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Could This Spell the End for Troubled Atmel?

Last week, Microchip Technology and On Semiconductor made an unsolicited bid to buy troubled Atmel Corp. for $5 a share or $2.3 billion in cash. The deal would carve Atmel up into three pieces: Its memory and radio frequency - automotive units would go to On Semi, while Microchip would keep the microcontroller business and spin off the application specific division.

That would spell the end for the 24-year old Silicon Valley company and a bizarre series of events that began a couple of years ago. Here's what happened.

In 1981, Gordon Campbell and a few other Intel engineers and managers, including a Greek immigrant named George Perlegos, formed Seeq Technology. Kleiner Perkins led the venture funding.

atmel_logo.jpgWhen Seeq imploded three years later, George teamed up with brother Gust to found Atmel. In stark contrast to the way Campbell formed Seeq, George bootstrapped Atmel with $30K of his own money and a development contract with General Instrument.

As president and CEO, George had a unique way of doing things. He ran Atmel lean and mean with few frills, a flat management structure, and differentiated, low-power products that targeted growing market niches.

Whatever he did, it worked.

The company went public in 1991, surpassed $1 billion in revenue in 1996 and briefly hit $2 billion in 2000 before falling off a cliff when the tech bubble burst. The company lost half its revenue and, while growth returned, profits didn't. That set the stage for what happened next.

Enter Steven LaubSteven Laub, Atmel CEO
Steven Laub had been an executive with Lattice Semiconductor for 13 years. In November of 2004, he resigned as president to become CEO of Silicon Image. Unfortunately, founder and former-CEO David Lee just wasn't ready to let go. The two butted heads and Laub resigned just two months after he got there.

Four board directors and five corporate officers followed Laub out the door, but that's a story for another day. He joined a private equity firm and landed on Atmel's board in February of 2006.

In July, Atmel's board began an independent and voluntary review of its stock option backdating practices.
In August, George, Gust and two other officers were terminated for cause following an investigation into the misuse of corporate travel funds. Laub was named CEO. Perlegos launched a proxy battle, but ultimately lost.

In an SEC filing, the board fingered George for improper options backdating that resulted in 13 years of restated earnings, but claimed that had nothing to do with the termination.

Decisions, decisions
At this point, everybody should be happy, right? Not exactly.

In just over two years, Laub has failed to transform Atmel into a more focused and consistently profitable entity. Profits are right around breakeven, revenues have flat-lined, and the stock is down more than 40% since Laub took office.

But the company does have a new registered tag line: Everywhere You Are. Milk-toast marketing at its best.

The board has a decision to make. Ride it out with Laub, fire him, or take the 52.4% premium over the pre-offer share price and call it a day.

I think Laub has had more than enough time to turn things around. Mark Hurd had a far tougher job at HP and pulled off a remarkable turnaround in months, not years. Atmel's board should fire Laub and install somebody interested in creating shareholder value, not another unimpressive 13-year stint, or take the deal. End of story.

(Steven Laub and Atmel Logo images courtesy of Atmel Corp.)