Atmel Sells Serial Flash Memory (ATML) (QCOM) (TXN)

Atmel Corporation (ATML) recently completed the sale of its Serial Flash memory product lines to privately-held Adesto Technologies Corporation. However, the financial terms of the transaction were not disclosed.

The product lines include the Atmel AT45XXX (Data Flash) and AT25XXX (BIOS Flash) product families and employee teams supporting those products. The company has retained its Serial EEPROM, Crypto and Digital Temperature Sensor memory product lines and expects to continue to invest in those businesses. In addition, Atmel will also assist Adesto for a smoother transition.

Meanwhile, Atmel is in the process of evolving into a purely microcontroller-based company to improve its cost structure and unlock value. The company is focusing on its core Microcontroller business and is stalling development in non-core areas with the aim of targeting high-growth and high-margin businesses.

The growing microcontrollers business is expected to contribute to the company's top-line growth going forward. Microcontrollers are poised to grow significantly based on versatile application in various end markets, such as communications, industrial, automotive, computer and consumer.

Atmel is well positioned in the microcontroller market as the company is placed among the top players in this segment. The migration of industrial and commercial lighting from lightbulbs to LED requires a microcontroller that drives powers and supports the LED lighting infrastructure.

Touch-sensing technology is the fastest growing area in Atmel's microcontroller business and is expected to remain a major growth driver in the coming quarters. The phenomenal growth is driven by rapid growth of smartphones, the rise of Android tablets and the penetration into new high-volume applications.

Atmel continues to see the touch-sensing market expand rapidly beyond smartphones into new applications, such as tablets, netbooks, cameras, printers, automotive and other areas. For tablets, Atmel has won designs for Android tablet platforms from Texas Instruments (TXN) and Qualcomm Inc (QCOM).

We continue to maintain a Neutral recommendation on Atmel Corporation. Our recommendation is supported by a Zacks #3 Rank, which translates into a short-term rating of Hold.