Needham & Company Downgrades Atmel (ATML) to Hold; N-T Risks and Neutral Risk/Reward Profile

Needham & Company downgraded Atmel (NASDAQ: ATML) from Buy to Hold.

Needham analyst said, "Buoyed by the hopes of a demand recovery in semiconductors, ATML is up 24% YTD compared to the SOX of 14% and S&P 500 of 5%. Given Linear Tech (Nasdaq: LLTC), Xilinx (Nasdaq: XLNX) and TI’s (NYSE: TXN) recent commentary, we think the non-touch portion of ATML's business might fare better than expected. We should have a better idea on the microcontroller business, specifically, when Microchip (Nasdaq: MCHP) reports on 2/2. ATML reports on 2/8. However, we believe there are risks to 1Q12 and 2012 consensus estimates due to the following: 1) continuing non-Apple (Nasdaq: AAPL) tablet inventory correction (ATML has 70-80% share); 2) market share loss to Synaptics (Nasdaq: SYNA); 3) exposure to HTC (50%+ share); and 4) gross margin risk due to excess inventory and significant ASP erosion in touch. With 2012 non-GAAP street estimates potentially falling below $0.80, we believe the risk/reward profile is balanced at current share levels. Although we believe ATML has good long-term drivers, namely its strong position on Windows 8 platforms (both Ultrabooks and tablets), exposure to capacitive touch, and a cyclical recovery in the industrial microcontrollers, we would look for a more attractive entry point."

For an analyst ratings summary and ratings history on Atmel click here. For more ratings news on Atmel click here.

Shares of Atmel closed at $10.00 yesterday.

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