Atmel Seeks To Cut French Workers

SAN JOSE, Calif. -- There are more cutbacks at Atmel Corp. The chip maker is now seeking to cut up to 210 workers within its operations in France. Buried in its second-quarter results on Wednesday (July 30), Atmel said that it is ''commencing a consultation procedure with the works councils in France in relation to potential redundancies in the operations in Rousset and Nantes, France.'' San Jose-based 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, which could impact up to 210 employees,'' said Edwin Mok, an analyst at Needham & Co. LLC, in a report. ''While Atmel cannot provide more details, it stated that the review will take 2-3 months. We believe this is a good sign that Atmel will take additional steps to reduce Euro-based expenses.'' ''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 FBR, in a report. ''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 addressing 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.'' The disclosure follows a loss for Atmel. Revenues for the second quarter of 2008 were $420.9 million, a 2.4 percent increase compared to $411.2 million for the first quarter of 2008 and a 4.1 percent increase compared to $404.2 million for the second quarter ended June 30, 2007. Net loss for the second quarter of 2008 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 first quarter of 2008 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, Atmel's president and chief executive, in a statement. "In addition to achieving record microcontroller revenues, gross profit continued to increase.'' Atmel implemented a change in revenue recognition with regards to its independent distributors in Europe converting from a sell-in to a sell-through revenue model. As a result, the company expects that there will be a one time revenue reduction of approximately $28 million to $34 million to third quarter revenues. Including this one time accounting adjustment, third quarter 2008 revenues are expected to be down 3 percent to 7 percent sequentially. What did analysts say about Atmel's results? ''Atmel reported in-line 2Q 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 QOQ due to macroeconomic weakness and increased price pressure,'' said FBR's Berger. Meanwhile, Atmel is scrambling to shed its older fabs and is quietly cutting back select operations. In May, for example, Atmel quietly sold its WiMax development group in Germany as part of an ongoing effort to restructure the company, according to reports from analysts. The reports did not identify the buyer for the group, but they did indicate that the company's restructuring efforts are far from over. A key for Atmel's future is moving towards 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.'' In 2005, Atmel sold its Nantes fab to XbyBus, a France-based components supplier. Seeking to cut more costs, Atmel in July of 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 towards 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 of 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. And in October of 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 (Hsinchu, Taiwan) 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.