Well, I hate to say "I told you so." But it feels good to have been right from the get-go, especially with shareholders' interests on the line.
Broad-line microchip maker Atmel (NASDAQ:ATML) is now free to go about its business without the Damoclean sword of a buyout offer hanging over it. Rival Microchip Technology (NASDAQ:MCHP) started its pursuit of Atmel last October, hoping to hand off parts of Atmel to ON Semiconductor (NASDAQ:ONNN) immediately upon closing this deal. Then ON dropped out, Microchip sailed on all alone for a while, and it's now finally dropped its $5-per-share bid altogether.
"In light of the economic uncertainty and the lack of visibility that continues to exist with respect to Atmel's business, Microchip is no longer able to put a value on Atmel," said Microchip CEO Steve Sanghi. Atmel preferred to trumpet a couple of tasty operational numbers in response and walk away without gloating much: "Microcontroller revenues grew 14% in 2008 and full year gross profit margins reached the highest level since 2000. As we enter the next phase of Atmel's transformation plan, we remain confident that we are on the right track to further enhance shareholder value."
As mergers go, this one never smelled right. Microchip really only wanted one part of Atmel's business and was quite ready to chop Atmel in pieces and sell the rest to the highest bidder. That made sense for Microchip, given that the original $5 bid per share came out to a $2.3 billion investment. Microchip only has $1.4 billion of cash on hand, and financing deals with new debt is not easy to do these days.
Of course, Microchip could still come back again later, kind of like how Microsoft (NASDAQ:MSFT) can't seem to keep its mind off Yahoo! (NASDAQ:YHOO). Perhaps there'd be some new -- and richer -- allies by its side. I mean companies that really like Atmel's application-specific chips (ASIC) and nonvolatile memory products. Texas Instruments (NYSE:TXN) and STMicroelectronics (NYSE:STM) spring to mind, being big and rich and deeply involved in the right markets.
But that's a long shot at best. While the computer memory industry looks likely to consolidate as companies seek cost reductions in the face of rapidly declining demand, sales of the advanced microcontrollers and ASICs that Atmel makes have held up better in the recession, and their manufacturers are less prone to consolidate for survival's sake. For that reason, look for Atmel to stay independent for the foreseeable future.
Oh, and by the way: I told you so.
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