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Atmel Beats on Q4 Earnings

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Leading semiconductor manufacturer Atmel Corporation reported fourth quarter 2013 non-GAAP net income (excluding one-time items) of $43.6 million or 10 cents per share compared with $29.4 million or 7 cents per share in the year-ago quarter. Adjusted earnings for the reported quarter beat the Zacks Consensus Estimate by 3 cents.

GAAP net income in fourth quarter 2013 was $4.5 million or a penny per share compared to a loss of $12.3 million or loss of 3 cents per share in the year-earlier quarter. The year-over-year improvement in GAAP as well as non-GAAP earnings is primarily attributable to higher revenues and lower operating expenses.

For full year 2013, non-GAAP net income was $120.2 million or 27 cents per share compared with $145.1 million or 32 cents per share in 2012. Although adjusted earnings for 2013 decreased year over year, it comfortably beat the Zacks Consensus Estimate of 18 cents. Atmel recorded GAAP net loss of $24.8 million or loss of 6 cents per share compared to net income of $30.4 million or 7 cents per share in 2012. The year-over-year decline in the GAAP number in 2013 was primarily due to lower revenues and high restructuring expenses.

Atmel reported net sales of $353.2 million in the reported quarter, up from $345.1 million in the year-ago quarter with solid revenues from the microcontroller business. However, net sales missed the Zacks Consensus Estimate of $358 million. In terms of geography, Asia represented 58% of total revenue, while EMEA (Europe, Middle East and Africa) and the Americas accounted for 26% and 16% of revenue, respectively. For full year 2013, revenues declined to $1,386.4 million from $1,432.1 million in the previous year.

GAAP gross margin improved to 42.7% in the reported quarter from 38.1% in the prior-year period. Non-GAAP gross margin also went up to 43.7% in the fourth quarter of 2013 from 41.6% in the fourth quarter of 2012.

During 2013, Atmel introduced over 125 new core 32-bit microcontroller products and launched a new family of ARM Cortex-M4-based ultra-low power microcontrollers for sensor hub and battery-operated consumer applications. Atmel is increasingly focusing on its core microcontroller business as it aims to target high-growth businesses. These controllers deliver high performance and lower power consumption and are also claimed to be more effective than other available variants in the market.

As part of its share repurchase program, Atmel repurchased 3.3 million shares during the reported quarter at an average price of $7.36 each. Since the inception of the share repurchase program in the second half of 2010, the company has repurchased approximately $661 million worth of stock.

During the quarter, Atmel closed a revolving credit facility in order to augment its liquidity. The five-year $300 million senior secured credit facility was obtained from a consortium of lenders led by Morgan Stanley Senior Funding, Inc., a subsidiary of Morgan Stanley (MS - Free Report) . Morgan Stanley Senior Funding, Inc. also served as the administrative agent on the facility.

The credit facility will bear interest at LIBOR or at base rate with an applicable margin depending on Atmel's total leverage ratio. Atmel will utilize the borrowing capacity of the credit facility for general corporate purposes, including working capital management, stock repurchases and acquisitions.

The company ended the quarter with cash and cash equivalents of $276.9 million, down from $293.4 million as of Dec 31, 2012. Cash provided by operations totaled $49.0 million for the reported quarter versus $78.7 million in the year-ago period.

Atmel is continuously upgrading its product portfolio to fuel growth and thwart intense competition and price wars from rivals. Moving ahead, the company expects improving business conditions and new product portfolio to drive its earnings and margins.

Atmel currently has a Zacks Rank #3 (Hold). Stocks that look promising and are worth considering at current levels include Himax Technologies, Inc. (HIMX - Free Report) and Freescale Semiconductor, Ltd. , both with a Zacks Rank #2 (Buy).

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