Although it is too early to say that the up trend in oil price is over, it is reasonable to believe that oil prices have reached a short-term peak. We should have a much improved business environment for the airline industry in the very short term. We are also increasing our revenue estimate to US$295 million for 2008 and US$325 million for 2009.
Atmel Sales Balanced by Costs
Atmel Corp. (ATML) reported Q2:FY08 revenues of $420.9 million, up 4.1% year-over-year and up 2.4% quarter-to-quarter basis. Gross margin came in at 36.5% compared to 35.5% in Q1 08. Going forward, the management expects revenues to be down 3%-7% in Q3:FY08, due to one-time revenue adjustment. Excluding these adjustments, Q3 organic revenue guidance is for up 1% to 4% sequentially. We had earlier upgraded ATML to a Hold and have adjusted our target price to $4.25.
The company has announced the sale of its Irving, Texas, wafer fabrication facility for $38 million in cash. In addition, the company recognized a gain of $3 million with this sale in relation to a supply contract that had been previously reserved.
The management estimates that capacitive sensing products will rapidly penetrate the overall touch sensing market, which in turn is expected to grow from over $1 billion in 2007 to more than $3 billion in 2011. The company has acquired Quantum Research Group Ltd. and launched numerous new products into the fast-growing capacitive touch sensing market. Quantum's touch sensing solutions support a wide range of large and high-growth market applications.
The company has been taking steps to streamline its workforce and improve profitability. The management expects cost savings between $80 million and $95 million in 2008. On the second quarter conference call, the management stated that it remains on track to achieve cost savings at the higher end of its anticipated range,
The central problem for Atmel is translating sales growth into earnings growth. Given the continual pressure on prices, Atmel has been outsourcing more of its smart card manufacturing to foundry partners for15 micron production. This, however, could lead to quality issues.
