Or at least you could have (see bottom of post)

ATML investors are in for a nasty earnings surprise. The table below shows ATML’s quarter-to-quarter earnings performance (predicted and actual) over the last 18 months and comparing to MCHP:

_______________ATML Revenue____________________MCHP (Revenue)
________Pred. $M (%)______Actual $M (%)____Pred. $M (%)_______Actual (%)
Q1CY08__395-413 (-7 to -3)__411 (-3.4)_______247-263 (-2 to +4)___260 (3.1)
Q2CY08__411-423 (0 – 3)____421 (2.4)_______265-276 (2 – 6)______268.2 (3)
Q3CY08__391-408 (-7 to -3)__400(-5)________268-276 (0 – 3)______269.7 (0.6)
Q4CY08__388-412(-3 to +3)__335 (-16.3)______227-248 (-8 to -16)___192 (-28.8)
Q1CY09__290 (-13)_________271 (-19)_______173 (-10)___________173.3 (-9.8)
Q2CY09__274-282 (1-4)_____284 (5)_________182 (5)*____________193 (11.4)
Q3CY09__not provided_____________________206-214 (7-11)**_____226.6 (17.6)

Revenue Change ATML: -31%___________MCHP: -25%

* Mid-quarter revision to 8-10%
** Mid-quarter revision to 12-14%

_________ATML Profit $M________MCHP Profit $M
Q1CY08__6.8________________76.7
Q2CY08__-4.9_______________76.3
Q3CY08__-4.7_______________75.6
Q4CY08__-24.3______________73.2
Q1CY09__3.6________________22.8
Q2CY09__-12.4______________27.4
Q3CY09__TBD (likely in the red again)_______44.5

Point #1:
ATML’s revenue prediction’s history is spotty at best. And before you all harp on MCHP’s Q4CY08 earnings miss, keep in mind that Steve Laub was promoting his “great” earnings all the way into December before realizing ATML was in deep doo-doo as well.

Point #2:
Let’s look at MCHP’s revenue increase over the last two quarter and note that MCHP revised those numbers up in each quarter. The last mid-quarter revision to 12-14% is of particular interest because semi companies like TI (and others) also did a significant mid-quarter increases; but yet, not a peep from ATML.

Point #3:
You need to keep in mind where most of the revenue growth is coming from (China) and how ATML recognizes revenue in that region vs. MCHP. ATML’s U.S. and European sales are sell-through but Asia revenue is sell-in; in contrast all MCHP revenue is recognized as sell-through. Given the explosive growth in Asia ATML revenue should be going though the roof, and if it were, one would expect that they would announce an increased guidance given that they would be under pressure to do so based on other semis. Unless…the increased revenue is simply not materializing.

Point #4:
ATML decided to announce their earnings the day after MCHP. In fact, ATML set their earning date only after MCHP set their earnings date. As I write this I imagine Steve Laub et. al. is burning the midnight oil to come up with some creative accounting to make their earning look better than they really are. Caveat Emptor!!!

Coupling all these together it doesn’t look good. Even if ATML is at the upper end of guidance or even exceeds it by 1-2%, it still shows a massive underperformance compared to the rest of the industry.

Now addressing the message title...

Let’s say you bought 1000 ATML shares at $3.25 (average price from Jan -Oct ’08). MCHP offers $5.00 per share and the Board was smart enough to take it; you now made 54%. Now let’s say the deal is closed by the end of the year and you buy 256 shares of MCHP stock at the end of year price ($5000/19.50 = 256). Today the stock price is $24.41 (and will go up tomorrow) so now you have another 25%. Keep in mind that MCHP pays a healthy dividend and you would have gotten $87 per quarter for 3 quarters (0.339*256 = 86.78). Your $3250 initial investment is now worth $6510; that’s just over 100% return.

Since the ATML board was not smart (or at least on the side of the shareholders),how long will it take to match that return? 5 years. What will MCHP be at then? $35, 40?

Just something to ponder as you get another anemic earnings with Laub's excuses.