Tech Sector Nelson Zhu (SL) Keng Hoe Wong Charis Nan Ji Bowen Yang Angela Yang

Di Ai Alex Lee Adam Sun Joe Walsh Ee Xin Wong

Well-positioned for Growth in the Touch-Functionality Markets & Current Entry Point provides Great Value Recommendation: Buy

Ticker
Price Market Cap Beta

ATML
$ 10.44 $ 4.67B 1.44

LTM Revenue
ROE

$ 1.80B
29.50%

Operating Margin 20.64%

29th Feb 2012

Overview of Atmel Corp.

One of the leaders in the designing, developing and supply of microcontrollers Offers a portfolio of touch products with 4 product segments: -Microcontrollers/Touchscreen -Application Specific Integrated Circuits (ASIC) -Non-Volatile Memories -Radio Frequency/ Automotive

Co-Engineering Partner for Microsoft Windows 8 OS, which supports Touch functionality.

Overview of Atmel Corp.

Diversified Revenue by country and geography: -30% from China -16% from US Sold fabrication operations in Germany, England & France to transition into Fab-Lite Model. Currently owns 1 manufacturing facility in Colorado Springs, USA. Independent assembly contractors in Asia are sent wafers for package & delivery.

Share Price over trailing 12 months

3Q Earnings Guidance 4Q Earnings Guidance

52wk Range: $7.36 - $15.65

What are Microcontrollers?

Wikipedia: A small computer on a single integrated circuit containing a processor core, memory, and programmable input/output peripherals.

Cheap to produce, consumes less power; power consumption while sleeping are in nanowatts Offer enhanced programming capabilities compared to traditional microprocessors

Economical to digitally control many devices and processes

Retains functionality while waiting for an event such as a button press or other interrupt; making many of them well suited for long lasting battery applications.

Recent News & Industry Outlook

Atmel preannounced weaker 4Q11 revenue of $384M (decline 20% Q/Q). Earnings fell 14 cents from 25 cents to 7 cents, slightly below estimates of 8 cents. - Due to one time distributor rescheduling of $11m, and cyclical conditions. - Across microcontroller industry, revenue growth has been negative 21.3% year on year

During Q3, Atmel acquired Advanced Digital Design, also known as ADD Semiconductor, a privately held company based in Spain that develops power line communication solutions.
Share price fell significantly in 3Q 2011, as management attributed flat revenue to major customers (Dell and Samsung) being unable to compete in tablets sales with Apples iPad.

Investment Thesis
Market Over-reaction: Despite weaker revenue and the one-time item, gross margin is still 48%, inline with prior guidance. Microcontroller business expected to pick up in 2H2012

ATML remains one of the more efficient and least cost producers, with partnerships with the Windows 8, and access to 3G expansions in the Chinese market.

Top 5 Shareholders
Complete List

Largest Shareholders
Investor Name T. Rowe Price Associates, Inc. Janus Capital Management LLC BlackRock Institutional Trust Company, N.A. RS Investments Vanguard Group, Inc. % Shares Outstanding Current Position 14.91 68,959,690 Value ($MM) 558.57

9.85

45,578,797

369.19

4.44

20,519,820

166.21

4.40 4.18

20,370,742 19,352,222

165.00 156.75

Management holds significant stock

Name Steven Laub Title Shares Currently Held

President, Chief Executive 5,707,137 Officer, Director

Executive Vice President Office of the President, 2,015,260 Director

Tsung-Ching Wu

Walter Lifsey

Executive Vice President and Chief Operation Officer

653,245

Catalysts to Price Realization

Several positive near-term catalysts could move shares higher Conclusion of transition to single chip for tablets - According to management, the transition to single-chip solutions for tablets largely wrapped up in Q4, meaning a major source of revenue weakness was removed in the current quarter. We also believe inventory digestion at key touch customers is now mostly behind the company. When combined with the ramp of new customer designs, touch growth appears primed to resume. Looming announcements around Mobile World Congress - While Atmel typically announces new wins during earnings (and speaks to tear-downs), Mobile World Congress (starts Feb 27) should bring additional announcements from smartphone and tablet customers, generating buzz around Atmel's touch leadership. Win8 launch H2/C2012 - Discussions with industry players at CES indicate Win8 coul be shipping by Q3, potentially in time for back-to-school. While specific timing remains uncertain absent an official announcement from Microsoft, we believe H2 ramp is likely, and we expect Atmel to garner substantial share (should be at least as high as for smartphone, ex-Apple, or above 30%). Many ultrabook designs will require multicontroller solutions, helping to support ASPs, and tablets running Win8 could see better sell-through than Android versions due to their perceived utility. Stylus support is also important, given Atmel's maXStylus appears to offer the highest performance. Direct Touch doesn't eliminate need for maXTouch - Based on conversations with

Industry

Microcontrollers
Very competitive industry with lots of players Compete on mainly price and performance Short life cycles requiring constant innovation and R&D Prices of products tend to go down as time on market increases Higher margins on custom builds and higher performance microcontrollers

Atmels Revenue from Microcontrollers

Atmels maxTouch contributed $140 million in 2010 Global Microcontrollers Market 2009-2013 report by Technavio Insights forecasts the Microcontrollers market to grow at a CAGR of 6.5 percent

Touch Screen Technology Fueling Atmels growth in Microcontroller Market

In PCWorlds latest list of the top 10 best smartphones published March 29, 2011, Atmel is powering the touch screen capabilities in eight of them

Revenue from Touch Panel Sales

Growing Global Data Demand

Present:
In 2011, mobile data traffic was eight times the size of the entire global Internet in 2000. A 4G connection generated 28 times more traffic on average than a non-4G connection

Future:
Global mobile data traffic will increase 18-fold between 2011 and 2016 (78% CAGR) 4G connections represent only 0.2 percent of mobile connections today

Growing Smartphone Market

Present: Average smartphone usage nearly tripled in 2011 Future: Smartphones represent only 12 percent of total global handsets in use today Why is this important:
A smartphone has significantly higher dollar content for PA suppliers than a basic handset

Growing Tablet and Other Mobile Devices Market

Present: In 2011, the number of mobile-connected tablets tripled to 34 million Future:
Over the next 5 years, global shipments of tablet computers is expected to increase significantly (48% CAGR) Global IPv6-capable smartphones and tablets will reach 1.6B by 2016

Military
Principal customers include BAE Systems, EADS, Honeywell, Litton, LockheedMartin, Northrop Grumman, Raytheon, Roche and Thales. Avionics and aerospace ASICs conform to stricter standards and high-performance

Automotive
Body electronics for passenger comfort and convenience Air-bad drivers Anti-lock brake control Tire pressure monitors Keyless entry transmitters Touch interfaces and receivers for in-vehicle entertainment components Systems and controls in engine Sales of 10.4 million units in 2009, 12.7 million 2010, 14 million est. 2012 in US Expanding hybrid and electric vehicles means more microcontrollers

Competitive Market

Atmel is improving Market Share

Lots of competitors that are much larger, such as Intel and Texas Instruments Emerging companies specializing in a specific niche Technological innovation, performance, price, and product availability Atmel is number 4 in terms of market share in 2010 Touchscreen technology fueling growth

Competitors

Comparables methodology
Similar market cap Similar product segments as ATML
Microcontrollers constitute majority of revenue Revenue driven by touchscreen technology

Risks:
Diversified operations exposes comps to other influential factors Performance of comps might be driven by growth in products not manufactured by ATML

Microchip Technology (MCHP)

Main product portfolio
Microcontrollers (68.2%) Memory products (14.9%) Analog and interface products (12%)

Recently acquired a touchscreen controller company to expand into the touch industry Made an unsuccessful attempt to acquire ATML in Oct 2009

Cypress Semiconductors (CY)

Main business segments:
Consumer and computation (51%)
Microcontrollers, touchscreen solutions

Memory Products (35%)

Increase in revenue in C&C driven by higher demand in touchscreen applications Has a Data and Communications division
Manufactures controllers, switches, cable drivers for networking/telecom market

ST Microelectronics (STM)
Manufactures analog, mixed signal and application specific products (ASIC) Main product segments:
RF and Automotive (40.3%) IMS including microcontrollers and nonvolatile memory products (37.6%)

Very diversified
Also present in home entertainment, displays and imaging division

Comps

Trading Comparables Valuation

($ in millions except for per share data)

ATML Multiplier $1,640.00

Low Mult. 0.5x -

High Mult. 4.3x

Price (low) $2.47 -

Price high) $15.97

Include? Yes

EV/Revenue (2012E)

EV/Revenue (2013E)
EV/EBITDA (2012E) EV/EBITDA (2013E) P/E (2012E) P/E (2013E) P/B $ $

$1,860.00
$0.00 $0.00 0.42 0.66 $1,191.00

2.4x
0.0x 0.0x 16.1x 10.4x 0.8x

4.4x
0.0x 0.0x 24.8x 17.5x 6.7x

$10.37
$0.77 $0.77 $6.78 $6.89 $2.16

$18.33
$0.77 $0.77 $10.43 $11.55 $17.36

Yes
Yes Yes Yes Yes Yes

Value Range:
Suggested Premium:

$4.32
-57.8%

- $10.74
5.0%

Risks
ATML operates in a highly competitive environment, competing with others primarily on price and technology Heavy Reliance on distributors (55% of Net Revenue), and the success of its Customers end products Slow Growth in End Markets and if a weak 1H2012 extends Decline in Gross Margins, Heavy Competition (E.g. SYNA) However, these are not idiosyncratic risks to ATML, but risks that apply to the whole industry.

Thank You
Well-positioned for Growth in the TouchFunctionality Markets & Current Entry Point provides Great Value

Questions?

Appendix

Industrial Electronics and Batteries

industrial electronics in 2010 was the second-fastest growing semiconductor market after automotive. As the use of mobile phones, digital music players, laptops, and cameras increase, the demand for batteries will also increase.

http://www.isuppli.com/Semiconductor-Value-Chain/News/Pages/Texas-Instruments-Reigns-Supreme-in-Industrial-ElectronicsSemiconductor-Market.aspx