Analyst Conference Summary

conference date: August 1, 2007 @ 2 PM PT
for quarter ending: June 30, 2007 (2nd quarter 2007)

Forward-looking statements

Overview: Sequential revenue increase, but still not a great quarter.

Basic data:

Revenues were $404.2 million, up 3.3% sequentially from $391.3 million but down 6% from $429.5 million year-earlier.

Net income was $0.7 million, down sequentially from $28.9 million and $8.3 million in Q2 2006.

EPS was slightly above $0.00.

Cash and equivalents ended at $476.1 million, a slight sequential decrease.

Guidance:

Revenues expected to grow 1% to 3% sequentially.

Conference Highlights:

Gross margins were 35%; they were 35.8% in Q1 and 32.4% year-earlier.

Liabilities (current and long term) decreased $119.3 million in the quarter to $745.3 million.

Quarter results include $15 million in charges related to the May special shareholder meeting. Shareholders voted overwhelming support for current board at the meeting.

Atmel sold its network storage products to MoSys and its Irving, Texas wager fabrication facility sold for $38 million to Maxim. New products were introduced.

All geographies and business units had sequential growth excepting RF CDMA, which declined $10 million sequentially.

ASIC revenues $124 million, up 12% sequentially. Security and aerospace products were strong, as were ARM products.

Microcontroller revenues were $111 million, up 2%. AVR microntrollers had 8% sequential growth.

Non-volatile memory revenues were $89 million up 4%.

RF/automotive revenues were $80 million, down 7% (includes RF CDMA).

Geographical: Asia up 5% sequentially and represented 50% of total revenues. Europe up slightly and represented 35% of revenues. Americas were up 14% and represented 15%.

Operating expenses $137 million. Stock-based compensation expense $2.8 million. $69 million was R&D, $68 million was SG&A (including the $15 million one-time charges for stockholders meeting and backdating issues). $7.1 million income tax provision.

Each penny variation in the Euro - dollar exhange rate results in $1 million change in revenues. Q2 operating income was reduced by $10 million due to currency exhange.

Capital expenditures were $18 million. Depreciation and amortization expense was $32 million.

Achieved target of reduction in personnel by 300 and cost savings plans have hit targets. Still plan to sell plant.

Q&A:

Divestitures? Are looking at some, but will not announce in advance.

Backlog coverage? End of July was 80% of guidance, about the same as for Q2.

Europe linearity? Expect a little bit of growth in Europe in Q3, despite slowness of summer demand in Europe.

Margin guidance? R&D numbers are down year to year. Expect $67.5 to $69.5 million in Q3. SG&A $55 million going forward. Had a 1 week shut down in Q2, won't do that in Q3, so margins should improve 50 to 75 basis points.

Tax rate? $7 million per quarter, just foreign subs until loss carry forward is used up.

Year from now margins? Too much uncertainty that far forward. Fab-lite model should move gross margins to the 40% range. Will increase microcontroller R&D head count.

Lead times? 2 to 4 weeks for most products. We have abundant inventory.

Pricing? No big changes. Memory and smart card IC ASPs are trending down.

Cypress PSock? They are doing capacitor sensing, which we do as well. We are winning substantial designs.

Housing sector impact? Our U.S. sales were up 14% in Q2. We are not seeing any particular softness; we have thousands of products, some of which do go into housing market.

Guidance by segment? Growth in microcontrollers, ASICs. Decline in CDMA foundry, softening in RF / automotive. Memory flat to slightly up.

Smart card? Believes gained market share sequentially. Looking to banking cards for higher margins.

95% of our wafers are produced internally. We need to sell off our internal capacity before we can move to outside fabrication.

In 2006 first half had tremendous microcontroller growth, then declined sequentially in Q3 and Q4. Don't expect that this year; expect sequential growth in Q3 and Q4 2007. Portable consumer products is a high growth area for us.

North Tynside foundry is running at only about 50% utilization due to loss of largest customer, which hurts profitability for microcontrollers and AVR products.

How much RF CDMA business is left? Annual run rate has declined by $100 million in last year. Now 4% of company revenues.

OpenIcon Analyst Conference Summaries Main Page

Atmel Investor Relations page

Search

More Analyst Conference Pages: