Interesting history relevant to hostile take-over attempt

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Interesting history.. found on http://seekingalpha.com/article/...

However, the press would have us believe that Atmel has thwarted the take-over. For now.

Atmel: Where the Value Lies

I worked at Atmel (ATML) from 1994 to 1998, in their (now merged into ASIC) Programmable Logic Group. George Perlegos was the CEO and most of the people at Atmel loved him; he had founded the company in 1984, with no venture funding in the early days (he/Atmel did get venture funding later on, before its 1991 IPO).

The company exceeded a billion dollars a year in revenue by the time I left Atmel, but the stock was exactly where it was when I joined the company in 1994. Back then the company was one of ARM Holdings’ (ARMH) first “big semi” licensees - in fact, ATML licensed Arm’s Thumb and Arm processors. ATML hedged its ARM bet by buying a small Norwegian maker of the AVR 8 bit RISC. The first generation of Atmel’s AVR based micro-controllers had the same pin-out as Intel’s 8051 and were designed as plug-in replacements, albeit with many technical improvements over the dated 8051.

Then there were the acquisition of defunct fabs in Europe (France and North Tyneside, England) in the late 1990s, which cost the company a lot of $$$$ to retool, but these have already been expensed, and the fab in North Tyneside - which hurt Atmel financially for several years - was divested recently. Most of the goodwill on ATML’s books is due to their $100M acquisition of Quantum Research, who make capacitance sensing chips/modules [watch out Synaptics (SYNA)].

It was during the tech boom from 1999 to 2001 - when Atmel started getting a large number of design-ins for the micro-controller division - which was still dwarfed by the ASIC and specialized memory divisions. Without getting into too many details here, it took almost a decade (1995 - 2005) for the micro-controller division to take off, and become Atmel’s flagship division.

In a rare coup d’etat in August 2006, George Perlegos (and a few others) were forced to step down for misusing travel funds. I am not sure why Mr. Perlegos would do something like this; the Mr. Perlegos that I know/knew, ran a tight ship at Atmel. There was little waste (we had to pay for coffee!), and George took pride in the fact that he was not like other CEOs who were overcompensated. He is still the largest individual stockholder, and holds over 5% of the company's stock.

For twenty years, George was the head of the compensation committee (and the board was with him all the way), so, I find it hard to believe that he would knowingly misappropriate what amounted to a very small amount of $$$$. In other words, he could have paid himself whatever he wanted (within limits, of course), but chose not to; plus, Atmel was his “baby” - he never sold a single share from 1984 to 1998.

Back to the topic at hand: Atmel now has four major Business Units - Micro-controllers (including touch/capacitive sensing); ASICs; Non-volatile memory; RF and Automotive. Their revenues for the quarter ending Sep 30, 2008 was $400 Million, with gross margins of 40% - a number that SanDisk (SNDK) or Micron (MU) would kill for. They have cash of about a buck a share, and debt of $150M. All divisions (except micro-controllers - which grew by 20 plus percent yoy) had a negative growth rate.

Recently, Microchip (MCHP) and ON Semiconductor (ONNN) bid $5/share in cash for Atmel. Microchip would get the flagship micro-controller division, while ON would get the Non-volatile memory and RF/Auto divisions; the ASIC division would be sold off. This deal does make sense for Microchip, which is growing at 2% - the addition of ATML’s micro-controller division would add $500M to MCHP’s top-line and a division with a growth rate in excess of 20%.

ON gets another foot into the CDMA door through the purchase of ATML’s RF/NV/Auto divisions. The ASIC division will probably not fetch much in today’s depressed semiconductor market. I think that $5/share cash fully and fairly values ATML. In fact, even if Mr. Perlegos is brought back to lead ATML, he has stated that he would divest the Non-volatile, RF/Auto and ASIC divisions, and run Atmel as a micro-controller/touch capacitive sensor company - which is an alternative that the current management needs to consider.

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Bapcha is passionate about analyzing stocks and doing it right (and differently from how the hacks currently do). He does not post about a company unless he has personally analyzed it. Bapcha often visits the companies that he talks about and is acquainted with many of the companies' employees and management.

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Total votes: 0

All he does is give a small history of Atmel and says he likes the former offer, without going into the reasons why. And, he left Atmel 10 years ago, so I don't see how his perspective is any more relevant than anyone else's perspective.