Atmel on the Block

PARIS -- Atmel Corp. is on the block, looking for a potential buyer, Reuters reported Monday. If true, the move feeds further fuel into the M&A frenzy currently affecting the global semiconductor market.

Atmel, a mid-sized chip vendor with revenue last year of $1.41 billion, is known for its MCU and touch-sensing technology. Atmel’s latest pitch to the investment community is that its strategy — banking on the emerging Internet of Things market – has transformed it into a higher-margin, higher-growth business.

Steven Laub, Atmel CEO

During the company’s earnings call last month, Steven Laub, president and CEO, announced his plan to retire at the end of August. He told financial analysts, “Today, the company is comprised of very desirable businesses: microcontrollers, wireless, touch, security and automotive, all of which are positioned to grow in attractive high growth markets.”

Citing two unnamed sources, Reuters reported that Atmel has retained investment bank Qatalyst Partners to help with the sale process.

Atmel CEO’s retirement
Some speculate that the retirement of Atmel's longtime CEO might be a factor driving the company's decision to explore alternatives.

During the last earnings call, Laub was asked to comment on NXP’s planned acquisition of Freescale, a deal expected to make the combined entities the world’s second largest general-purpose microcontroller vendor, after Renesas.

Laub said, “With respect to industry consolidation, there is no doubt that there has been a lot of that occurring over the past at least last couple of years, and I think the sense is there will be some continuation of that this year as well.” However, he quickly added, “That hasn't had any influence on my decision to retire.”

Adding more wireless connectivity
Beyond MCUs and touch solutions, Atmel has been busy beefing up its wireless connectivity portfolio. Last July, Atmel bought Newport Media, a provider of advanced WiFi and Bluetooth solutions.

Among Atmel’s wireless products are WiFi-Direct (which came from Atmel’s acquisition of Ozmo Devices in 2012), Wi-Fi b/g/n standard products, Bluetooth and newly introduced Bluetooth Low Energy products. The company claims that these new products are ramping today, but the CEO said that they're “not at a material level that we believe it is worthy to disclose those out.”

How much of Atmel’s revenue is really driven by IoT is hard to pin down. As Laub acknowledged, it “depends on how people want to define IoT.” Noting that one company in the semiconductor industry defines IoT revenue as MCU, wireless, sensors and analog, Laub said, “if using that definition and including security, our IoT revenue in the first quarter already exceeded $200 million.”

As Atmel admits, this is an inflated number. Laub said, “We believe a more accurate definition is to only measure product revenue sold directly into IoT applications, which, when you have thousands of customers as we do, is difficult to precisely determine.”

Previous takeover bids
Atmel was a hostile takeover target in the past. In October 2008, it received an unsolicited offer from Microchip Technology and On Semiconductor, estimated at $2.3 billion.

Steve Sanghi, Microchip Technology’s chairman, president and CEO, said at that time in an interview with EE Times that Microchip is bidding for Atmel for “a very simple reason; its businesses are underperforming and this has driven down the stock price by more than 46 percent in the last year (2007).”

Sanghi then said, “The microcontroller business has good prospects but right now it is very hard to extract value from it because it is surrounded by other businesses that are not performing well. We have devised a creative scheme with our partner ON Semiconductor that would allow us to draw the diamond out of the rough at Atmel.

“We do not want to own Atmel's entire operation. That is why we needed a partner who would consider the other businesses strategic and it makes sense for ON Semiconductor.”

Of course, that was 2008 and it’s 2015 now. A lot has happened in seven years.

Looking back on this nine years as head of Atmel’s operations, Laub explained that Atmel, despite losing more than $1 billion of net income from 2001-2005, now sustainably generates double digit non-GAAP operating margins.

The company sees itself among industry leaders in the attractive microcontroller marketplace. Laub noted, “We have more than tripled our revenues since 2005. We have exited over 20 different businesses and product lines and made five acquisitions, as we focused the company on higher margin and higher growth businesses.”

This year, 2015, is turning into the biggest for semiconductor deals since 2000, according to Reuters data. The recent deals among chip vendors include NXP Semiconductors’ taking over Freescale Semicondcutor, Avago Technologies’ purchasing Broadcom Corp, and Intel Corp buying Altera Corp.