its microcontrollers in China as it has more than 500 clients in the region, according to a Citigroup analyst. Also, RBC Capital believes that the roll-out of 4G in China by China Mobile will also help Freescale’s growth. So, this is another turnaround story to watch.  

Conclusion
Atmel Corporation (NASDAQ:ATML) is bleeding as Windows PCs aren’t helping its business, while Freescale is trying to turn around. However, it is Texas Instruments that seems to be the best-positioned, considering its dominant position in end markets and lucrative program of returning cash to shareholders. Investors should consider this stock.

The article A Semiconductor Stock to Consider originally appeared on Fool.com and is written by ANUP SINGH.

ANUP SINGH has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 

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