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Atmel plans to trim down France workforce

Posted: 05 Aug 2008 ?? ?Print Version ?Bookmark and Share

Keywords:Atmel layoff? redundancy? labor? France facility?

More cutbacks at Atmel Corp. are being prepared as the chipmaker seeks to cut up to 210 workers in its fab operations in France.

Buried in its recent Q2 results, Atmel said it has started a consultation procedure with the labor groups in France with regard to potential redundancies in the operations in Rousset and Nantes, France.'

"Atmel has a fab in Rousset, which is a drain on resources," analysts said. The company sold its fab in Nantes in 2005.

"Atmel submitted a proposal to French works council to reduce overlap groups that could affect 210 employees," said Edwin Mok, analyst, Needham & Co. LLC, in a report. "While Atmel cannot provide more details, it said the review will take two to three months. We believe this is a good sign that the company will take more steps to reduce Euro-based expenses," he added.

"The elephant in the conference room is Atmel's ability to exit its Rousset France fab, a very expensive plant. Management has that facility fully utilized, and it is one of the firm's two big fabs," said Craig Berger, an analyst with Friedman, Billings, Ramsey Group Inc., in a report. Too soon to invest
"While we would like to see Atmel buy a low-cost facility in the U.S. or Asia, or move all of these products to an Asian foundry, it seems like Atmel is two to three years away from looking at this issue, a disappointing overhang for investors," Berger said. "If the firm can successfully exit this fab, then Atmel could double or potentially triple from current levels, a good opportunity for the very patient investor," he added.

The disclosure follows a loss for Atmel. Revenues for the Q2 08 were $420.9 million, a 2.4-percent increase compared to $411.2 million for Q1 08 and a 4.1-percent increase compared to $404.2 million for Q2 that ended June 30, 2007.

Net loss for the Q2 08 totaled $4.9 million, or minus $0.01 per diluted share. This compares to net income of $6.8 million or $0.02 per diluted share for the Q1 08 and net income of $0.7 million or $0.00 per diluted share for the year-ago quarter.

"We are pleased to have reached the upper end of our revenue guidance in spite of the challenging macroeconomic environment," said Steven Laub, president and chief executive, Atmel, in a statement. "In addition to achieving record microcontroller revenues, gross profit continued to increase," he added.

Shifting to better strategy
Atmel implemented a change in revenue recognition with regard to its independent distributors in Europe converting from a sell-in to a sell-through revenue model.

As a result, the company anticipates that there will be a one-time revenue reduction of approximately $28 million to $34 million to Q3 revenues. With the inclusion of the one-time accounting adjustment, Q3 08 revenues are expected to be down from 3 percent to 7 percent sequentially.

What did analysts say about Atmel's results? "Atmel reported in-line Q2 results. Revenues of $421 million were modestly better than the Street estimate as microcontroller and ASIC shipments grew 9 percent and 5 percent, respectively. Memory sales fell 8 percent q-on-q due to macroeconomic weakness and increased price pressure," said Berger.

Sreamlining operations
Meanwhile, Atmel is scrambling to shed its older fabs and is quietly cutting back select operations. In May, the company quietly sold its WiMAX development group in Germany as part of an ongoing effort to restructure the company, according to reports. Although the reports did not identify the group's buyer, but they said the company's restructuring programs are far from over.

A key for Atmel's future is moving toward a fab-lite model. "Atmel is now shopping its small six-inch fab in Heilbronn Germany, with a possible 2H sale announcement," the analyst said. "Atmel would continue to fab its automotive chips in Heilbronn, buying the parts from the new fab owner, and would slowly transition those automotive chips to its Colorado Springs fab over time. Thus, fewer parts will be bought from the German fab owner over time," he added.

Downsizing, selling fabs
In 2005, Atmel sold its Nantes fab to XbyBus, a France-based components supplier. Seeking to cut more costs, Atmel in July 2006 sold its Grenoble, France subsidiary and a wafer fab in that location to e2v Technologies plc for approximately $140 million in cash.

Then, moving toward a "fab-lite" strategy, Atmel recently moved to sell two fabs and reduced its headcount by 1,300 employees. At the time, it was looking to sell its wafer fabrication facilities in North Tyneside, U.K. and Heilbronn, Germany.

In May 2007, Atmel sold its wafer fab in Irving, Texas, to Maxim Integrated Products Inc. for about $38 million. Then, in July of 2007, Atmel sold its network storage unit to MoSys Inc. for an undisclosed sum.

In October 2007, Atmel entered into separate agreements with Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) and Highbridge Business Park Ltd. for the sale of its 8-inch wafer fabrication equipment and related property located in North Tyneside, U.K.

Under the terms, TSMC agreed to purchase Atmel's 8-inch wafer fabrication equipment. Highbridge Business Park Ltd. has agreed to purchase the North Tyneside land and buildings for a combined total of $124 million in cash.

- Mark LaPedus
EE Times Europe

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