NEW YORK (TheStreet) -- Atmel (ATML) stock is down 1.83% to $7.52 in afternoon trading on Tuesday, as activist hedge fund Elliott Management disputes Dialog Semiconductor's (DLGNF) proposed $4.6 billion takeover of its fellow chipmaker.
Dialog's value will be negatively impacted by Atmel's revenue declines, and cost savings will be difficult to attain, the hedge fund said in a letter to shareholders yesterday, Bloomberg reports.
"We strongly believe that any acquisition must have a solid strategic rationale, be value creative for Dialog shareholders and that the level of value creation should be carefully weighed against the associated risks," Elliott said in the letter, according to Bloomberg. "This deal falls considerably short against these criteria."
Elliott Management has disclosed a 2.9% stake in Dialog Semiconductor.
Dialog shareholders will be able to approve the deal on a November 19 meeting. The deal is expected to close in the fiscal 2016 first quarter, pending regulator and shareholder approval.
Separately, 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 largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- ATML's debt-to-equity ratio is very low at 0.08 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, ATML has a quick ratio of 1.66, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for ATMEL CORP is rather high; currently it is at 50.55%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.21% is in-line with the industry average.
- ATMEL CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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 turned its bottom line around by earning $0.08 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus $0.08).
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 103.6% when compared to the same quarter one year ago, falling from $17.25 million to -$0.61 million.
- You can view the full analysis from the report here: ATML