Why Atmel Could Be a Smart Choice Now

The ongoing war between Apple and Samsung has created an interesting investment opportunity. Atmel (Nasdaq: ATML  ) came out with its earnings earlier this month and projected a shallow outlook for the ongoing quarter, sending its shares down. This makes me want to take a closer look at the stock.

Let's see why the shares went south and why this stock could turn out to be an intriguing buy.

Apple plays spoilsport
Atmel supplies its touchscreen controllers to iPad competitors Samsung and Dell. However, with Apple taking Samsung to court on allegations of patent violation and restricting sales across different geographies, Atmel's sales have taken a hit. Also, the popularity of Apple's products has further hindered Atmel's prospects.

Another factor behind low sales of non-iPad tablets is the global economic weakness, which has resulted in a glut of inventories at major tablet players and has further hurt Atmel.

But there's more to it…
These factors pushed Atmel to lower its forecast for the ongoing quarter, which sent its shares down. But what was probably not taken into account is the sale of smartphones, in which Samsung is the new world leader. Atmel expects shipments of its maXTouch controllers to smartphone makers like Samsung, HTC, and Nokia (NYSE: NOK  ) to increase during the quarter and thus result in higher sales.

Moreover, smartphones running Google's Android are on a roll nowadays. They sell like hotcakes, and with the holiday season looming, we may see higher sales of both the tablets and smartphones. And it is a known fact that all of Atmel's clients mentioned above run primarily on Android systems. In addition, Atmel's microcontroller business recorded impressive revenues of $301 million in the just-concluded quarter and grew 18% from the year-ago period.

A temporary hiccup
Macroeconomic factors have certainly hindered consumer spending, slowing down sales of tablets. Discounting a stock on the basis of just one weak economic cycle is certainly not a good idea, especially considering Amtel's impressive clientele and the end product for which it supplies its components.

The Foolish takeaway
Atmel is shifting its focus from multitouch-enabled controllers for tablets to single-chip ones, and this will take a toll on revenues in the short run. But once the shift is complete, we may see Atmel touch new heights, since it supplies components to tablet and smartphone manufacturers who are leaders of the market. For investors thinking of getting involved in a semiconductor play, the time may be just right to consider Atmel.

To stay on top of the latest news and developments at Atmel, add it to My Watchlist.

Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. 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.

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8/29/2014 4:00 PM
ATML $8.86 Up +0.28 +3.26%
Atmel Corp CAPS Rating: ****
NOK $8.37 Up +0.24 +2.95%
Nokia CAPS Rating: **

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