Looking Beyond Atmel's Earnings


Touchscreen controller maker Atmel (NAS: ATML) witnessed a fall in its revenue when it came out with its fourth-quarter earnings recently. This prompts me to take a closer look at the company's prospects and find out whether it can turn the tide in its favor.

Some reasons to smile
Atmel, which primarily supplies its touchscreen controllers to Apple iPad rivals such as Samsung and HTC, saw its revenues climb for 10 consecutive quarters. However, global economic concerns caught up with the company as it saw its top line go down around 16% from last year. Also, delayed payments from an Asian distributor affected its top line by some $11 million, causing the company to miss revenue estimates.

However, the company did manage to spring a few surprises. Atmel posted its highest annual revenue since the turn of the millennium, at $1.8 billion. This was driven by the solid growth of its maXTouch touchscreen controller business, which increased 25% from last year, contributing $1.1 billion in revenue.

...followed by a few more
These touchscreen controllers, for me, are the biggest reason to believe that Atmel can overcome the immediate hurdles in the coming months. Atmel's engineers are pushing the maXTouch line of products pretty hard, and the results are quite impressive. These controllers will be found across Samsung's line of phones, such as the Focus Flash and Focus S Windows smartphones, apart from an LTE edition of the hugely successful Samsung Galaxy S2.

In addition, the company reported that it had added smartphone maker LG to its existing clientele, along with others in the Korean and the Japanese markets. Atmel is also making huge strides in China, one of the fastest-growing mobile markets in the world, where it has added customers such as ZTE, Xiaomi, and OPPO Electronics, among others.

And the story of the company's prospects doesn't end here. Its partnership with Microsoft for Windows 8-based tablets, convertible PCs, and Ultrabooks could see Atmel record handsome profits when these products are launched and gain traction among consumers. From a venture with NVIDIA for developing Tegra designs for Android Ice Cream Sandwich devices to supplying Sony with touchscreen controllers for the Playstation Vita (a successor to the highly successful PSP), Atmel has a brilliant lineup to display.

The Foolish takeaway
Management is confident that things will start looking up from the second quarter this year. Atmel looks to generate substantial revenue from its touchscreen controllers. It might take some time, but Atmel is one stock that should be on your radar if you are looking to gain from the mobile computing revolution.

To stay up to speed on the latest developments at Atmel, add the stock to your Watchlist.

At the time thisarticle was published Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and NVIDIA, writing puts in NVIDIA, and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published