In the meantime, Atmel has the competitive advantage from an up-market standpoint. This is because average selling prices (ASPs) are higher which helps the company's margins. In my opinion, signs of improved profitability are what it's going to take to compel the Street to believe.
In that regard, the company is making some good strides, but it remains a challenge. Though management was able to make the best out of what has been a difficult economic environment, that gross margins shed almost 1% sequentially and 7% year-over year in the third quarter was discouraging.
Having said that, this has been an issue for the entire sector and speaks to the level of competition and margin pressure that exists. From that standpoint, I expect Atmel to differentiate itself from the rest of the pack by growing in areas where the competition can't. Atmel's Xsense touch sensor can become that differentiating product.
Although touch is now everywhere, the high performance and flexibility of Xsense takes it a step further by enabling new design possibilities for products that rely on touch. The company's roll-to-roll metal mesh technology is able to offer features that are not yet common in today's industry-leading products - including those made by Apple.What's more, as new concepts enter the market, companies that are looking for a competitive edge will need Xsense to offer unique experiences to consumers -- Xsense offers this at a much lower cost. Investors should also find it encouraging that production and commercial shipments of Xsense has already begun and have been delivered to OEMs in October.