The worst may be over for the chipmaker.

Photographer: Kristian Helgesen/Bloomberg

Atmel's Clouds Have a Silver Lining

Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.
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Investors in Silicon Valley chipmaker Atmel just suffered their steepest two-day drop in more than a year. On the bright side, they probably don't have much left to lose.

It all started when Dialog Semiconductor -- the company that's buying Atmel -- plunged 20 percent Monday after reporting third-quarter sales that missed analysts' estimates.

Dialog's drop eroded the value of its cash-and-stock offer to about $8.60 per Atmel share, down from $10.42 when it was first announced. The decline also triggered a 12 percent slide in Atmel 's stock. The chipmaker is now trading at close to $7.60 -- roughly in line with where it was before it agreed to the deal with Dialog in September.

For Atmel shareholders, there's a good chance things get better from here. If the deal with Dialog still goes through at something close to the current price, there's some upside from here. Dialog shares may also recover as the initial shock of the earnings miss wears off. 

If the deal doesn't go through, Atmel investors are essentially back where they started. That's not as horrible as it sounds. 

While the company has had a tough go of things recently, its business seems on track to get better. Analysts are projecting the company's string of quarterly sales declines will stop in mid-2016. Their average price target was in the $9 range before Reuters reported in June that Atmel was exploring strategic alternatives.

To be fair, the prospect of a suitor swooping in likely played some role in those projections. Atmel was frequently cited as a potential takeover target ever since M&A in the industry started taking off last year.

A counterbidder could still make a move for Atmel. Semiconductor makers have announced almost $90 billion of takeovers so far this year. Just Tuesday, Bloomberg News reported that STMicroelectronics is considering a purchase of Fairchild Semiconductor, citing people familiar with the matter.

In announcing the deal with Dialog, Atmel CEO Steven Laub noted that there was "significant interest" in the company. Should Atmel go with another suitor, it has to pay a breakup fee of $137.3 million. But Dialog's slump means other buyers have a lower offer to beat. This could be their opportunity to come forward. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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Brooke Sutherland at

To contact the editor responsible for this story:
Beth Williams at