Has Atmel Corporation (ATML) Become the Perfect Stock?

Atmel makes microcontrollers that enable touch screens to function. Clearly, that’s been a huge growth industry lately, as smartphones and tablets have revolutionized the computing industry and rely almost exclusively on touch-screen input. But Atmel lost out on lucrative MacBook, iPod Touch, iPhone, and iPad business to Cypress Semiconductor Corporation(NASDAQ:CY) and Texas Instruments Incorporated (NASDAQ:TXN), and that combined with weakness in Android tablet sales left Atmel hitting new lows.

Yet as Fool tech expert Evan Niu points out, Atmel has superior technology to Cypress and Synaptics, Incorporated (NASDAQ:SYNA), and the company has had some success in getting into products like the new Surface tablet and some Ultrabook offerings, as well as many Samsung phone lines. The sticking point is cost, where Atmel isn’t the low-price provider, but for higher-margin products, the odds are better that mobile-device makers will pay up for quality. That’s likely the case with Samsung’s top-of-the-line Galaxy S IV, where Synaptics is the main rival but where Evan expects Atmel to retain its position within the phone.

Earlier this month, Atmel gave disappointing guidance for the current quarter. Even as the new Windows 8 operating system makes touchscreens more common, Atmel doesn’t expect sales to reach as high as what analysts had expected. With a sluggish overall semiconductor market, it’s hard for Atmel to reach its full growth potential even with its promising microcontroller business.

For Atmel to improve, it needs to keep scoring wins in the touch-screen market, especially as new players seek to distinguish their products from existing mainstays. If Atmel can make the most of its technological advantages, it could claw back toward perfection in the years ahead.

The article Has Atmel Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.

Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Cypress Semiconductor.

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