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Why Atmel’s 2015 Earnings Missed Analyst Estimates

Paige Tanner

Atmel after 4Q15: Why the Weak Earnings ahead of Acquisition?

(Continued from Prior Part)

How did Atmel perform in 2015?

In the preceding part of this series, we saw that Atmel (ATML) missed analyst estimates for 4Q15 earnings because the uncertainty surrounding its acquisition by either Microchip (MCHP) or Dialog caused Asian distributors to lower their inventory. Now let’s remove this effect and examine the company’s overall performance in 2015.

In 2015, Atmel’s revenue fell by 17% YoY (year-over-year) to $1.17 billion, missing the analyst estimate of nearly $1.2 billion. Its non-GAAP (generally accepted accounting principles) EPS (earnings per share) fell by 18% YoY to $0.32, lower than the analyst estimate of $0.33.

The company’s overall performance in 2015 was lower than in 2014 as the entire semiconductor industry faced a slowdown. Moreover, the strengthening of the US dollar made the company’s products expensive, and the weakness in the general macroeconomic environment reduced the buying power of its customers.

Profitability

On a non-GAAP basis, Atmel’s gross margin rose from 46.3% in 2014 to 47.5% in 2015. The company’s operating margin fell slightly from 12.3% to 11.9% during the same period. In dollar terms, its gross income fell by 14.8% YoY to $556 million, and its operating income fell by 20% YoY to $139 million during the quarter.

The improvement in gross margin came as a result of the company’s cost reduction plan. Other companies such as Maxim Integrated (MXIM) and Texas Instruments (TXN) also improved their gross margins in 2015 despite lower revenues through restructuring.

Forecast

The company has not released any guidance for 2016, but analysts expect the company to report EPS of $0.36 on revenue of nearly $1.2 billion in 2016. By comparison, Atmel’s acquirer, Microchip, has posted flat guidance for the March 2016 quarter because it expects declines in China due to the New Year holidays to be offset by growth in Europe (EZU).

In the next part of this series, we’ll examine the Microchip acquisition of Atmel in more detail.

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