Chipmaker Atmel Corp forecast dismal fourth-quarter sales and margins, mostly on lower sales of touchscreen controllers to iPad rivals grappling with higher inventories and a weak global economy.
The forecast pushed the company's shares down as much as 8 percent in after-market trade. They had closed at $10.29 on Tuesday on Nasdaq.
For the fourth quarter, Atmel expects sales to fall 12-16 percent sequentially, which implies sales of $402.7-$421.9 million, lower than analysts' expectations of $484.2 million.
The company, which supplies its flagship maXTouch tablet chips to Apple Inc rivals Samsung Electronics and Dell Inc, expects fourth-quarter gross margins to fall to 47.5-48.5 percent from 50.1 percent in the third quarter.
Non-iPad tablet sales have been hampered by the popularity of the Apple product and patent-infringement litigation brought by the Cupertino company against its chief competitor Samsung in various markets.
In a conference call with analysts, Chief Executive Steve Laub said the company will also have to deal with a shift to single-chip touchscreens in tablets.
There's a transition occurring from multi-chip solutions for touch within the tablets to a single chip which is bringing down the content per tablet as well, so we're seeing this convergence of events occur in the fourth quarter, the CEO added.
However, the company raised its full-year sales forecast for its maXTouch to $375 million from $350 million on expected higher sales to smartphone makers.
Atmel, which competes with Cypress Semiconductor and Synaptics Inc, also sells smartphone touchscreen controllers to Samsung, HTC Corp and Nokia Oyj.
In October, Cypress Semiconductor also warned of a higher-than-expected revenue decline in the fourth quarter, but backed its full-year touchscreen sales forecast.
For July-September period, the company posted an adjusted profit of 26 cents a share on sales of $479.4 million.
Analysts, on average, expected a profit of 20 cents a share on sales of $483.8 million. (Reporting by Soham Chatterjee in Bangalore; Editing by Supriya Kurane and Sriraj Kalluvila)