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Key Synergies from the Atmel-Dialog Merger

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Oct. 16 2015, Updated 1:05 a.m. ET

Future prospects of the Atmel-Dialog merger

The combined company from the merger of Atmel (ATML) and Dialog will become a global leader in both power management and embedded processing solutions. Jalal Bagherli will continue to be Dialog’s chief executive officer and executive board director after the merger. The deal will give Dialog access to Atmel’s diversified market and open up more opportunities to increase revenue. Dialog expects the deal to bring annual cost savings of $150 million over the next two years.

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Rapid growth in IoT market

The International Data Corporation forecasts the manufacturing spending on IoT (Internet of Things) to grow at a compounded annual rate of 18.6% from $42.2 billion in 2013 to $98.8 billion in 2018. IoT is a concept that makes the Internet accessible beyond desktops and laptops and includes consumer electronics, household appliances, wearables, cars, medical devices, jet engines, and maybe entire factories.

Expanding product offerings

Solutions for mobile systems account for 82% of Dialog’s revenue. The company is looking to expand its product offerings in the automotive and IoT spaces. The acquisition will give Dialog access to Atmel’s broad portfolio of connected solutions for automotive and IoT devices. The combined product portfolio will enable Dialog to cater to a larger and more diversified customer base. Moreover, Atmel’s distributor channel will open up new markets for Dialog.

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Atmel chief executive officer, Steven Laub, said, “Adding Dialog’s world-class capabilities in Power Management with Atmel’s keen focus on Microcontrollers, Connectivity and Security will enable Dialog to more effectively target high-growth applications within the Mobile, IoT and Automotive markets.”

We will discuss Atmel’s product portfolio and customer base later in the series.

Competition

The combined company will compete with European semiconductor players NXP Semiconductors (NXPI), which is merging with Freescale, and STMicroelectronics (STM), which reported a revenue of $7.4 billion in fiscal 2014. In the US, the combined company will compete with Microchip Technology (MCHP) and ON Semiconductor (ONNN).

You can get exposure to Atmel through the iShares Russell 1000 Growth ETF (IWF). IWF has a 0.03% holding in Atmel.

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