How Will Atmel (ATML) Stock Respond To Newport Media Purchase?

NEW YORK (TheStreet) -- Atmel Corp. (ATML), the touchscreen chipmaker, said it would buy Newport Media, a maker of low-power Wi-Fi and bluetooth gear, for $140 million to gain ground in a technology that helps connect everything through the Internet, Reuters reports.

Newport Media reported revenue of $43 million for 2013.

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TheStreet Ratings team rates ATMEL CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate ATMEL CORP (ATML) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and good cash flow from operations. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 104.5% when compared to the same quarter one year prior, rising from -$47.67 million to $2.17 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 2.9%. Since the same quarter one year prior, revenues slightly increased by 2.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • ATMEL CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, ATMEL CORP swung to a loss, reporting -$0.05 versus $0.07 in the prior year. This year, the market expects an improvement in earnings ($0.44 versus -$0.05).
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 26.73%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, ATMEL CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: ATML Ratings Report

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