Atmel Corporation (ATML) reported earnings per share of 4 cents in the second quarter of 2012, in line with the Zacks Consensus Estimate. On a reported basis, the company posted break-even earnings in the second quarter, down from 5 cents per share in the previous quarter and 20 cents a share in the year-ago quarter.
Net income came in at $0.8 million, including a pre-tax charge of $14.4 million, primarily related to restructuring activities in Europe, down from $20.4 million in the previous quarter and $90.9 million in the second quarter of 2011.
Revenues
The company reported net sales of $368.2 million in the second quarter of 2012, down 23% year over year and but up 3% sequentially. Net sales in the quarter were in line with management’s guidance of sequential revenue growth of 2% – 6%.
Atmel saw an improvement in revenue across most business segments in the quarter including a recovery in core Microcontroller business.
Microcontrollers business generated revenues of $220 million, down 27% year over year but up 1% sequentially. 8-bit microcontroller grew 4% sequentially but plunged 29% year over year. 32-bit microcontrollers decreased 7% sequentially and 21% year over year.
The Non-Volatile Memory segment generated revenues of $47 million, down 1% sequentially and 34% year over year. The sequential decline in the memory business was a result of older legacy terminal flash products approaching the end of their product life.
In the RF and Automotive segment, revenue improved 9% sequentially but fell 10% year over year to $48 million. Atmel saw a healthy pickup in both high voltage and product lines during the quarter. The non-automotive portion of the business, including a legacy foundry business, also grew in the second quarter.
The ASIC business segment generated revenues of $53 million, up 9% sequentially but down 1% year over year, aided by higher revenues in the aerospace and custom parts for medical and point-of-sale applications.
On a geographical basis, Asia accounted for 54% of total business. Europe, Middle East and Africa accounted for 28% of total while the Americas contributed 18% to the total.
Margins
Gross margin (excluding one-time items) increased to 44.6% from 43.2% in the previous quarter, primarily due to higher factory utilization as a result of a sequential increase in business levels. However, reported gross margin was down from 52.3% in the second quarter of 2011. Operating margin came in at 11.6%, up from 9.9% in the previous quarter.
Balance Sheet and Cash Flows
The company ended the quarter with cash and cash equivalents of $240.9 million, down from $288.3 million at the end of the previous quarter. The decrease was due to share repurchase activity in the quarter.
During the second quarter, Atmel repurchased 6.1 million shares for $44.0 million. Atmel generated $7.9 million in cash from operations in the second quarter, significantly down from $61 in the prior quarter primarily due to unfavorable timing of new product ramps that affected linearity of shipments toward the end of the quarter. The company incurred $9 million in capital expenditures.
Outlook
Management stated although maXTouch business was soft in the quarter, new design wins continue to be robust. Hence, management does not expect to achieve its previous forecast of maXTouch business of over $335 million.
The company now expects the company’s business to be 10% to 15% lower than the previous forecast as lower handset sales at its largest handset customer are not being sufficiently compensated by maXTouch sales to other customers.
Nevertheless, Atmel expects that the anticipated launch of Windows 8 and growth in new markets should drive its maXTouch business in both the third and fourth quarter of the year.
Management continues to have limited visibility going ahead in 2012 due to the economic situation in Europe and recent slowdown in Asia.
Going forward, Atmel expects revenues between $357 million and $379 million in the third quarter of 2012, due to lower revenue from ASIC business, which should recover in the fourth quarter.
Gross margin is projected between 43.5% – 44.5% in the third quarter of 2012.
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