Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Stephen Cumming - VP & CFO

Analysts

Atmel (ATML) Bank of America Merrill Lynch 2012 Technology Conference May 8, 2012 5:45 PM ET

Stephen Cumming

Thank you Vivek. It’s a pleasure to be here this afternoon. For those of you not familiar with Atmel, we’re a leading public semiconductor company based in San Jose, Silicon Valley.

In 2011, we had revenues of approximately $1.8 billion and have sales and operations throughout the world. We are primarily focused in the areas of embedded microcontrollers, and we’ve been particularly successful over the last few years in the areas of capacity touch. And I will talk a little bit about that later on.

So today, I’ll discuss Atmel’s business strategy and substantial changes we’re making to that strategy and the optimization of the operations of the company and the impact that’s having on the overall financial performance of the company.

Before I do that, I’d like to draw your attention to Safe Harbor statement. During the course of this presentation, I will be making forward-looking projections about Atmel’s business outlook. Actual results may differ materially from those expressed in this presentation due to a number of risks and uncertainties.

And those risks and uncertainties can be found in our filings, that's our 10-K and 10-Q, and we just filed 10-Q as of last Friday. So there is a lot of interesting reading in there, when you get a chance, feel free to dwell through it.

So turning to a discussion on Atmel, some of you have probably heard about Atmel’s transformation. But I think it’s worth summarizing for those of you that are new to the story. About approximately five years ago we put in place a strategy to make a lot of changes in the company. The changes we pursued were actually relatively simple, but they've had a substantial impact on the overall performance of the company.

We focused on three main areas. First and foremost; we recognized that the most valuable and the most important part of the business with the greatest potential for growth and margin expansion was our microcontroller business.

And so we put in place to make ourselves a microcontroller-centric company, focusing on the high growth, high margin opportunities. We also said that we pursued and reallocated a lot of our R&D resources and our sales and marketing resources over to microcontrollers.

We went into acquisition mode, and we acquired a few micro based companies. We acquired Quantum Research back in March of 2008. We acquired a ZigBee IP company and more recently, we acquired a company that gave us access to Power Line Communications. On top of the restructuring and transformation of the company, we shed 21 noncore businesses.

The second leg of the strategy was to adopt a fab like manufacturing model. Five years ago, the company was manufacturing approximately 95% of its capacity in house and many of those manufacturing facilities were in the higher cost regions of Europe.

So over the last five years, we've exited four of those fabs, we have one remaining facility in Colorado. And our vapor capacity now is roughly 50-50 split, give or take, between internal and external.

The third leg of the strategy was pursuing a complete organizational change and cultural change in the company. We have a new management team in place. We’ve also simplified the organization. We cut out cost and we reduced our headcount by about 35%. We've done a lot in terms of rewiring and restructuring the company, but I think the biggest catalyst for improvement is really building a very valuable microcontroller business.

And as this chart shows, our product mix has shifted in favor of the high growth, high margin products. Microcontroller parts have gone from 24% of revenues in 2006 to 62% of the company’s revenues in 2011, a substantial increase in just five years. And as you've seen, we have made a lot of changes in some of other businesses as well. Nonvolatile memory has gone from 22% to 14% of the company’s revenues. Our ASICs declined from 31% to 13% of the revenues, in part, as we divested our smart card business that we sold back in Q3 of 2010. And our RFA business has gone from 23% of revenues to 11% of revenues as we exit some of the foundry business there.

In our most recent quarter, Q1 of 2012, our microcontroller business represented 61% of the overall company’s revenues. For the full year of 2011, the revenues of the company grew 10% year-over-year. And if I exclude the smart card business, which we sold back in Q3 of 2010, our full year growth would have been 15%, when I believe the overall market semiconductor growth grew something like 0.4% in 2011.

A lot of the growth has been driven by our microcontroller business and that is attributable to our very popular ADR product line and to give you a sense of the progress we are making in that area, since we entered the market back in the late 1990s, we've really grown substantially and I would say, explosive growth in the last five or six years. The growth has been driven from a number of key milestones. These include development of our 8051 architecture, the development of our own proprietary AVR architecture where we have that both in 8 bit and 32 bit product-line. We’re licensees to ARM as well.

We’ve also made a number of strategic acquisitions. We acquired an IT company to help us move into the ZigBee space to participate in some of the high growth, high margin, smart power metering parts of the market. We acquired Quantum Research back in 2008 to combine with our proprietary AVR microcontroller hardware to play in the touch space. And now we are number one in touch screens with over 40% market share.

And mSilica enabled us to play in the LED, smart lighting segments and more recently ADD to play in the power line communications markets. And as you can see from this slide, we’ve taken microcontroller revenues from $270 plus million in 2005 to over $1.1 billion in 2011.

2011, we grew year-over-year by something like 25% and have an impressive CAGR over the last five or six years of about 26%. I think when you look at this chart; it’s worth nothing that our growth in microcontrollers has not just come from our touch business. We’ve seen substantial growth in our core microcontrollers as well and we expect that to continue.

This has allowed us to gain substantial market share in the microcontroller space. If you take a look at the rankings of the suppliers in the microcontroller area, this chart is ranked based on sales prior to 1996, Atmel was a non-player in the microcontroller space and since then we’ve grown significantly over the years, outpacing our competition year-over-year. In 1998 we were the 14th largest supplier. We became the eighth largest supplier in 2008, jumping to the fourth largest supplier in 2010.

A few weeks ago, Gartner released their analysis for microcontroller companies. I’m proud to say that once again, we’ve grown up this chart by an additional place. We are the third largest microcontroller in the world if I take out the smart card business and we expect to continue that upward momentum as we go forward.

So, what are the future areas of growth that we continue to see the upward trajectory of microcontrollers? Actually our analyst day last year, we spoke about a number of key growth areas. If you look at the overall microcontroller market over the last five or six years, it’s been growing probably in the single digit zip code. Obviously, for us we’ve seen substantial growth, much, much faster than that. And we’ve done that by picking certain applications that we believe are among the highest growth within a given market.

Going forward, we’ve identified 70 vertical markets that we believe will have growth faster than the industry. Touch is one that you’re all probably more familiar with, probably one of the fastest growing areas in the semiconductor market. But areas like battery management, smart power metering, energy, lighting, the sensor market and wireless connectivity are some of these areas, coupled with automotive. The TAM in these areas today represents roughly about $8 billion and by 2014 we’re expecting that to grow somewhere to around $12 billion.

Now let’s dig a little bit deeper into touch as that is the second area of growth for the company going forward. Touch is probably one of, if not, the fastest growing areas in the semiconductor space. On the 28th of March, IHS predicted shipments of touch controllers should reach 2.4 billion units by 2015. And according to Gartner, global smartphones reached something like 470 plus million units in 2011 and are projected to exceed over 1 billion units by 2015.

Tablets are forecasted to grow from roughly around 60 plus million units that we saw in 2011 to somewhere around 326 million units in 2015 according to Gartner Research. You will see laptops adopting touch with the arrival of Windows 8. Windows 8 is a touch centric operating system and really will drive the next generation of touch devices, starting predominantly in the second half of 2012.

IHS predicts that non-Apple Ultrabook shipments will soar to somewhere around 29 million units in 2012, up from somewhere around a million units in 2011 and by 2015, going to somewhere around 136 million units. We are forecasting touch to grow in a wide range of new applications whether that’s printers, digital still cameras, GPS, portable media players, appliances, automotive. These are all examples that will drive the sustained growth of touch as we go forward.

And as you will see, Atmel has grown rapidly and captured significant market share. As I say, we have over 40% market share in this space. We’ve invested heavily, even through the downturns of the cycle.

So, let's talk a little bit about maXTouch. Many of you have probably heard of our fully integrated capacity of touch screen solution, maXTouch which we launched back in May of 2009. It really provides touch screen performance which significantly exceeds any leading edge solution out there today.

What we did is we took our AVR engineering team and got them to work exclusively with the acquisition we made for Quantum Research to come up with the next generation of touch screen controllers, initially for the smartphone market but you can see the success we've had in new applications.

The response from the major smartphone manufacturers and some of the tablet manufacturers has been tremendous. We started shipping the product in 2010. From zero revenues we achieved over $140 million in 2010. We achieved over $375 million in 2011 and we expect to achieve over $375 million in 2012.

Some of the product features, it’s truly unlimited touch. You can put as many touch points on the screen, it will recognize all of them. It has a very fast response time, say from the time you touch the screen to the device interacting with you, it’s very, very fast. It’s very particularly important for texting and gaming as it starts to penetrate into those new applications. Has maximum precision so the pinch separation and all the gestures extremely precise, very high performance solution. And because it’s using our AVR proprietary architecture for the maXTouch solution, is extremely low power device and that’s particularly important for many of the portable devices that it’s going into today.

In January we formally announced the availability of our next generation of maXTouch products, the S series products at the Consumer Electronics Show in Vegas. The S series products are designed to meet the stringent requirements of the Windows 8 operating system which is a touch centric operating system, but also other operating systems as well. And once again really sets the standard for touch screen performance.

So, to give you a sense of how we are doing in touch technology, here are some of the recent announcements in terms of design wins. We have a strong history in some of the Tier 1 handset manufacturers, Samsung, Nokia, HTC, Motorola, and we have added a significant new customer recently in the last few quarters, LG. As you can see in two of the fastest growing markets, in the world handsets and tablets, our customers are trusting us with their flagship products.

We continue to expand our customer base into a number of new Chinese market design wins using multiple touch products including both our high end and our lower end node count maXTouch solutions. We announced new customers such as Huawei and ZTE and we continue to see wins with our lower node count device, our 112E product which was beginning to ship in Q1 of this year and we are very optimistic about the ongoing growth and momentum we have in the Chinese market to address some of the feature phones that are adopting touch.

The second half of 2012 brings Windows 8 based tablets, convertible PCs and Ultrabooks and is the market leader in touch screen solutions for tablets, combined with our new maXTouch S Series, we are very well positioned to extend our market leadership position.

If you look at the market expansion for touch, we believe it is a multi-year growth opportunity. It really started off with phones and tablets, really phones were the first to adopt capacity of touch. It’s really moving into many new applications. 2010 was the year of the phones, 2011 it was that plus tablets, you are seeing strong introduction of new tablets continuing into 2012. And with the arrival of Windows 8 in the second half of this year that will also proliferate the expansion of touch screens.

And you will see it going to new applications like GPS devices; you will see it going into gaming consoles. We had a design win with Sony on the Vita PlayStation that’s been shipping in some volumes last quarter. You will also start to see it go into the automotive market. We have design wins in both North America, Europe and Asia in automotive touch screens and some of those revenues will start to materialize towards the latter part of this year.

I think when we talk about the performance of maXTouch, we really point to third party surveys to justify why we think the performance of maXTouch is go good. I think it’s no accident that when you look at the top 10 best performing handsets and smartphones as published by PC World Atmel’s maXTouch is powering seven of the top 10.

This is a survey that was published back in April the 9th of this year and it’s actually a survey that gets published pretty much every month now and if you go back over the last 18 months, you will see that Atmel’s maXTouch has pretty much been powering between seven to eight of the top 10 best smartphones as recommended by PC world. So what does this mean in terms of our global market share particularly when it comes to touch? I think it’s fair to say as the touch market has grown Atmel has been the big winner in this space. This chart is excluding Apple who do their own touch products. Atmel’s market share has risen from less than 5% in 2009 to over 40% in 2011.

Clearly the market is very competitive and we want to make sure that we continue to maintain our market leadership position by excellent product execution and best performance of our maXTouch devices. So we’ve had tremendous success, we’ve invested heavily in this market; our intention is continue to maintain and grow our leadership position as we look out into the future.

Now let’s talk a little bit about our touch sensor announcement that we made last month. Touch sensors are a multi-billion dollar market opportunity. About a month ago we announced our intentions to enter into the touch sensor market with a unique proprietary technology with a product that we call XSense.

XSense is based on a fine-line metal mesh technology and is a high-performance alternative to traditional touch sensors, most commonly used today. We see the TAM of touch sensors of approximately just over $5 billion today, growing to somewhere by of around $9 billion by 2015.

The TAM for the market for touch sensor technology should roughly be the same size, unit size as the touch controller market over the time. But from a dollar point of view the opportunity for touch sensors can potentially be larger due to the fact that the dollar value increases more substantially with the increase in the screen size.

We believe we are at the beginning of a multi-year rapid growth of this technology as it penetrates into the broader touch sensor market space. And in the near time, we think our touch sensor qualification is currently on schedule for Q3 of this year. Customers will begin their design cycles and we expect to see meaningful volume revenue by the second half of 2013, somewhere in the region of around $50 million for the second half of 2013.

Our XSense touch sensors are highly flexible and enable a new generation of smartphones, tablets and emerging applications. OEMs will now be able to develop new industrial designs that are edgeless or have narrow borders that create lighter, sleeker and revolutionary new form factors in smartphones, tablets and a broad range of touch enabled products. The touch technology also enables touch screen’s surfaces to be fully utilized, enabling new industrial designs and reducing or eliminating the need to less variable and less reliable mechanical buttons. XSense is synergistic and complementary to our maXTouch product line and the two technologies have the opportunity to drive sales for another multiple years and extend Atmel’s leadership position in the touch space.

Now let’s turn over to some of our other businesses, we have an automotive business. Our automotive business comprises of products dedicated to the automotive systems, utilizing our high voltage and high temperature and a lot of mixed signal processes. We address the chassis, the body, power train/safety type applications and this also leverages our AVR and our ARM core microcontroller processes. We also have RF solutions which address passive entry go and remote keyless entry solutions. Automotive is very synergistic with our microcontroller business, over 30% of the industry’s microcontrollers sell into this space and for us it’s still relatively small. So over the longer term we do see this is as a growth opportunity for the company. You will see the overall volume of vehicles grow. On top of that you’re seeing the increase in semiconductor content and more particularly microcontroller content as more and more intelligence is being added to the car.

We also have a non-volatile memory business. Atmel’s non-volatile memory products are focused on the higher growth serial memory piece of the market and we offer those in both EEPROM and Flash based technologies. So what does this mean to all the financials of the company? You can see using 2006 as a starting point we had 33.8% non-GAAP gross margins back in 2006 and non-GAAP operating margins of something in the low single digits. In 2010 we reported non-GAAP gross margins of just under 45% and non-GAAP operating margins of just under 18%. And for 2011, which was a record for the company, we had just under 51% gross margins non-GAAP and 24.4% non-GAAP operating margins. In the first quarter of this year, which we believe is the bottom of the current semiconductor cycle we had non-GAAP gross margins of 42.6% and non-GAAP operating income of 9.9%. This is significantly better than the trough of our previous cycles where we had somewhere around 31% in our overall gross margin. So, clearly outstanding performance in terms of the progression of the company, both gross margins, operating margins and our ability to generate cash.

So on that, turning to the balance sheet. We’ve always been quite conservative with our cash, which I think is a good thing when it comes to the semiconductor market. I think the thing to focus on here is our ability to generate cash has been pretty good, even through the down cycles, particularly in 2009. And that’s really enabled us to continue to invest in the business, make strategic acquisitions where necessary. As you can see we’ve made four strategic acquisitions in the last few years. And also make a return to our shareholders in the form of a buyback.

In 2011, we spent approximately $304 million to repurchase a little under 29 million shares in the open market, average price of somewhere $10-ish and our plan to date of Atmel’s $500 million buyback program which we instituted back in the third quarter of 2010 is basically at about $489 million, a little under 50 million shares. We’ve actually had approval from our Board of Directors to extend that by an incremental $200 million for the ongoing repurchase program.

So in summary, we continue to focus on our outstanding microcontroller business and continue to be the fastest growing microcontroller supplier in the industry with tremendous top-line growth. We’ve established our leadership position in touch where we were a distant third to some of the competitors historically. We are now number one in the touch screen space. And as I said, we exceeded $375 million in our maXTouch products in 2011. We expect to exceed that in 2012.

Our financial footprint has dramatically improved. We’ve enhanced our gross margin and our operating margins and our ability to generate cash has continued to improve and strengthen a very strong balance sheet and allowed us to make some acquisitions and invest in R&D appropriately.

We’ve improved the profile of our automotive business and our memory business, returning them to profitability. And finally Atmel is very well positioned for continual growth in the industry and continual growth in market share gains within our microcontroller business.

So that’s my presentation. I will hand it over to questions.

Question-and-Answer Session

Unidentified Analyst

Well, I’ll kick it off with a question, so very impressive performance in terms of market share gains on the microcontroller side. So moving from number 14 to number eight to now number three as of 2011. But it was also interesting to see on that same chart that there are still 20 plus suppliers in that market. So how do you differentiate over the next few years? I mean, there is also this growing use ARM architecture, more standard architectures. So how do you differentiate, how do you maintain your pricing edge in the market and do you foresee any consolidation in that market?

Stephen Cumming

Well, as you said the market is extremely fragmented and you can see that we have consistently won against some very large players in the market, whether that’s Renesas, Freescale. There is some Ti, some very big players playing in the microcontroller market. What we’ve done is we’re winning really from our proprietary AVR architecture as I said in our presentation. This is something that we developed back in the late 1990s. Our AVR architecture addresses both the 8-bit product line and the 32-bit product line. It differentiates itself over some of the other industry architectures in the fact that it’s extremely low power, which is always beneficial especially when you’re going after portable applications or anywhere where you want to minimize energy and power usage.

It also has great code compaction, so you can put a lot more code down on the chip, gives you a lot of flexibility in terms of how you’re programming. Some of the other areas where we differentiate and we’re winning is we have a very strong toolset and ecosystem. So it takes a lot to migrate off of a given architecture and I think what you’re seeing with AVR it’s got a sort of cult status and very established within the engineering community and the architecture of choice.

We also are licensees to ARM and that’s also been very beneficial in the 32-bit space for us. Actually on our earnings call, we spoke about a number of Cortex M3 and M4 products that we’ve launched. And you’re also seeing the 32-bit space, an area of high growth and what you would otherwise see in the 8-bit area. So we do differentiate ourselves with our architecture. We also try to target higher growth, higher margin vertical markets. So industrials market is probably our largest market for our core micros. But within that we’ve identified high growth, high margin opportunities such as energy or smart power metering which has seen tremendous growth over the last few years.

Areas like home and building automation, point of sales and security are other areas which are very high growth and high margin, which has allowed us to grow faster than the market and continue to take share.

And as you saw from that chart in the presentation, we’ve gone from a non-player back in 1996 to be the third largest microcontroller supplier, after excluding the smart card business, in 2011.

Unidentified Analyst

Got it. Let me pause there and see if there are any questions from the audience. If not maybe on maXTouch, the area of a lot of interest for investors. I think on the call you mentioned that you do expect to grow your touch revenues year-on-year. But that the smartphone component could be down. And if I look at that trend and I say, okay, last year tablet and/or tablets were supposed to take off, but they had some difficulty. This year people are still somewhat skeptical about the Android tablet market.

Is it really the non-smartphone and tablet application that will grow to make your entire touch revenues grow year-on-year? How should we look at the mix elements in that?

Stephen Cumming

Sure. What we actually said, our maXTouch business which was over $375 million in 2011, we said that we expect to be over $375 million in 2012. The way we look at the market for touch is really in three key areas. Smartphones, which is probably the largest and I think our base for 2011 was somewhere between 60% to 70% of our touch number was made up of smartphones.

Last year you did see a large launch of non-Apple tablets with everybody expecting to gain 100% market share and that clearly wasn’t going to work. And so I would say that the larger form factors is probably the other area that we look in the market and in that I would say that’s tablet, that’s Ultrabooks, that’s e-readers or the media tablets that are evolving now.

And then the third area of the market is what we categorize as other and what’s rolling up in there is areas like gaming, like automotive and again in the presentation we’re starting to see traction in there within automotive and some of the home appliances like white goods, where you can actually start to see smaller screens pop up on your dishwashers, your washing machines, your ovens, your cooktops, as they proliferate through the home.

And so we do expect overall in the smartphone area, we’ve predominantly been in the mid to upper end of the market, I think you’re seeing a new growth of the mid-tier of the market, where you’re seeing feature phones start to adopt capacity of touch away from resistive. And so that’s a growth opportunity for us.

We actually launched last year our smaller die size, smaller node count solution, our 112E product to play in this space, so it’s a smaller die, it’s a lower cost solution.. But very higher performance, very fast response time to address the smaller screen sizes of somewhere between 2.5 inches to 3.5 inches. So we do expect that area to grow as well.

And then I think overall you’re also seeing areas in smartphones called super phones, so these are phones that are actually somewhere around five plus inches and that have tremendous growth over the last few quarter, and I expect you’re going to see that continue. The Samsung Galaxy Note is a good example of that.

So there’s some of the areas within smartphone. Also we are penetrating new customers in smartphones. Nokia, you’re starting to see new products getting released there, and LG as I mentioned earlier is a new customer for us.

We do anticipate that in the second half of 2012 with the arrival of Windows 8 there is going to be some adoption of larger screen form factors in terms of Ultrabooks or convertible PCs that will also drive the growth of touch revenue for us in 2012.

Unidentified Analyst

Is there a way to quantify, Stephen, how much Windows impact we could see? So if you assume that your touch revenue is at $375 million or better then could Windows 8 have a 5%, 10% kind of impact, how do we size that?

Stephen Cumming

Yeah. It’s tough to size it. Its early days, the product’s not out. We don’t know the adoption rates, et cetera. I think we said openly that we expect that Windows 8 to be moderately successful in order for us to achieve our greater than $375 million of revenue.

The data points that I see and you guys probably see as well, I think, some of the stuff I mentioned in the presentation, where there is iSuppli or IHS are quoting that somewhere around 29 million units of Ultrabooks will be sold in 2012 versus non-Apple Ultrabooks I should say versus somewhere around less than a million units in 2011.

So you would expect that not all of that’s going to be Windows 8, not all of that is going to be touch enabled, but it actually doesn’t take too much in terms of a percentage to get some meaningful revenues coming from those areas. And then we’ve got new customers and new applications like the media tablets that we expect will contribute to the growth in the second half.

Unidentified Analyst

Got it. Maybe a question on gross margin, so that was one of the topics of contention in your last earnings call. How do we think about gross margin trends longer term? So, obviously, there was a dip that you saw in Q1, but as we look over the next several quarters, is it utilization, is it mix? What are the different drivers of gross margin improvement?

Stephen Cumming

Sure. So I would say we feel comfortable that Q1 is a trough for us both in terms of revenue and gross margins. And our gross margins in Q1 were 42.6% on a GAAP basis. And so we do expect that to continue to improve on a sequential basis as we go throughout the rest of this year. I think one of the bigger factors that’s driving that as we get our own inventory inline, is we do expect to increase the utilization of our own manufacturing assets. So that is going to be a driver to the gross margin, assuming that we see continued revenue growth and that’s our expectation that that does continue for the rest of this year.

Obviously, as growth resumes, you are going to see a higher, more favorable mix of our microcontroller business and touch, which is a higher gross margin business compared to the other product lines. And so that’s going enrich the overall gross margins as well.

We did say obviously on our Q1 earnings call that our gross margins, we’re expecting, assuming the topline growth, somewhere between 47.5% and 48.5% as we exit 2012. And then we do expect that gross margin progression to improve as we go into 2013.

There is a lot of manufacturing improvements that we’re working on at the moment in terms of die shrink yields, improvement in test time reductions that will also the tailwinds to the overall gross margin improvement.

Unidentified Analyst

Got it. Maybe and just one last one on uses of cash, so you announced the $200 million buyback plan. When I contrast that with some of the other microcontroller players, we had Cypress here before you, Microchip, they have also focused a lot on dividends. In some cases over 3% dividend yield. So as CFO, how do you look at both of those options, why not also think about paying a dividend?

Stephen Cumming

So this is something that we actually do look at quite a lot internally and with our board. I think to categorize it the company as you saw from those financials has gone through a tremendous transformation. We were a company that was low gross margin, lower operating margins, and we’ve transformed that to continue to make money even through the down cycles and we do expect the overall financial performance growth and operating margin to continue to improve as we come through this cycle.

So to be honest, we have had so much more opportunity in plowing that cash back into the business and growing the business faster than our competition and faster than the industry. And I haven’t really wanted to particularly lock ourselves into some of sort of committed dividend. What suits us better is returning capital to our shareholders through an opportunistic buyback program and we think that gives us the most flexibility to balance reinvestment in the business and return capital to shareholders.

Unidentified Analyst

All right. And maybe one last question on the China strategy, so Q1 more smartphones sold in China than in the U.S. What is your China strategy? Does there come a point where touch capability is good enough for a big part of emerging market smartphones and it becomes harder to show off or differentiate through intellectual property?

Stephen Cumming

I think that’s probably relevant in the low, low end of the market. And so what you’re seeing the touch market particularly in handsets and smartphones sort of segment between sort of we’ve traditionally played in this I would say the mid to upper end of the market.

As I mentioned in the presentation, this growing volume of sort of feature phones adopting touch and so that’s an area where we intend to play with our 112E products and I guess the upper end of a low end market.

I think where you are seeing sort of more pricing pressure and less differentiation required is in the low, low end of the market and that’s not an area where we’re choosing to play.

We still think that we can add substantial differentiation and get that right price performance part of the market right for sort of the mid to upper end or the upper end to the low end of the market.

Unidentified Analyst

Any words on M&A strategy, do you see the chance to maybe add technology capabilities, plug a few holes in our portfolio?

Stephen Cumming

Yes. I mean that’s something that as a company over the last few years we’ve made a number of acquisitions. And so I think you can assume that we are always looking for building out incremental IP, generally the acquisitions we’ve made have been around our microcontroller business to pick up more IP to allow us to play in more of the high growth markets. Quantum Research was great, it catapulted us into capacity of touch. This MeshNetics acquisition allowed us to immediately play in smart power metering which are two very high growth, high margin opportunities.

We more recently acquired ADD, which is a power line communication company in Europe. So you’re going to see that continual ongoing strategy. I would say smaller tuck-in acquisitions that build out our IP around microcontrollers.

Unidentified Analyst

Okay. Good. I think that’s the end of our allotted time. Thank you so much Stephen for (inaudible) to chat with us. Really appreciate it.

Stephen Cumming

Thanks very much. Really appreciate it.

Unidentified Analyst

Thank you, everyone.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Atmel's Management Present at Bank of America Merrill Lynch 2012 Technology Conference (Transcript)
This Transcript
All Transcripts