How Low Can Atmel Go?

Shares of Atmel (Nasdaq: ATML  ) hit a 52-week low recently. Let's look at how it got here and whether dark clouds are ahead.

How it got here
The touchscreen microcontroller specialist enjoyed some time in the sun for a while in 2010 and 2011 as it scored handfuls of design wins powering the touchscreens of many a Google (Nasdaq: GOOG  ) Android smartphone with its maXTouch lineup.

Investors justifiably thought that dominance would carry over to the Android tablet market, which it has in terms of market share. The problem is that the Android tablet market itself simply hasn't lived up to those hopes.

This is the theme that's been holding back Atmel's earnings lately, including its fourth-quarter figures in February and its first-quarter release last week. Interestingly, Atmel's impressive list of design wins has never included Apple, which uses chips from rivals like Cypress Semiconductor (NYSE: CY  ) in MacBooks and iPods and Texas Instruments (NYSE: TXN  ) in iPhones and iPads.

CEO Steve Laub expects last quarter to be the bottom, but next quarter's guidance wasn't all that hot either.

How it stacks up
Let's see how Atmel stacks up against some of its microcontroller peers.

ATML Chart

ATML data by YCharts

Let's add in some fundamental metrics for more insight.

Company

P/E (TTM)

Sales growth (MRQ)

Net margin (TTM)

ROE (TTM)

Atmel 13.2 (22.5%) 15.4% 24.7%
Cypress 26 (20.6%) 10.5% NM
Synaptics 17.4 (7.5%) 10.1% 14.9%
Texas Instruments 19.7 (8%) 13.6% 16.7%

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter. NM = not meaningful.

The broader sector is plagued by falling sales, but Atmel is taking it worse than others. It spun off its lower-margin Smart Card business in 2010, but this is far enough in the rearview mirror that the missing revenue from that segment is already effectively factored out of growth comparisons.

What's next?
I think the worst is behind Atmel. There are some potentially significant growth catalysts in the near future, most notably a possible win in Amazon.com's (Nasdaq: AMZN  ) second-generation Kindle Fire. Laub all but confirmed this on the conference call, saying "media-based e-reader and e-book tablets" should help "drive dramatic growth."

Beyond that, Microsoft Windows 8 will also give Atmel more tablet exposure later this year. It's been a rough year for Atmel, but I think we're seeing the bottom.

If you'd like to stay on top of the latest developments, use our free Watchlist feature to get updated analysis.

Fool contributor Evan Niu owns shares of Cypress Semiconductor, Apple, and Amazon.com, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Amazon.com, Microsoft, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Google, Amazon.com, Microsoft, Apple, and Cypress Semiconductor. Motley Fool newsletter services have recommended creating bull call spread positions in Apple and Microsoft. The Motley Fool has a disclosure policy.

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