10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED SEPTEMBER 30, 2007

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                                          TO                                         

Commission File Number 0-19032

ATMEL CORPORATION

(Registrant)

Delaware
(State or other jurisdiction of
incorporation or organization) 77-0051991
(I.R.S. Employer Identification
Number)

2325 Orchard Parkway
San Jose, California 95131
(Address of principal executive offices, including zip code)

(408) 441-0311
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act):

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

On October 31, 2007, the Registrant had 449,107,234 outstanding shares of Common Stock.

ATMEL CORPORATION

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2007

PART I: FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets at September 30, 2007 and December 31, 2006	3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2007 and September 30, 2006	4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and September 30, 2006	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition And Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures About Market Risk	43
Item 4. Controls and Procedures	45
PART II: OTHER INFORMATION	46
Item 1. Legal Proceedings	46
Item 1A. Risk Factors	48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3. Defaults Upon Senior Securities	61
Item 4. Submission of Matters to a Vote of Security Holders	61
Item 5. Other Information	61
Item 6. Exhibits	61
SIGNATURES	62
EXHIBIT INDEX
EXHIBIT 3.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Atmel Corporation

Condensed Consolidated Balance Sheets
(Unaudited)

	September 30,			December 31,
(in thousands, except par value)	2007			2006
ASSETS
Current assets
Cash and cash equivalents	$	199,080		$	410,480
Short-term investments		52,146			56,264
Accounts receivable, net of allowance for doubtful accounts of $3,204 and $3,605, respectively		226,317			227,031
Inventories		348,793			339,799
Other current assets		75,882			118,965
Total current assets		902,218			1,152,539
Fixed assets, net		582,872			602,290
Non-current assets held for sale		—			35,040
Intangible and other assets, net		21,036			28,670
Total assets	$	1,506,126		$	1,818,539
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	83,755		$	108,651
Trade accounts payable		115,364			162,408
Accrued and other liabilities		241,987			277,461
Deferred income on shipments to distributors		18,628			18,856
Total current liabilities		459,734			567,376
Long-term debt less current portion		22,062			60,333
Other long-term liabilities		222,389			236,936
Total liabilities		704,185			864,645
Commitments and contingencies (Note 15)
Stockholders’ equity
Common stock; par value $0.001; Authorized: 1,600,000 shares; Shares issued and outstanding: 448,876 at September 30, 2007 and 488,844 at December 31, 2006		449			489
Additional paid-in capital		1,187,424			1,418,004
Accumulated other comprehensive income		139,733			107,237
Accumulated deficit		(525,665	)		(571,836	)
Total stockholders’ equity		801,941			953,894
Total liabilities and stockholders’ equity	$	1,506,126		$	1,818,539

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

3

Atmel Corporation

Condensed Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
(in thousands, except per share data)	2007			2006			2007			2006
Net revenues	$	418,097		$	431,734		$	1,213,657		$	1,262,006
Operating expenses
Cost of revenues		269,063			280,176			783,044			845,038
Research and development		63,609			75,181			200,174			217,892
Selling, general and administrative		58,518			50,206			184,458			149,881
Charges for grant repayments		1,189			—			1,189			—
Restructuring charges		1,386			—			528			151
Asset impairment recovery		(1,057	)		—			(1,057	)		—
Total operating expenses		392,708			405,563			1,168,336			1,212,962
Income from operations		25,389			26,171			45,321			49,044
Interest and other income (expenses), net		1,299			1,692			2,888			(5,571	)
Income from continuing operations before income taxes		26,688			27,863			48,209			43,473
Provision for income taxes		(10,135	)		(5,603	)		(2,038	)		(19,516	)
Income from continuing operations		16,553			22,260			46,171			23,957
Income from discontinued operations, net of income taxes		—			1,679			—			12,969
Gain on sale of discontinued operations, net of income taxes		—			100,332			—			100,332
Net income	$	16,553		$	124,271		$	46,171		$	137,258
Basic net income per share:
Income from continuing operations	$	0.03		$	0.04		$	0.09		$	0.05
Income from discontinued operations, net of income taxes		—			0.00			—			0.02
Gain on sale of discontinued operations, net of income taxes		—			0.21			—			0.21
Net income	$	0.03		$	0.25		$	0.09		$	0.28
Weighted-average shares used in basic net income per share calculations		485,540			488,303			487,731			486,935
Diluted net income per share:
Income from continuing operations	$	0.03		$	0.04		$	0.09		$	0.05
Income from discontinued operations, net of income taxes		—			0.00			—			0.02
Gain on sale of discontinued operations, net of income taxes		—			0.21			—			0.21
Net income	$	0.03		$	0.25		$	0.09		$	0.28
Weighted-average shares used in diluted net income per share calculations		489,791			494,066			492,747			492,698

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

4

Atmel Corporation

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	September 30,			September 30,
(in thousands)	2007			2006
Cash flows from operating activities
Net income	$	46,171		$	137,258
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		94,425			175,483
Gain on sale of discontinued operations		—			(109,838	)
Gain on sale of fixed assets and businesses		(1,657	)		(2,571	)
Asset impairment recovery		(1,057	)		—
Other non-cash losses		2,017			1,625
Provision (recovery) for doubtful accounts receivable		(45	)		115
Accrued interest on zero coupon convertible debt		—			2,819
Accrued interest on other long-term debt		526			1,276
Stock-based compensation		11,506			6,571
Changes in operating assets and liabilities
Accounts receivable		809			(10,238	)
Inventories		(5,677	)		(13,873	)
Current and other assets		46,948			4,352
Trade accounts payable		(18,005	)		29,714
Accrued and other liabilities		(70,293	)		48,389
Deferred income on shipments to distributors		(228	)		3,198
Net cash provided by operating activities		105,440			274,280
Cash flows from investing activities
Acquisitions of fixed assets		(53,339	)		(63,591	)
Proceeds from the sale of fixed assets and businesses		3,000			3,795
Proceeds from sale of discontinued operations, net		—			125,912
Proceeds from sale of manufacturing facilities, net of selling costs		34,714			—
Proceeds from the sale of interest in privately-held companies		—			1,799
Acquisitions of intangible assets		—			(209	)
Purchases of short-term investments		(7,743	)		(18,286	)
Sales or maturities of short-term investments		12,276			9,157
Net cash provided by (used in) investing activities		(11,092	)		58,577
Cash flows from financing activities
Principal payments on capital leases and other debt		(68,615	)		(98,446	)
Proceeds from equipment financing and other debt		—			25,000
Repurchase of convertible notes		—			(145,515	)
Repurchase of common stock		(250,111	)		—
Proceeds from issuance of common stock		8,044			11,206
Net cash used in financing activities		(310,682	)		(207,755	)
Effect of exchange rate changes on cash and cash equivalents		4,934			76
Net increase (decrease) in cash and cash equivalents		(211,400	)		125,178
Cash and cash equivalents at beginning of period		410,480			300,323
Cash and cash equivalents at end of period	$	199,080		$	425,501
Supplemental cash flow disclosures:
Interest paid	$	6,393		$	10,807
Income taxes paid, net		12,585			6,105
Decreases in accounts payable related to fixed asset purchases		(13,600	)		(315	)
Fixed assets acquired under capital leases		—			3,243

The accompanying notes are an integral part of these Condensed Consolidated Financial statements.

5

Notes to Condensed Consolidated Financial Statements

(In thousands, except per share data and percentages)
(Unaudited)

Note 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     These unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to state fairly, in all material respects, the financial position of Atmel Corporation (“the Company” or “Atmel”) and its subsidiaries as of September 30, 2007 and the results of operations for the three and nine months ended September 30, 2007 and 2006 and cash flows for the nine months ended September 30, 2007 and 2006. All intercompany balances have been eliminated. Because all of the disclosures required by U.S. generally accepted accounting principles are not included, these interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2006. The December 31, 2006 year-end condensed consolidated balance sheet data was derived from the audited consolidated financial statements and does not include all of the disclosures required by U.S. generally accepted accounting principles. The condensed consolidated statements of operations for the periods presented are not necessarily indicative of results to be expected for any future period, nor for the entire year.

     In the third quarter of 2006, the Company completed the divestiture of its Grenoble, France, subsidiary. Results from the Grenoble subsidiary are excluded from the amounts from continuing operations for the three and nine months ended September 30, 2006 disclosed herein, and have been classified as Results from Discontinued Operations. See Note 7 for further discussion.

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these financial statements include reserves for inventory, sales return reserves, restructuring charges, stock-based compensation expense, allowances for doubtful accounts receivable, warranty reserves, estimates for useful lives associated with long-lived assets, asset impairments, certain accrued liabilities and income taxes and tax valuation allowances. Actual results could differ from those estimates.

Reclassifications

     Certain prior-year amounts in the condensed consolidated financial statements and the notes thereto have been reclassified where necessary to conform to the current presentation. The Company reclassified “non-current assets held for sale” totaling $88,757 on the condensed consolidated balance sheets as of December 31, 2006 to “fixed assets, net” for $87,941 and “intangible and other assets, net” for $816. In addition, as of December 31, 2006, the Company reclassified “liabilities related to assets held for sale” totaling $63,553 to “trade accounts payable” in the amount of $17,329 and “accrued and other liabilities” in the amount of $46,224 on the condensed consolidated balance sheets. The Company also reclassified debt and capital lease obligations totaling $70,340 from “liabilities related to assets held for sale” to “current portion of long-term debt” and $313 from “non-current liabilities related to assets held for sale” to “long-term debt less current portion” on the condensed consolidated balance sheets as of December 31, 2006. These reclassifications did not affect the prior period’s total current assets, total assets, total current liabilities, total long-term liabilities, stockholders’ equity, net loss or cash flow from operations. See Note 8 for further discussion of assets held for sale.

Inventories

     Inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis for raw materials and purchased parts; and an average-cost basis for work in progress and finished goods) or market. Market is based on estimated net realizable value. The Company establishes lower of cost or market reserves, aged inventory reserves and obsolescence reserves. Inventory reserves are generally recorded when the inventory product exceeds nine months of demand or twelve months of backlog for that product. Inventory reserves are not relieved until the related inventory has been sold or scrapped. Inventories are comprised of the following:

	September 30,		December 31,
(in thousands)	2007		2006
Raw materials and purchased parts	$	22,741	$	13,434
Work-in-process		249,075		245,760
Finished goods		76,977		80,605
	$	348,793	$	339,799

6

Grant Recognition

     Subsidy grants from government organizations are amortized as a reduction of expenses over the period the related obligations are fulfilled. In fiscal 2006, Atmel entered into new grant agreements and modified existing agreements, with several European government agencies. Recognition of future subsidy benefits will depend on Atmel’s achievement of certain capital investment, research and development spending and employment goals. The Company recognized the following amount of subsidy grant benefits as a reduction of either cost of revenues or research and development expenses, depending on the nature of the grant:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2007		2006		2007		2006
Cost of revenues	$	771	$	2,854	$	1,217	$	6,628
Research and development expenses		5,041		3,013		14,384		7,827
Total	$	5,812	$	5,867	$	15,601	$	14,455

Stock-Based Compensation

     Upon adoption of SFAS No. 123R, the Company reassessed its equity compensation valuation method and related assumptions. The Company’s determination of the fair value of share-based payment awards on the date of grant utilizes an option-pricing model and is impacted by its common stock price as well as a change in assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to: expected common stock price volatility over the term of the option awards, as well as the projected employee option exercise behaviors (expected period between stock option vesting date and stock option exercise date).

     Stock-based compensation expense recognized in the Company’s condensed consolidated statements of operations for the three and nine months ended September 30, 2007 and 2006 included a combination of awards granted prior to January 1, 2006 and awards granted subsequent to January 1, 2006. For stock-based awards granted prior to January 1, 2006, the Company attributes the value of stock-based compensation, determined under SFAS No. 123R, to expense using the accelerated multiple-option approach. Compensation expense for all stock-based payment awards granted subsequent to January 1, 2006 is recognized using the straight-line single-option method. Stock-based compensation expense included in the three and nine months ended September 30, 2007 and 2006 includes the impact of estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For the periods prior to 2006, the Company accounted for forfeitures as they occurred. The adoption of SFAS No. 123R requires the Company to reflect the net cumulative impact of estimating forfeitures in the determination of period expense by reversing the previously recognized cumulative compensation expense related to those forfeitures, rather than recording forfeitures when they occur as previously permitted. The Company did not record this cumulative impact upon adoption, as the amount was insignificant. Stock options granted in periods prior to 2006 were measured based on SFAS No. 123 requirements, whereas stock options granted subsequent to January 1, 2006 were measured based on SFAS No. 123R requirements. See Note 9 for further discussion.

Recent Accounting Pronouncements

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The provisions of SFAS No. 157 should be applied prospectively as of the beginning of the fiscal year in which SFAS No. 157 is initially applied, except in limited circumstances. The Company expects to adopt SFAS No. 157 beginning January 1, 2008. The Company is currently evaluating the impact that this pronouncement may have on its consolidated financial statements.

7

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157. The Company expects to adopt SFAS No. 159 beginning January 1, 2008. The Company is currently evaluating the impact that this pronouncement may have on its consolidated financial statements.

Note 2 SHORT-TERM INVESTMENTS

     Short-term investments as of September 30, 2007 and December 31, 2006 primarily comprise of U.S. and foreign corporate debt securities, U.S. Government and municipal agency debt securities, commercial paper, and guaranteed variable annuities.

     All marketable securities are deemed by management to be available-for-sale and are reported at fair value. Net unrealized gains or losses that are not determined to be “other than temporary” are reported within stockholders’ equity on the Company’s condensed consolidated balance sheets as a component of accumulated other comprehensive income. Realized gains or losses are recorded based on the specific identification method. During the three and nine months ended September 30, 2007 and 2006, the Company’s realized gains or losses on short-term investments were not material. The carrying amount of the Company’s investments is shown in the table below:

	September 30, 2007					December 31, 2006
(in thousands)	Book Value			Market Value		Book Value			Market Value
U.S. Government debt securities	$	107		$	107	$	1,400		$	1,396
State and municipal debt securities		3,450			3,450		3,450			3,450
Corporate equity securities		87			1,035		87			892
Corporate debt securities and other obligations		46,254			47,554		49,170			50,526
	$	49,898		$	52,146	$	54,107		$	56,264
Unrealized gains		2,260			—		2,176			—
Unrealized losses		(12	)		—		(19	)		—
Net unrealized gains		2,248			—		2,157			—
Total	$	52,146		$	52,146	$	56,264		$	56,264

     The Company considers the unrealized losses in the table above not to be “other than temporary” due primarily to their nature, quality and short-term holding.

     Contractual maturities (at book value) of available-for-sale debt securities as of September 30, 2007, were as follows:

Due within one year	$	8,676
Due in 1-5 years		4,054
Due in 5-10 years		—
Due after 10 years		37,168
Total	$	49,898

     Atmel has classified all investments with maturity dates of 90 days or more as short-term since it has the ability to redeem them within the year.

8

Note 3 INTANGIBLE ASSETS

     Intangible assets as of September 30, 2007, consisted of the following:

	Gross		Accumulated			Net
(in thousands)	Assets		Amortization			Assets
Core/licensed technology	$	89,439	$	(87,149	)	$	2,290
Total Intangible Assets	$	89,439	$	(87,149	)	$	2,290

     Intangible assets as of December 31, 2006, consisted of the following:

	Gross		Accumulated			Net
(in thousands)	Assets		Amortization			Assets
Core/licensed technology	$	89,581	$	(83,557	)	$	6,024
Total Intangible Assets	$	89,581	$	(83,557	)	$	6,024

     Amortization expense for intangible assets for the three months ended September 30, 2007 and 2006 totaled $942 and $1,597, respectively, and amortization expense for the nine months ended September 30, 2007 and 2006 totaled $3,543 and $4,763, respectively.

     The following table presents the estimated future amortization of the intangible assets:

Years Ending December 31:
(in thousands)
2007 (October 1 through December 31)	$	960
2008		1,100
2009		175
2010		55
2011		—
Total future amortization	$	2,290

Note 4 BORROWING ARRANGEMENTS

     Information with respect to Atmel’s debt and capital lease obligations as of September 30, 2007 and December 31, 2006 is shown in the following table:

	September 30,			December 31,
(in thousands)	2007			2006
Various interest-bearing notes	$	41,371		$	80,550
Bank lines of credit		25,000			25,000
Capital lease obligations		39,446			63,434
Total	$	105,817		$	168,984
Less: current portion of long-term debt and capital lease obligation		(83,755	)		(108,651	)
Long-term debt and capital lease obligations due after one year	$	22,062		$	60,333

9

     Maturities of debt and capital lease obligations are as follows:

Years Ending December 31:
(in thousands)
2007 (October 1 through December 31)	$	48,345
2008		44,728
2009		7,171
2010		6,055
2011		4,923
Thereafter		3,724
		114,946
Less: amount representing interest		(9,129	)
Total	$	105,817

     Certain of the Company’s debt facilities contain terms that subject the Company to financial and other covenants. The Company was in compliance with its covenants as of September 30, 2007, except for the non-compliance with one financial covenant related to a revolving line of credit. This default provision, if not cured during the applicable cure period, may also trigger cross default provisions on other debt and capital leases that are classified as current liabilities as of September 30, 2007. The Company expects to regain compliance during the cure period stated in the borrowing agreement.

      The Company was not in compliance with covenants requiring timely filing of U.S. GAAP financial statements as of December 31, 2006, and, as a result, the Company requested waivers from its lenders to avoid default under these facilities. Waivers were not received from all lenders, and as a result, the Company had previously classified $22,544 of non-current liabilities as current liabilities on the condensed consolidated balance sheet as of December 31, 2006. As a result of the Company’s return to compliance to the related financial and filing requirement covenants in June 2007, these liabilities are classified as non-current liabilities as of September 30, 2007.

     On June 30, 2006, the Company entered into a 3-year term loan agreement for $25,000 with a European bank to finance equipment purchases. The interest rate on this loan is based on the London Interbank Offered Rate (“LIBOR”) plus 2.5%. Principal repayments are to be made in equal quarterly installments beginning September 30, 2006. The loan is collateralized by the financed assets and is subject to certain cross-default provisions. As of September 30, 2007, the outstanding balance on the term loan was $14,583 and was classified as an interest bearing note in the summary debt table above. The Company has classified the entire amount of this loan within current liabilities as of September 30, 2007 as it intends to pay off this term loan in the next twelve months in connection with the sale of assets at our North Tyneside facility.

     On March 15, 2006, the Company entered into a five-year asset-backed credit facility for up to $165,000 with certain European lenders. This facility is secured by the Company’s non-U.S. trade receivables. At September 30, 2007, the amount available under this facility was up to approximately $119,000, based on eligible non-U.S. trade receivables. Borrowings under the facility bear interest at LIBOR plus 2% per annum, while the undrawn portion is subject to a commitment fee of 0.375% per annum. The terms of the facility subject the Company to certain financial and other covenants and cross-default provisions. As of September 30, 2007, there were no amounts outstanding under this facility. Commitment fees and amortization of up-front fees paid related to the Facility for the three and nine months ended September 30, 2007 totaled $324 and $1,051, respectively, and for the three and nine months ended September 30, 2006 totaled $323 and $727, respectively, and are included in interest and other expenses, net, in the condensed consolidated statements of operations.

     In September 2005, the Company obtained a $15,000 term loan with a domestic bank. This term loan matures in September 2008. The interest rate on this term loan is LIBOR plus 2.25%. In December 2004, the Company had obtained a term loan with the same domestic bank in the amount of $20,000. Concurrent to this, the Company established a $25,000 revolving line of credit with this domestic bank, which has been extended until September 2008. The term loan matures in December 2007. The interest rate on the revolving line of credit is determined by the Company and must be either the domestic bank’s prime rate or LIBOR plus 2%. The interest rate on the term loan is 90-day euro Interbank Offered Rate (“EURIBOR”) plus 2.0%. All U.S. domestic account receivable balances secure amounts borrowed. The revolving line of credit and both term loans require the Company to meet certain financial ratios and to comply with other covenants on a periodic basis. As of September 30, 2007, the full $25,000 of the revolving line of credit was outstanding and $6,787 of the term loans was outstanding and was classified as an interest bearing note in the summary debt table above. The Company was not in compliance with one financial covenant for the revolving line of credit as of September 30, 2007. The Company expects to regain compliance during the cure period stated in the borrowing agreement.

     In June 2005, the Company entered into a euro 43,156 ($52,237) term loan agreement with a domestic bank. The interest rate is fixed at 4.10%. The Company has pledged certain manufacturing equipment as collateral. The loan is required to be repaid in equal installments of euro 3,841 ($4,649) per calendar quarter commencing on September 30, 2005, with the final payment due on June 28, 2008. As of September 30, 2007, the outstanding balance on the loan was $16,065 and was classified as an interest-bearing note in the summary debt table above.

10

     In February 2005, the Company entered into an equipment financing arrangement in the amount of euro 40,685 ($54,005) which is repayable in quarterly installments over three years. The stated interest rate is EURIBOR plus 2.25%. This equipment financing is collateralized by the financed assets. As of September 30, 2007, the balance outstanding under the arrangement was $10,186 and was classified as a capital lease.

     In September 2004, the Company entered into a euro 32,421 ($40,274) loan agreement with a European bank. The loan is to be repaid in equal principal installments of euro 970 ($1,205) per month plus interest on the unpaid balance, with the final payment due on October 1, 2007. The interest rate is fixed at 4.85%. The Company has pledged certain manufacturing equipment as collateral. This note requires Atmel to meet certain financial ratios and to comply with other covenants on a periodic basis. As of September 30, 2007, the outstanding balance on the loan was $1,373 and was classified in current liabilities as an interest-bearing note in the summary debt table above.

     The Company’s remaining $31,823 in outstanding debt obligations as of September 30, 2007 is comprised of $29,260 in capital leases and $2,563 in an interest bearing note.

     Included within the outstanding debt obligations are $77,775 of variable-rate debt obligations where the interest rates are based on either the LIBOR plus a spread ranging from 2.0% to 2.5% or the short-term EURIBOR plus a spread ranging from 0.9% to 2.25%. Approximately $63,808 of the Company’s total debt obligations have cross default provisions.

Note 5 PENSION PLANS

     The Company sponsors defined benefit pension plans that cover substantially all French and German employees. Plan benefits are provided in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. The plans are unfunded. Pension liabilities and charges to expense are based upon various assumptions, updated quarterly, including discount rates, future salary increases, employee turnover, and mortality rates.

     Pension Plans consist of two types of plans. The first plan type provides for termination benefits paid to employees only at retirement, and consists of approximately one to five months of salary. This structure covers the Company’s French employees. The second plan type provides for defined benefit payouts for the remaining employee’s post-retirement life, and covers the Company’s German employees.

     The aggregate net pension expense relating to the two plan types for the three and nine months ended September 30, 2007 and 2006, are as follows:

	Three Months Ended					Nine Months Ended
	September 30,			September 30,		September 30,		September 30,
(in thousands)	2007			2006		2007		2006
Service costs-benefits earned during the period	$	660		$	719	$	1,955	$	2,241
Interest cost on projected benefit obligation		621			593		1,832		1,796
Amortization of actuarial losses (gains)		(75	)		135		108		419
Net pension cost	$	1,206		$	1,447	$	3,895	$	4,456
Distribution of pension costs
Continuing operations	$	1,206		$	1,401	$	3,895	$	4,139
Discontinued operations		—			46		—		317
Net pension cost	$	1,206		$	1,447	$	3,895	$	4,456

     Amounts for the three and nine months ended September 30, 2006 have been adjusted to reflect the divestiture of the Company’s Grenoble, France, subsidiary in July 2006. Results from the Grenoble subsidiary were classified within Results from Discontinued Operations for the three and nine months ended September 30, 2006. See Note 7 for further discussion.

     The Company expects to make $1,130 in benefit payments in 2007. As of September 30, 2007, the Company had paid approximately $471.

11

     The Company’s pension liability represents the present value of estimated future benefits to be paid. With respect to the Company’s unfunded plans in Europe, during 2007, an increase in the discount rate assumption and an increase in inflation rate assumptions and an adjustment for retirement age used to calculate the present value of the pension obligation resulted in a decrease in the pension liability of $8,894. This resulted in a benefit net of tax, of $6,227, which was credited to accumulated other comprehensive income in stockholders’ equity in the condensed consolidated balance sheet during the nine months ended September 30, 2007, in accordance with SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.”

Note 6 RESTRUCTURING CHARGES

     The following tables summarize the activity related to the accrual for restructuring charges detailed by event for the three and nine months ended September 30, 2007 and 2006.

	December 31,							Currency		March 31,								Currency		June 30,							Currency		September 30,
	2006							Translation		2007		Charges/						Translation		2007		Charges/					Translation		2007
(in thousands)	Accrual		Charges		Payments			Adjustment		Accrual		(Credits)			Payments			Adjustment		Accrual		(Credits)		Payments			Adjustment		Accrual
Third quarter of 2002
Termination of contract with supplier	$	8,896	$	—	$	(249	)	$	—	$	8,647	$	(3,071	)	$	(3,984	)	$	—	$	1,592	$	—	$	—		$	—	$	1,592
Fourth quarter of 2005
Nantes fabrication facility sale		115		—		—			—		115		(27	)		—			—		88		—		(90	)		2		—
Fourth quarter of 2006
Employee termination costs		7,490		1,782		(1,743	)		41		7,570		458			(3,899	)		111		4,240		1,386		(3,094	)		284		2,816
Total 2007 activity	$	16,501	$	1,782	$	(1,992	)	$	41	$	16,332	$	(2,640	)	$	(7,883	)	$	111	$	5,920	$	1,386	$	(3,184	)	$	286	$	4,408

	December 31,							March 31,					June 30,					September 30,
	2005							2006					2006					2006
(in thousands)	Accrual		Charges		Payments			Accrual		Payments			Accrual		Payments			Accrual
Third quarter of 2002
Termination of contract with supplier	$	9,833	$	—	$	(217	)	$	9,616	$	(251	)	$	9,365	$	(225	)	$	9,140
Third quarter of 2005
Employee termination costs		1,246		—		(497	)		749		(672	)		77		(77	)		—
Fourth quarter of 2005
Nantes fabrication facility sale		1,310		—		(873	)		437		(204	)		233		(113	)		120
Employee termination costs		1,223		—		(704	)		519		(492	)		27		(27	)		—
First quarter of 2006
Employee termination costs		—		151		(5	)		146		(65	)		81		(81	)		—
Total 2006 activity	$	13,612	$	151	$	(2,296	)	$	11,467	$	(1,684	)	$	9,783	$	(523	)	$	9,260

2007 Restructuring Charges

     During the three and nine months ended September 30, 2007, the Company continued to implement the restructuring initiatives announced from 2002 to 2006 and recorded a net restructuring charge of $1,386 and $528, respectively, consisting primarily of the following:

• Charges of $506 and $2,508 for the three and nine months ended September 30, 2007, respectively, related to one-time minimum statutory termination benefits recorded in accordance with SFAS No. 112, “Employers’ Accounting for Post Employment Benefits” (“SFAS No. 112).

• Charges of $914 and $2,050 for the three and nine months ended September 30, 2007, respectively, related to severance costs for involuntary termination of employees. These employee severance costs were recorded in accordance with SFAS No. 146, “Accounting for Costs Associated with exit or Disposal Activities” (“SFAS No. 146”).

• A credit of $34 and $932 in the three and nine months ended September 30, 2007 related to changes in estimates of termination benefits originally recorded in accordance with SFAS No. 112, “Employers’ Accounting for Post Employment Benefits” (“SFAS No. 112”).

• A credit of $3,071 in the nine months ended September 30, 2007 related to the settlement of a long-term gas supply contract for which the accrual was $12,437, originally recorded in the third quarter of 2002. On May 1, 2007, in connection with the sale of the Irving, Texas facility, the Company paid $5,600 to terminate this contract, of which $1,700 was reimbursed by the buyer of the facility. The remaining balance of $1,592 is expected to be paid upon the commencement of volume manufacturing activity by the buyer in 2008.

12

2006 Restructuring Activities

     In the first quarter of 2006, the Company incurred $151 in restructuring charges primarily comprised of severance and one-time termination benefits.

     In the three and nine months ended September 30, 2007, the Company paid $3,094 and $8,736 related to employee termination costs, respectively. In the three and nine months ended September 30, 2006, the Company paid $185 and $2,620 related to employee termination costs, respectively.

Note 7 DISCONTINUED OPERATIONS

Grenoble, France, Subsidiary Sale

     The Company’s condensed consolidated financial statements and related footnote disclosures reflect the results of the Company’s Grenoble, France, subsidiary as Discontinued Operations, net of applicable income taxes, for all reporting periods presented.

     In July 2006, Atmel completed the sale of its Grenoble, France, subsidiary to e2v technologies plc, a British corporation (“e2v”). On August 1, 2006, the Company received $140,000 in cash upon closing ($120,073, net of working capital adjustments and costs of disposition).

     The facility was originally acquired in May 2000 from Thomson-CSF, and was used to manufacture image sensors, as well as analog, digital and radio frequency ASICs.

     Technology rights and certain assets related to biometry or “Finger Chip” technology were excluded from the sale. As of July 31, 2006, the facility employed a total of 519 employees, of which 14 employees primarily involved with the Finger Chip technology were retained, and the remaining 505 employees were transferred to e2v.

     In connection with the sale, Atmel agreed to provide certain technical support, foundry, distribution and other services extending up to four years following the completion of the sale, and in turn e2v has agreed to provide certain design and other services to Atmel extending up to 5 years following the completion of the sale. The financial statement impact of these agreements is not expected to be material to the Company. The ongoing cash flows between Atmel and e2v are not significant and as a result, the Company has no significant continuing involvement in the operations of the subsidiary. Therefore, the Company has met the criteria in SFAS No. 144, which were necessary to classify the Grenoble, France, subsidiary as discontinued operations.

     Included in other currents assets on the condensed consolidated balance sheet as of September 30, 2007 is an outstanding receivable balance due from e2v of $1,779 related to payments advanced to e2v to be collected from customers of e2v by Atmel. The transitioning of the collection of trade receivables on behalf of e2v is expected to be completed in 2007.

     The following table shows the components of the gain from the sale of Discontinued Operations, net of taxes, recognized upon the sale:

(in thousands)
Proceeds, net of working capital adjustments	$	122,610
Costs of disposition		(2,537	)
Net proceeds from the sale		120,073
Less:
Book value of net assets disposed of		(14,866	)
Cumulative translation adjustment effect		4,631
Gain on sale of discontinued operations, before income taxes		109,838
Provision for income taxes		(9,506	)
Gain on sale of discontinued operations, net of income taxes	$	100,332

13

     The following table summarizes results from Discontinued Operations for the periods indicated included in the condensed consolidated statement of operations:

	Three Months Ended			Nine Months Ended
(in thousands)	September 30, 2006			September 30, 2006
Net revenues	$	10,584		$	79,871
Operating costs and expenses		7,246			57,509
Income from discontinued operations, before income taxes		3,338			22,362
Gain on sale of discontinued operations, before income taxes		109,838			109,838
Income from and gain on sale of discontinued operations		113,176			132,200
Less: provision for income taxes — income from discontinued operations		(1,659	)		(9,393	)
Less: provision for income taxes — gain on sale of discontinued operations		(9,506	)		(9,506	)
Income from and gain on sale of discontinued operations, net of income taxes	$	102,011		$	113,301
Income from and gain on sale of discontinued operations, net of income taxes, per share:
Basic	$	0.21		$	0.23
Diluted	$	0.21		$	0.23
Weighted-average shares used in basic income per share calculations		488,303			486,935
Weighted-average shares used in diluted income per share calculations		494,066			492,698

Note 8 ASSETS HELD FOR SALE AND ASSET IMPAIRMENT RECOVERY

     Under Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”) the Company assesses the recoverability of long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the Company may not be able to recover the asset’s carrying amount. The Company measures the amount of impairment of such long-lived assets by the amount by which the carrying value of the asset exceeds the fair market value of the asset, which is generally determined based on projected discounted future cash flows or appraised values. The Company classifies long-lived assets to be disposed of other than by sale as held and used until they are disposed, including assets not available for immediate sale in their present condition. The Company reports assets and liabilities to be disposed of by sale under the caption of “held for sale” and recognizes those assets and liabilities on the condensed consolidated balance sheet at the lower of carrying amount or fair value, less cost to sell. Assets classified as held for sale are not depreciated.

North Tyneside, United Kingdom, and Heilbronn, Germany, Facilities

     In December 2006, the Company announced its decision to sell its wafer fabrication facilities in North Tyneside, United Kingdom, and Heilbronn, Germany. It is expected these actions will increase manufacturing efficiencies by better utilizing remaining wafer fabrication facilities, while reducing future capital expenditure requirements. The Company had previously classified assets of the North Tyneside site with a net book value of $88,757 (excluding cash and inventory which will not be included in any sale of the facility) as assets held-for-sale on the condensed consolidated balance sheet as of December 31, 2006. Following the announcement of intention to sell the facility in the fourth quarter of 2006, the Company assessed the fair market value of the facility compared to the carrying value recorded. The fair value was determined using a market-based valuation technique and estimated future cash flows. The Company recorded a net impairment charge of $72,277 in the quarter ended December 31, 2006 related to the write-down of long lived assets to their estimated fair values, less costs to dispose of the assets. The charge included an asset write-down of $170,002 for equipment, land and buildings, offset by related currency translation adjustment associated with the assets, of $97,725, as the Company intends to sell its United Kingdom subsidiary, which contains the facility, and hence the currency translation adjustment related to the assets is included in the impairment calculation.

     The Company acquired the North Tyneside, United Kingdom, facility in September 2000, including an interest in 100 acres of land and the fabrication facility of approximately 750,000 square feet, for approximately $100,000. The Company will have the right to acquire title to the land in 2016 for a nominal amount. The Company sold 40 acres in 2002 for $13,900. The Company subsequently purchased additional manufacturing equipment and then recorded an asset impairment charge of $317,927 in the second quarter of 2002 to write-down the carrying value of equipment in the fabrication facilities in North Tyneside, United Kingdom, to its estimated fair value. The estimate of fair value was made based on management’s best estimates based on a number of factors.

14

     On October 8, 2007, the Company entered into definitive agreements to sell certain wafer fabrication equipment and real property at North Tyneside to Taiwan Semiconductor Manufacturing Company Limited (“TSMC”) and Highbridge Business Park Limited (“Highbridge”) for a total of approximately $124,000. The disposal group previously classified as held for sale included all fabrication equipment and all liabilities of the North Tyneside legal entity. Upon entering into the agreements noted above, the Company determined that certain equipment and all of the related liabilities were no longer included in the disposal group. As a result, the Company reassessed whether the assets to be sold in this transaction continued to meet the criteria for classification as held for sale as of September 30, 2007. The Company concluded that the assets to be sold under the above agreements were no longer available for immediate sale in their present condition as the terms of the these agreements require the Company to perform significant additional steps, including the dismantling, decommissioning and testing of the wafer fabrication equipment before TSMC will accept transfer of title of the purchased equipment, as well as the delivery of a vacated building to Highbridge. The Company had previously expected to sell the assets in the form of the transfer of the legal entity and then enter into a further supply agreement for product wafers with the buyer. However, the agreements noted above require termination of production efforts in order to deliver assets in the condition specified by the buyers. The Company has determined that it needs to continue to operate the facility in order to build sufficient inventory as a result of the closure of the North Tyneside facility, and therefore cannot deliver the assets to be sold in the conditions specified in the sales agreements until production activity is concluded, which is not expect to occur until early 2008. In accordance with SFAS No. 144, the Company determined that the assets to be sold to TSMC and Highbridge did not meet the criteria for assets held for sale at September 30, 2007. These assets were reclassified as held and used, and were measured at the lower of their adjusted carrying amounts or fair values less cost to sell as of September 30, 2007.

     Assets removed from the disposal group and expected to be retained were reclassified by the Company to assets held and used as of September 30, 2007. In accordance with SFAS No. 144, these assets are reported individually at the lower of their respective carrying amount before they were initially classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had these assets been continuously classified as held and used or the fair value at the date of the subsequent decision not to sell. As a result of this reclassification, the Company recorded a credit of $1,057 related to the recovery of previous impairment charges recorded for these assets in the third quarter of 2007. This credit was included within Asset Impairment Recovery on the condensed consolidated statements of operations.

     The Heilbronn, Germany, facility did not meet the criteria for classification as held for sale as of September 30, 2007 and December 31, 2006, due to uncertainties relating to the likelihood of completing the sale within the next twelve months. Long-lived assets of this facility at September 30, 2007 and at December 31, 2006, respectively, remain classified as held and used. After an assessment of expected future cash flows generated by the Heilbronn, Germany facility, the Company concluded that no impairment exists.

Irving, Texas, Facility

     The Company acquired its Irving, Texas, wafer fabrication facility in January 2000 for $60,000 plus $25,000 in additional costs to retrofit the facility after the purchase. Following significant investment and effort to reach commercial production levels, the Company decided to close the facility in 2002 and it has been idle since then. Since 2002, the Company recorded various impairment charges, including $3,980 during the quarter ended December 31, 2005. In the quarter ended December 31, 2006, the Company performed an assessment of the market value for this facility based on management’s estimate, which considered a current offer from a willing third party to purchase the facility, among other factors, in determining fair market value. Based on this assessment, an additional impairment charge of $10,305 was recorded.

     The Company classified the assets of Irving, Texas, facility of $35,040 as held for sale during the quarter ended December 31, 2006. The Irving facility did not qualify as discontinued operations as it is an idle facility and does not constitute a component of an entity in accordance with SFAS No. 144.

     On May 1, 2007, the Company sold its Irving, Texas, wafer fabrication facility for $36,500 in cash ($34,714, net of selling costs). The sale of the facility includes 39 acres of land, the fabrication facility building, and related offices, and remaining equipment. An additional 17 acres was retained by the Company. No significant gain or loss was recorded upon the sale of the facility.

Note 9 STOCK-BASED COMPENSATION

Option and Employee Stock Purchase Plans

     Atmel has two stock option plans — the 1986 Stock Plan and the 2005 Stock Plan (an amendment and restatement of the 1996 Stock Plan). The 1986 Stock Plan expired in April 1996. The 2005 Stock Plan was approved by stockholders on May 11, 2005. As of September 30, 2007, of the 56,000 shares authorized for issuance under the 2005 Stock Plan, 8,434 shares of common stock remain available for grant. Under Atmel’s 2005 Stock Plan, Atmel may issue common stock directly or grant options to purchase common stock to employees, consultants and directors of Atmel. Options, which generally vest over four years, are granted at fair market value on the date of the grant and generally expire ten years from that date.

15

     Activity under Atmel’s 1986 Stock Plan and 2005 Stock Plan is set forth below:

							Outstanding Options					Weighted-
							Exercise		Aggregate			Average
	Available			Number of			Price		Exercise			Exercise Price
(in thousands, except per share data)	for Grant			Options			per Share		Price			per Share
Balances, December 31, 2006		13,300			31,320		$	1.68-$24.44		181,480		$	5.79
Options granted		(608	)		608			5.20-6.05		3,632			5.97
Options forfeited		221			(221	)		1.98-19.81		(1,111	)		5.03
Options exercised		—			—					—
Balances, March 31, 2007		12,913			31,707		$	1.68-$24.44		184,001			5.80
Options granted		(470	)		470		$	5.17-$5.67		2,639			5.62
Options forfeited		303			(304	)	$	1.98-$18.13		(2,164	)		6.34
Options exercised		—			(224	)	$	1.68-$5.75		(616	)		2.75
Balances, June 30, 2007		12,746			31,649		$	1.68-$24.44		183,860		$	5.81
Restricted stock issued		(1,000	)		—					—			—
Options granted		(5,535	)		5,535		$	4.74-$5.69		26,768			4.84
Options forfeited		2,223			(2,223	)	$	1.77-$24.44		(17,292	)		7.78
Options exercised		—			(2,928	)	$	1.68-$5.75		(7,479	)		2.55
Balances, September 30, 2007		8,434			32,033		$	1.68-$24.44		185,857		$	5.80

     Of the 1,000 restricted stock units issued, 250 units were vested during the third quarter of 2007. The 250 units had a fair value of $1,220 on the vesting date. The aggregate intrinsic value of stock options exercised was $8,698 and $9,353 in the three and nine months ended September 30, 2007, respectively.

     The following table summarizes the stock options outstanding at September 30, 2007:

Options Outstanding									Options Exercisable
(in thousands, except for price and contractual life data)
			Weighted-								Weighted-
			Average		Weighted-						Average		Weighted-
Range of			Remaining		Average		Aggregate				Remaining		Average		Aggregate
Exercise	Number		Contractual		Exercise		Intrinsic		Number		Contractual		Exercise		Intrinsic
Price	Outstanding		Term (years)		Price		Value		Exercisable		Term (years)		Price		Value
$1.68-2.11		3,629		4.29	$	2.07	$	11,214		2,670		4.01	$	2.06	$	8,277
2.13-3.29		3,249		7.36		3.05		6,855		1,391		7.33		2.99		3,018
3.33-4.70		1,100		5.02		4.02		1,254		737		3.72		3.92		914
4.74-4.74		3,393		9.80		4.74		1,425		63		9.88		4.74		26
4.77-4.92		3,427		9.35		4.90		891		451		8.80		4.88		126
4.95-5.73		4,306		8.76		5.50		—		972		7.94		5.39		—
5.75-5.91		3,380		5.76		5.76		—		2,429		5.82		5.76		—
5.96-6.27		633		8.85		6.08		—		215		8.12		6.13		—
6.28-6.28		3,547		9.13		6.28		—		398		9.22		6.28		—
6.41-24.44		5,369		3.17		11.52		—		5,319		3.25		11.56		—
$1.68-24.44		32,033		6.94	$	5.80	$	21,639		14,645		4.97	$	6.80	$	12,361

16

     The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2007			2006			2007			2006
Risk-free interest rate		4.25	%		4.60	%		4.34	%		4.70	%
Expected life (years)		5.64			6.07			5.70			6.06
Expected volatility		58	%		69	%		59	%		70	%
Expected dividend yield		0	%		0	%		0	%		0	%

     The Company’s weighted-average assumptions during the three and nine months ended September 30, 2007 and 2006 were determined in accordance with SFAS No. 123R and are further discussed below.

     The expected life of employee stock options represents the weighted-average period the stock options are expected to remain outstanding and was derived based on an evaluation of the Company’s historical settlement trends, including an evaluation of historical exercise and expected post-vesting employment-termination behavior. The expected life of employee stock options impacts all underlying assumptions used in the Company’s Black-Scholes option-pricing model, including the period applicable for risk-free interest and expected volatility.

     The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of the Company’s employee stock options.

     The Company calculates the historic volatility over the expected life of the employee stock options and believes this to be representative of the Company’s expectations about its future volatility over the expected life of the option.

     The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

     The weighted-average estimated fair values of options granted in the three months ended September 30, 2007 and 2006 were $2.74 and $3.54, respectively. The weighted-average estimated fair values of options granted in the nine months ended September 30, 2007 and 2006 were $2.88 and $3.44, respectively.

Employee Stock Purchase Plan

     Under the 1991 Employee Stock Purchase Plan (“ESPP”), qualified employees are entitled to purchase shares of Atmel’s common stock at the lower of 85 percent of the fair market value of the common stock at the date of commencement of the six-month offering period or at the last day of the offering period. Purchases are limited to 10% of an employee’s eligible compensation. There were no purchases under the ESPP for the three and nine months ended September 30, 2007. There were no ESPP offering period that began in the three and nine months ended September 30, 2006. Of the 42,000 shares authorized for issuance under this plan, 9,320 shares were available for issuance at September 30, 2007.

     The adoption of SFAS No. 123R did not impact the Company’s methodology to estimate the fair value of share-based payment awards under the Company’s ESPP. The fair value of each purchase under the ESPP is estimated on the date of the beginning of the offering period using the Black-Scholes option pricing model. The following assumptions were utilized to determine the fair value of the Company’s ESPP shares:

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
	2007			2007
Risk-free interest rate		4.09	%		4.09	%
Expected life (years)		0.50			0.50
Expected volatility		34	%		34	%
Expected dividend yield		—			—

17

     The components of the Company’s stock-based compensation expense, net of amounts capitalized in inventory, for the three and nine months ended September 30, 2007 and 2006 are summarized below:

	Three Months Ended					Nine Months Ended
	September 30,			September 30,		September 30,		September 30,
(in thousands)	2007			2006		2007		2006
Employee stock options	$	3,097		$	1,498	$	9,651	$	6,481
Employee stock purchase plan		205			—		205		302
Non-employee stock option modifications		—			—		—		120
Restricted Stock		1,648			—		1,648		—
Amounts liquidated from (capitalized in) inventory		(57	)		12		2		(332	)
	$	4,893		$	1,510	$	11,506	$	6,571

     SFAS No. 123R requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow. The future realizability of tax benefits related to stock compensation is dependent upon the timing of employee exercises and future taxable income, among other factors. The Company did not realize any tax benefit from the stock-based compensation expense incurred during the three and nine months ended September 30, 2007 or 2006, as the Company believes it is more likely than not that it will not realize the benefit from tax deductions related to equity compensation.

     The following table summarizes the distribution of stock-based compensation expense related to employee stock options, restricted stock and employee stock purchases under SFAS No. 123R for the three and nine months ended September 30, 2007 and 2006, which was recorded as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2007		2006		2007		2006
Cost of revenues	$	487	$	562	$	1,488	$	1,512
Research and development		647		329		2,136		1,607
Selling, general and administrative		3,759		619		7,882		3,452
Total stock-based compensation expense, before income taxes		4,893		1,510		11,506		6,571
Tax benefit		—		—		—		—
Total stock-based compensation expense, net of income taxes	$	4,893	$	1,510	$	11,506	$	6,571

     Non-employee stock-based compensation expense (based on fair value) included in net income for the three and nine months ended September 30, 2006 was $0 and $120, respectively. There was no non-employee stock-based compensation expense for the three and nine months ended September 30, 2007.

     As of September 30, 2007, total unearned compensation expense related to nonvested stock options, net of estimated forfeitures, was approximately $44,377, excluding forfeitures, and is expected to be recognized over the next 1.9 years calculated on a weighted average basis.

Note 10 ACCUMULATED OTHER COMPREHENSIVE INCOME

     Comprehensive income (loss) is defined as a change in equity of a company during a period, from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. The primary difference between net income (loss) and comprehensive income for Atmel arises from foreign currency translation adjustments, pension liability adjustments and unrealized gains (losses) on investments.

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     The components of accumulated other comprehensive income at September 30, 2007 and December 31, 2006, net of tax are as follows:

	September 30,		December 31,
(in thousands)	2007		2006
Foreign currency translation	$	136,944	$	110,766
Acturial gains (losses) related to defined benefit pension plan		541		(5,686	)
Net unrealized gains on investments		2,248		2,157
Total accumulated other comprehensive income	$	139,733	$	107,237

     The components of comprehensive income for the three and nine months ended September 30, 2007 and 2006 are as follows:

	Three Months Ended					Nine Months Ended
	September 30,		September 30,			September 30,		September 30,
(in thousands)	2007		2006			2007		2006
Net income	$	16,553	$	124,271		$	46,171	$	137,258
Other comprehensive income (loss):
Foreign currency translation adjustments		11,905		(7,576	)		26,178		48,426
Changes in acturial gains (losses) related to defined benefit pension plans		3,357		(2,401	)		6,227		980
Unrealized gains (losses) on investments		137		(52	)		91		1,077
Other comprehensive income (loss)		15,399		(10,029	)		32,496		50,483
Total comprehensive income	$	31,952	$	114,242		$	78,667	$	187,741

Note 11 NET INCOME PER SHARE

     Basic net income per share is calculated by using the weighted-average number of common shares outstanding during that period. Diluted net income per share is calculated giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental common shares issuable upon exercise of stock options for all periods. No dilutive potential common shares were included in the computation of any diluted per share amount when a loss from continuing operations was reported by the Company. The Company utilizes income or loss from continuing operations as the “control number” in determining whether potential common shares are dilutive or anti-dilutive.

     A reconciliation of the numerator and denominator of basic and diluted net income per share for both continuing and discontinued operations is provided as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2007		2006		2007		2006
Income from continuing operations	$	16,553	$	22,260	$	46,171	$	23,957
Income from discontinued operations, net of income taxes		—		1,679		—		12,969
Gain on sale of discontinued operations, net of income taxes		—		100,332		—		100,332
Net income	$	16,553	$	124,271	$	46,171	$	137,258
Weighted-average common shares — basic		485,540		488,303		487,731		486,935
Incremental common shares and share equivalents		4,251		5,763		5,016		5,763
Weighted-average common shares — diluted		489,791		494,066		492,747		492,698
Earnings per share:
Basic
Income from continuing operations	$	0.03	$	0.04	$	0.09	$	0.05
Income from discontinued operations, net of income taxes		—		0.00		—		0.02
Gain on sale of discontinued operations, net of income taxes		—		0.21		—		0.21
Net income per share — basic	$	0.03	$	0.25	$	0.09	$	0.28
Diluted
Income from continuing operations	$	0.03	$	0.04	$	0.09	$	0.05
Income from discontinued operations, net of income taxes		—		0.00		—		0.02
Gain on sale of discontinued operations, net of income taxes		—		0.21		—		0.21
Net income per share — diluted	$	0.03	$	0.25	$	0.09	$	0.28

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     The following table summarizes securities which were not included in the “Weighted-average shares — diluted” used for calculation of diluted net income per share, as their effect would have been antidilutive:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
(in thousands)	2007			2006			2007			2006
Employee stock options outstanding		32,208			27,924			31,911			28,332
Incremental common shares and share equivalents		(4,251	)		(5,763	)		(5,016	)		(5,763	)
Incremental common shares and share equivalents excluded from per share calculation		27,957			22,161			26,895			22,569
Common stock equivalent shares associated with:
Convertible notes due 2018		—			—			—			11
Convertible notes due 2021		—			—			—			1,747
Total weighted-average potential shares excluded from per share calculation		27,957			22,161			26,895			24,327

     The calculation of dilutive or potentially dilutive common shares related to the Company’s convertible securities considers the conversion features associated with these securities. Conversion features were considered, as at the option of the holders, the 2018 and 2021 convertible notes are convertible at any time, into the Company’s common stock at the rate of 55.932 shares per $1 (one thousand dollars) principal amount and 22.983 shares per $1 (one thousand dollars) principal amount, respectively. In this scenario, the “if converted” calculations are based upon the average outstanding convertible note balance for the three and nine months ended September 30, 2006 and the respective conversion ratios. These convertible notes were redeemed in full in 2006.

Note 12 INTEREST AND OTHER INCOME (EXPENSES), NET

     Interest and other income (expenses), net, is summarized in the following table:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
(in thousands)	2007			2006			2007			2006
Interest and other income	$	3,806		$	4,852		$	14,222		$	13,099
Interest expense		(2,802	)		(4,324	)		(9,345	)		(16,300	)
Foreign exchange transaction gains (losses)		295			1,164			(1,989	)		(2,370	)
Total	$	1,299		$	1,692		$	2,888		$	(5,571	)

     For the three and nine months ended September 30, 2006, interest and other income (expenses), net related to the Company’s Grenoble, France, subsidiary and included in Discontinued Operations totaled $64 and $541, respectively (see Note 7 for further discussion).

Note 13 INCOME TAXES

     For the three and nine months ended September 30, 2007, the Company recorded an income tax expense of $10,135 and $2,038, respectively, compared to an income tax expense of $5,603 and $19,516 for the three and nine months ended September 30, 2006.

     The provision for income taxes for these periods was first determined using the annual effective tax rate method for Atmel entities that are profitable. Entities that had operating losses with no tax benefit were excluded. As a result, excluding the impact of discrete tax events during the quarter, the provision for income taxes was at a higher consolidated effective rate than would have resulted if all entities were profitable or if losses produced tax benefits.

     During the quarter ended March 31, 2007 and the nine months ended September 30, 2007, the Company recognized a tax benefit of $19,549 resulting from the refund of French research tax credits for years 1999 through 2002, which was received during the quarter. In addition, in the three months ended March 31, 2007, the Hong Kong tax authorities completed a review of the Company’s tax returns for the years 2001 through 2004, which resulted in no adjustments. As a result, during the quarter ended March 31, 2007 and the nine months ended September 30, 2007, the Company recognized a tax benefit relating to a tax refund of $1,500 received in prior years that had been previously accrued as a tax contingency.

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     On August 17, 2007, Germany passed new tax legislation which will decrease the corporate income tax rate. The decrease in the corporate income tax rate is effective for years beginning after January 1, 2008. Due to the prospective change in the corporate income tax rate, deferred tax assets related to the German operations were revalued resulting in a $1,182 charge to tax expense in the quarter.

     In 2005, the Internal Revenue Service (“IRS”) proposed adjustments to the Company’s U.S. income tax returns for the years 2000 and 2001. In January 2007, after subsequent discussions with the Company, the IRS revised the proposed adjustments for these years. The Company has protested these proposed adjustments and is currently pursuing administrative review with the IRS Appeals Division.

     In May 2007, the IRS proposed adjustments to the Company’s U.S. income tax returns for the years 2002 and 2003. The Company filed a protest to these proposed adjustments and is pursuing administrative review with the IRS Appeals Division.

     In addition, the Company has various tax audits in progress in certain U.S. states and foreign jurisdictions. The Company has accrued taxes, and related interest and penalties that may be due upon the ultimate resolution of these examinations and for other matters relating to open U.S. Federal, state and foreign tax years in accordance with FIN 48.

     While the Company believes that the resolution of these audits will not have a material adverse impact on the Company’s results of operations, cash flows or financial position, the outcome is subject to uncertainty. Should the Company be unable to reach agreement with the IRS, U.S. state or foreign tax authorities on the various proposed adjustments, there exists the possibility of an adverse material impact on the results of operations, cash flows and financial position of the Company.

     The Company files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 1999. Tax years for significant foreign jurisdictions including Germany, France, United Kingdom, and Switzerland are closed through 2002, 2001, 2004 and 2001 respectively; subsequent tax years for these jurisdictions remain subject to tax authority review. Hong Kong tax years are closed for years through 2004 and subsequent tax years remain subject to tax authority review.

     On January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). Under FIN 48, the impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Upon review of the Company’s reserves, there were no changes to its reserves for uncertain tax positions upon adoption. At the adoption date of January 1, 2007, the Company had $176,309 of unrecognized tax benefits, all of which would affect its income tax expense if recognized. Material changes in unrecognized tax benefits in the nine months ended September 30, 2007 totaling $21,049 are described above.

     Management believes that events that could occur in the next 12 months and cause a material change in unrecognized tax benefits include, but are not limited to, the following:

• completion of examination of the Company’s tax returns by the U.S. or foreign tax authorities;

• expiration of statute of limitations on the Company’s tax returns; and

• recording taxable income in certain unprofitable entities.

     The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business. Management determined that an estimate of the range of reasonably possible material changes in the unrecognized tax benefits within the next 12 months can not be made.

     The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 1, 2007, the Company had approximately $30,866 of accrued interest and penalties related to uncertain tax positions. Interest and penalties of $5,371 have been expensed in the nine months ended September 30, 2007.

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Note 14 OPERATING AND GEOGRAPHICAL SEGMENTS

     The Company designs, develops, manufactures and sells a wide range of semiconductor integrated circuit products. The segments represent management’s view of the Company’s businesses and how it allocates Company resources and measures performance of its major components. In addition, each segment comprises product families with similar requirements for design, development and marketing. Each segment requires different design, development and marketing resources to produce and sell semiconductor integrated circuits. Atmel’s four reportable segments are as follows:

• Application specific integrated circuit (“ASIC”) segment includes custom application specific integrated circuits designed to meet specialized single-customer requirements for their high performance devices in a broad variety of applications. This segment also encompasses a range of products which provide security for digital data, including smart cards for mobile phones, set top boxes, banking and national identity cards. The Company also develops customer specific ASICs, some of which have military applications. This segment also includes products with military and aerospace applications.

• Microcontrollers segment includes a variety of proprietary and standard microcontrollers, the majority of which contain embedded nonvolatile memory and integrated analog peripherals.

• Nonvolatile Memories segment consists predominantly of serial interface electrically erasable programmable read-only memory (“SEEPROM”) and serial interface Flash memory products. This segment also includes parallel interfaced Flash memories as well as mature parallel interface EEPROM and EPROM devices. This segment also includes products with military and aerospace applications.

• Radio Frequency (“RF”) and Automotive segment includes products designed for the automotive industry. This segment produces and sells wireless and wired devices for industrial, consumer and automotive applications and it also provides foundry services which produce radio frequency products for the mobile telecommunications market.

     The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates segment performance based on revenues and income or loss from operations excluding impairment and restructuring charges. Interest and other expenses, net, nonrecurring gains and losses, foreign exchange gains and losses and income taxes are not measured by operating segment.

     The Company’s wafer manufacturing facilities fabricate integrated circuits for segments as necessary and their operating costs are reflected in the segments’ cost of revenues on the basis of product costs. Because segments are defined by the products they design and sell, they do not make sales to each other. The Company does not allocate assets by segment, as management does not use asset information to measure or evaluate a segment’s performance. Certain product families have been reassigned between the ASIC and Microcontroller segments as part of reorganization efforts to improve organizational efficiency. As a result, prior period net revenues and income from operating segments have been reclassified to conform to the current period presentation of operating segment information.

Information about Reportable Segments

				Micro-		Nonvolatile		RF and
(in thousands)	ASIC			Controllers		Memories		Automotive		Total
Three months ended September 30, 2007
Net revenues from external customers	$	128,200		$	118,610	$	96,829	$	74,458	$	418,097
Segment income from operations		1,430			11,560		7,034		6,883		26,907
Three months ended September 30, 2006
Net revenues from external customers	$	127,035		$	107,275	$	93,587	$	103,837	$	431,734
Segment income (loss) from operations		(8,731	)		17,234		10,651		7,017		26,171

				Micro-		Nonvolatile		RF and
(in thousands)	ASIC			Controllers		Memories		Automotive		Total
Nine months ended September 30, 2007
Net revenues from external customers	$	363,695		$	337,251	$	271,969	$	240,742	$	1,213,657
Segment income (loss) from operations		(21,431	)		19,822		30,238		17,352		45,981
Nine months ended September 30, 2006
Net revenues from external customers	$	374,822		$	309,678	$	282,431	$	295,075	$	1,262,006
Segment income (loss) from operations		(45,369	)		50,077		23,042		21,445		49,195

22

     Amounts for the three and nine months ended September 30, 2006 have been adjusted to reflect the divestiture of the Company’s Grenoble, France, subsidiary in July 2006. For the three and nine months ended September 30, 2006, net revenues related to this subsidiary and included in Discontinued Operations totaled $10,584 and $79,871, respectively. These amounts were previously reported in the Company’s ASIC operating segment. See Note 7 for further discussion.

	Three Months Ended					Nine Months Ended
	September 30,			September 30,		September 30,			September 30,
(in thousands)	2007			2006		2007			2006
Total segment income from operations	$	26,907		$	26,171	$	45,981		$	49,195
Unallocated amounts:
Charges for grant repayments		(1,189	)		—		(1,189	)		—
Restructuring charges		(1,386	)		—		(528	)		(151	)
Asset impairment (charges) credits		1,057			—		1,057			—
Consolidated income from operations	$	25,389		$	26,171	$	45,321		$	49,044

     Geographic sources of revenues were as follows:

	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
(in thousands)	2007		2006		2007		2006
United States	$	59,140	$	61,397	$	165,138	$	190,564
Germany		58,224		52,570		169,425		145,099
France		39,781		42,001		116,222		122,885
United Kingdom		7,292		6,028		23,912		19,147
Japan		23,147		15,129		71,086		42,660
China, including Hong Kong		96,346		88,033		266,614		260,432
Singapore		35,792		70,341		119,771		201,511
Rest of Asia-Pacific		54,810		55,666		147,834		157,024
Rest of Europe		37,648		36,501		118,407		111,904
Rest of the World		5,917		4,068		15,248		10,780
Total net revenues	$	418,097	$	431,734	$	1,213,657	$	1,262,006

     Net revenues are attributed to countries based on delivery locations.

     Locations of long-lived assets as of September 30, 2007 and December 31, 2006 were as follows:

	September 30,		December 31,
(in thousands)	2007		2006
United States	$	142,733	$	159,998
Germany		30,461		30,733
France		277,376		285,469
United Kingdom		107,667		108,510
Asia-Pacific		27,511		19,915
Rest of Europe		11,429		12,095
Total	$	597,177	$	616,720

     At December 31, 2006, long-lived assets totaling $35,040 classified as held for sale, and excluded from the table above, were located in the United States.

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Note 15 COMMITMENTS AND CONTINGENCIES

Commitments

Employment Agreements

     The Company entered into an employment agreement with an executive, effective August 7, 2006. The agreement provides for certain payments and benefits to be provided in the event that the executive is terminated without “cause” or that he resigns for “good reason,” including a “change of control.” The agreement initially called for the Company to issue restricted stock or restricted stock units to the executive on January 2, 2007. However, due to the Company’s non-timely status regarding reporting obligations under the Securities Exchange Act of 1934 (“Exchange Act”), the Company was unable to issue these shares on January 2, 2007. On March 13, 2007, the executive’s agreement was amended to provide for issuing these shares after the Company became current with its reporting obligations under the Exchange Act, or for an amount in cash if the executive’s employment terminates prior to issuance, equal to the portion that would have vested had these shares been issued on January 2, 2007, as originally intended. On July 11, 2007, the Company granted 1 million restricted stock units to the executive pursuant to the employment agreement of August 7, 2006 mentioned above.

Indemnifications

     As is customary in the Company’s industry, as provided for in local law in the United States and other jurisdictions, the Company’s standard contracts provide remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of the Company’s products. From time to time, the Company will indemnify customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of the Company’s products and services, usually up to a specified maximum amount. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws permit the indemnification of the Company’s agents. In the Company’s experience, claims made under such indemnifications are rare and the associated estimated fair value of the liability is not material.

     Subject to certain limitations, the Company is obligated to indemnify its current and former directors, officers and employees in connection with the investigation of the Company’s historical stock option practices and related government inquiries and litigation. These obligations arise under the terms of the Company’s certificate of incorporation, its bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify generally means that the Company is required to pay or reimburse the individuals’ reasonable legal expenses and possibly damages and other liabilities incurred in connection with these matters. The Company is currently paying or reimbursing legal expenses being incurred in connection with these matters by a number of its current and former directors, officers and employees.

Purchase Commitments

     At September 30, 2007, the Company had outstanding capital purchase commitments of $5,415. The Company also has a supply agreement obligation with a subsidiary of XbyBus SAS, a French Corporation, of $16,998 for wafer purchases through 2008.

Contingencies

Litigation

     Atmel currently is party to various legal proceedings. While management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations, cash flows and financial position of Atmel. The estimate of the potential impact on the Company’s financial position or overall results of operations or cash flows for the legal proceedings described below could change in the future. The Company has accrued for all losses related to litigation that the Company considers probable and for which the loss can be reasonably estimated.

     On August 7, 2006, George Perlegos, Atmel’s former President and Chief Executive Officer, and Gust Perlegos, Atmel’s former Executive Vice President, Office of the President, filed three actions in Delaware Chancery Court against Atmel and some of its officers and directors under Sections 211, 220 and 225 of the Delaware General Corporation Law. In the Section 211 action, plaintiffs alleged that on August 6, 2006, the Board of Directors wrongfully cancelled or rescinded a call for a special meeting of Atmel’s stockholders, and sought an order requiring the holding of the special meeting of stockholders. In the Section 225 action, plaintiffs alleged that their termination was the product of an invalidly noticed board meeting and improperly constituted committees acting with gross negligence and in bad faith. They further alleged that there was no basis in law or fact to remove them from their positions for cause, and sought an order declaring that they continue in their positions as President and Chief Executive Officer, and Executive Vice President, Office of the President, respectively. The Section 225 action concluded with the court finding that the plaintiffs had not demonstrated any right to hold any office of Atmel. For both actions, plaintiffs sought costs, reasonable attorneys’ fees and any other appropriate relief. The Section 220 action, which sought access to corporate records, was dismissed in 2006.

24

     Regarding the Section 211 action, a trial was held in October 2006, the court held argument in December 2006, issued a Memorandum Opinion in February 2007, and granted a Final Order on March 15, 2007. The Court ruled in favor of the plaintiffs with regards to calling a Special Meeting of Stockholders. The Perlegoses subsequently made a motion in the Chancery Court for attorneys’ fees and expenses, based on their having prevailed in the Section 211 action. On October 8, 2007, that motion was withdrawn, thus ending the proceeding, and the parties are in the process of filing a proposed final order on the matter.

     In January 2007, the Company received a subpoena from the Department of Justice (“DOJ”) requesting information relating to its past stock option grants and related accounting matters. Also, in August 2006, the Company received a letter from the SEC making an informal inquiry and request for information on the same subject matters. In August 2006, the Company received Information Document Requests from the IRS regarding the Company’s investigation into misuse of corporate travel funds and investigation into backdating of stock options. The Company is cooperating fully with the DOJ, SEC and IRS inquiries and intends to continue to do so. These inquiries likely will require the Company to expend significant management time and incur significant legal and other expenses, and could result in civil and criminal actions seeking, among other things, injunctions against the Company and the payment of significant fines and penalties by the Company, which may adversely affect our results of operations and cash flows. The Company cannot predict how long it will take or how much more time and resources it will have to expend to resolve these government inquiries, nor can the Company predict the outcome of these inquiries.

     From July through September 2006, six stockholder derivative lawsuits were filed (three in the U.S. District Court for the Northern District of California and three in Santa Clara County Superior Court) by persons claiming to be Company stockholders and purporting to act on Atmel’s behalf, naming Atmel as a nominal defendant and some of its current and former officers and directors as defendants. The suits contain various causes of action relating to the timing of stock option grants awarded by Atmel. The federal cases were consolidated and an amended complaint was filed on November 3, 2006. Atmel and the individual defendants have each moved to dismiss the consolidated amended complaint on various grounds. On July 16, 2007, the Court issued an order dismissing the complaint but granting the plaintiffs leave to file an amended complaint. In August 2007, the plaintiffs filed an amended complaint, and the Company and individual defendants moved to dismiss it. The state derivative cases have also been consolidated. In April 2007, a consolidated derivative complaint was filed in the state court action, and the Company moved to stay it. The court granted Atmel’s motion to stay on June 14, 2007. Atmel believes that the filing of the derivative actions was unwarranted and intends to vigorously contest them.

     On March 23, 2007, Atmel filed a complaint in the U.S. District Court for the Northern District of California against George Perlegos and Gust Perlegos. In the lawsuit, Atmel asserted that the Perlegoses used false and misleading proxy materials in violation of Section 14(a) of the federal securities laws to wage their proxy campaign to replace Atmel’s President and Chief Executive Officer and all of Atmel’s independent directors. Further, Atmel asserted that the Perlegos group, in violation of federal securities laws, failed to file a Schedule 13D as required, leaving stockholders without the information about the Perlegoses and their plans that is necessary for stockholders to make an informed assessment of the Perlegoses’ proposal. In its complaint, Atmel asked the Court to require the Perlegoses to comply with their disclosure obligations, and to enjoin them from using false and misleading statements to improperly solicit proxies as well as from voting any Atmel shares acquired during the period the Perlegoses were violating their disclosure obligations under the federal securities laws. On April 11, 2007, George Perlegos and Gust Perlegos filed a counterclaim with respect to such matters in the U.S. District Court for the Northern District of California seeking an injunction (a) prohibiting Atmel from making false and misleading statements and (b) requiring Atmel to publish and publicize corrective statements, and requesting an award of reasonable expenses and costs of this action. Atmel disputed this counterclaim. On July 3, 2007, this action, including the counterclaim, was dismissed.

     In October 2006, an action was filed in First Instance labour court, Nantes, France on behalf of 46 former employees of Atmel’s Nantes facility, claiming that the sale of the Nantes facility to MHS (XbyBus SAS) in December 2005 was not a valid sale, and that these employees should still be considered employees of Atmel, with the right to claim social benefits from Atmel. The action is for unspecified damages. A hearing took place on October 17, 2007 and Atmel is awaiting judgment. Atmel believes that the filing of this action is without merit and intends to vigorously defend this action.

     In January 2007, Quantum World Corporation filed a patent infringement suit in the United States District Court, Eastern District of Texas naming Atmel as a co-defendant, along with a number of other electronics manufacturing companies. The plaintiff claims that the asserted patents allegedly cover a true random number generator and that the patents are infringed by the manufacture, use importation and offer for sale of certain Atmel products. The suit seeks damages for infringement and recovery of attorneys’ fees and costs incurred. In March 2007, Atmel filed a counterclaim for declaratory relief that the patents are neither infringed nor valid. Atmel believes that the filing of this action is without merit and intends to vigorously defend against this action.

25

     In March 2006, Atmel filed suit against AuthenTec in the United States District Court, Northern District of California, San Jose Division, alleging infringement of U.S. Patent No. 6,289,114, and on November 1, 2006, Atmel filed a First Amended Complaint adding claims for infringement of U.S. Patent No. 6,459,804 (the “‘804 Patent”). In November 2006, AuthenTec answered denying liability and counterclaimed seeking a declaratory judgment of non-infringement and invalidity, its attorneys’ fees and other relief. In April 2007, AuthenTec filed an action against Atmel for declaratory relief in the United States District Court for the Middle District of Florida that the patents asserted against it by Atmel in the action pending in the Northern District of California are neither infringed nor valid, and amended that complaint in May 2007 to add claims for declaratory relief that the ‘804 Patent is unenforceable, alleged interference with business relationships, and abuse of process. AuthenTec sought declaratory relief and unspecified damages. On June 25, 2007, the action pending in the Middle District of Florida was transferred to the Northern District of California. On July 3, 2007, Atmel filed an answer to the claims for declaratory relief that the patents were neither valid nor infringed, and also added counterclaims of infringement. Also on July 3, 2007, Atmel moved to dismiss the remaining claims for declaratory relief that the ‘804 Patent is unenforceable, alleged interference with business relationships, and alleged abuse of process. On August 2, 2007 the parties agreed to the dismissal with prejudice of AuthenTec’s claims for alleged interference with business relationships and alleged abuse of process. The parties also agreed to grant AuthenTec leave to amend its counterclaim to add the claim for alleged unenforceability of the ‘804 Patent. Atmel believes that AuthenTec’s claims are without merit and intends to vigorously pursue and defend these actions.

     On September 28, 2007, Matheson Tri-Gas filed suit in Texas state court in Dallas County. Plaintiff alleges a claim for breach of contract for alleged failure to pay minimum payments under a purchase requirements contract. Matheson seeks unspecified damages, pre- and post-judgment interest, attorneys’ fees and costs. The Company believes that Matheson’s claims are without merit and intends to vigorously defend this action.

     From time to time, the Company may be notified of claims that the Company may be infringing patents issued to other parties and may subsequently engage in license negotiations regarding these claims.

Other Contingencies

     For products and technology exported from the U.S. or otherwise subject to U.S. jurisdiction, the Company is subject to U.S. laws and regulations governing international trade and exports, including, but not limited to the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and trade sanctions against embargoed countries and destinations administered by the Office of Foreign Assets Control (“OFAC”), U.S. Department of the Treasury. The Company has recently discovered shortcomings in its export compliance procedures. The Company is currently analyzing product shipments and technology transfers, working with U.S. government officials to ensure compliance with applicable U.S. export laws and regulations, and developing an enhanced export compliance system. A determination by the U.S. government that the Company has failed to comply with one or more of these export controls or trade sanctions could result in civil or criminal penalties, including the imposition of significant fines, denial of export privileges, loss of revenues from certain customers, and debarment from U.S. participation in government contracts. Any one or more of these sanctions could have a material adverse effect on the Company’s business, financial condition and results of operations.

Income Tax Contingencies

     In 2005, the Internal Revenue Service (“IRS”) completed its audit of the Company’s U.S. income tax returns for the years 2000 and 2001 and has proposed various adjustments to these income tax returns, including carryback adjustments to 1996 and 1999. In January 2007, after subsequent discussions with the Company, the IRS revised its proposed adjustments for these years. The Company has protested these proposed adjustments and is currently working through the matter with the IRS Appeals Division.

     In May 2007, the IRS completed its audit of the Company’s U.S. income tax returns for the years 2002 and 2003 and has proposed various adjustments to these income tax returns. The Company intends to file a protest to these proposed adjustments and to work through the matter with the IRS Appeals Division.

     While the Company believes that the resolution of these audits will not have a material adverse impact on the Company’s results of operations, cash flows or financial position, the outcome is subject to uncertainties. Should the Company be unable to reach agreement with the IRS on the various proposed adjustments, there exists the possibility of an adverse material impact on the results of operations, cash flows and financial position of the Company.

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     The Company’s French subsidiary’s income tax return for the 2003 tax year is currently under examination by the French tax authorities. The examination has resulted in an additional income tax assessment and the Company is currently pursuing administrative appeal of the assessment. While the Company believes the resolution of this matter will not have a material adverse impact on its results of operations, cash flows or financial position, the outcome is subject to uncertainty. The Company has provided its best estimate of income taxes and related interest and penalties due for potential adjustments that may result from the resolution of this examination, as well as for examinations of other open tax years.

     In addition, the Company has various tax audits in progress in certain U.S. states and foreign jurisdictions. The Company has provided its best estimate of taxes and related interest and penalties due for potential adjustments that may result from the resolution of these examinations, and examinations of open U.S. Federal, state and foreign tax years.

     The Company’s income tax calculations are based on application of the respective U.S. Federal, state or foreign tax law. The Company’s tax filings, however, are subject to audit by the respective tax authorities. Accordingly, the Company recognizes tax liabilities based upon its estimate of whether, and the extent to which, additional taxes will be due. To the extent the final tax liabilities are different from the amounts originally accrued, the increases or decreases are recorded as income tax expense.

Product Warranties

     The Company accrues for warranty costs based on historical trends of product failure rates and the expected material and labor costs to provide warranty services. The majority of products are generally covered by a warranty typically ranging from 90 days to two years.

     The following table summarizes the activity related to the product warranty liability during the three and nine months ended September 30, 2007 and 2006:

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
(in thousands)	2007			2006			2007			2006
Balance at beginning of period	$	5,318		$	5,386		$	4,773		$	6,184
Accrual for warranties during the period, net of change in estimates		2,275			(1,591	)		5,873			141
Actual costs incurred		(1,708	)		1,505			(4,761	)		(1,025	)
Balance at end of period	$	5,885		$	5,300		$	5,885		$	5,300

Guarantees

     During the ordinary course of business, the Company provides standby letters of credit or other guarantee instruments to certain parties as required for certain transactions initiated by either our subsidiaries or us. As of September 30, 2007, the maximum potential amount of future payments that we could be required to make under these guarantee agreements is approximately $12,000. The Company has not recorded any liability in connection with these guarantee arrangements. Based on historical experience and information currently available, the Company believes it will not be required to make any payments under these guarantee arrangements.

Note 16 ACCELERATED SHARE REPURCHASE PROGRAM

     On August 26, 2007, the Company entered into collared accelerated share repurchase transactions with each of Morgan Stanley & Co. Incorporated and Credit Suisse, New York Branch (the “dealers”) under which the Company intends to repurchase up to an aggregate of $250 million of its common stock. Pursuant to the terms of the transactions, the Company prepaid $125,000 to each dealer shortly after execution of the transactions, and the Company will purchase up to $125,000 of its common stock from each dealer. The aggregate number of shares actually purchased will be determined based on the volume weighted average share price of the Company’s common stock during a specified period of time, subject to certain provisions that establish a minimum and maximum number of shares that may be repurchased by the Company. In September 2007, the dealers delivered an aggregate of 43 million shares to the Company, which is the minimum number of shares to be repurchased by the Company. On November 5, 2007, the Company received approximately 2.8 million additional shares from Morgan Stanley & Co. Incorporated. The Company may receive additional shares from Credit Suisse, New York Branch depending on the average price of the Company’s common stock over a period of time following delivery of the minimum number of shares (no later than January 22, 2007), subject to a maximum number of shares. In certain circumstances the completion dates of the transactions may be shortened or extended from the periods described above. Shares repurchased under the transactions have been and will be retired.

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     The payment of $250,000 was included in the cash flows from financing activities in the Company’s condensed consolidated statement of cash flows and was recorded as a reduction of additional paid-in capital in the Company’s condensed consolidated balance sheets.

Note 17 CHARGES FOR GRANT REPAYMENTS

     In the fourth quarter of 2006, the Company announced its intention to close its design facility in Greece and its intention to sell its manufacturing facility in North Tyneside, United Kingdom. The Company recorded a charge of $30,034 in the fourth quarter of 2006 associated with the expected repayment of subsidy grants previously received and recognized related to grant agreements with government agencies at these locations. The proceeds of the subsidy grants were originally recorded as either a reduction of cost of revenues or research and development expense when they were recognized during the period from 2001 to 2006. In the third quarter of 2007, the Company recorded additional accrued interest of $1,189 related to the expected grant repayments. All of these charges have been included in “Charges for Grant Repayments” on the condensed consolidated statements of operations. The Company previously recognized the subsidy grant benefits by year as follows:

			Research
	Cost of		and Development
	Revenues		Expenses		Total
2006	$	6,607	$	302	$	6,909
2005		6,483		940		7,423
2004		4,181		409		4,590
2003		—		2,143		2,143
2002		—		2,086		2,086
2001		—		543		543
	$	17,271	$	6,423		23,694
Add: Accrued interest						1,908
Add: Impact of foreign exchange						4,432
Total liability at December 31, 2006						30,034
Add: Accrued interest in 2007						1,189
Add: Impact of foreign exchange						2,156
Total liability at September 30, 2007					$	33,379

Note 18 SUBSEQUENT EVENTS

     On October 8, 2007, the Company entered into agreements with Taiwan Semiconductor Manufacturing Company Limited (“TSMC”) and Highbridge Business Park Limited (“Highbridge) for the sale of the Company’s eight-inch wafer fabrication equipment and real property located in North Tyneside, United Kingdom for $124,000 as part of the Company’s strategic restructuring initiative undertaken in order to enhance profitability and accelerate the Company’s growth and reduce costs. The Company expects to record a gain of up to $40,000 for the sale of these assets and record related restructuring charges of up to $50,000 through the second quarter of 2008.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     You should read the following discussion and analysis in conjunction with the Condensed Consolidated Financial Statements and related Notes thereto contained elsewhere in this Report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Report and in our other reports filed with the SEC, including our Annual Report on Form 10-K/A for the year ended December 31, 2006.

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Forward Looking Statements

     You should read the following discussion of our financial condition and results of operations in conjunction with our Condensed Consolidated Financial Statements and the related “Notes to Condensed Consolidated Financial Statements” included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, particularly statements regarding our outlook for fiscal 2007, our anticipated revenues, operating expenses and liquidity, the effect of our restructuring and other strategic efforts and our expectations regarding the effects of exchange rates. Our actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, risks and uncertainties, including the risk factors set forth in this discussion, and in Item 1A — Risk Factors, and elsewhere in this Form 10-Q and similar discussions in our other filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K. Generally, the words “may,” “will,” “could,” “would,” “anticipate,” “expect,” “intend,” “believe,” “seek,” “estimate,” “plan,” “view,” “continue,” the plural of such terms, the negatives of such terms, or other comparable terminology and similar expressions identify forward-looking statements. The information included in this Form 10-Q is provided as of the filing date with the Securities and Exchange Commission and future events or circumstances could differ significantly from the forward-looking statements included herein. Accordingly, we caution readers not to place undue reliance on such statements. Atmel undertakes no obligation to update any forward-looking statements in this Form 10-Q.

OVERVIEW

     We are a leading designer, developer and manufacturer of a wide range of semiconductor products. Our diversified product portfolio includes our proprietary AVR microcontrollers, security and smart card integrated circuits, and a diverse range of advanced logic, mixed-signal, nonvolatile memory and radio frequency devices. Leveraging our broad intellectual property portfolio, we are able to provide our customers with complete system solutions. Our solutions target a wide range of applications in the communications, computing, consumer electronics, storage, security, automotive, military and aerospace markets, and are used in products such as mobile handsets, automotive electronics, GPS systems and batteries.

     We design, develop, manufacture and sell our products. We develop process technologies to ensure our products provide the maximum possible performance. During the nine months ended September 30, 2007, we manufactured approximately 94% of our products in our own wafer fabrication facilities.

     Our operating segments comprise: (1) application specific integrated circuits (ASICs); (2) microcontroller products (Microcontroller); (3) nonvolatile memory products (Nonvolatile Memory); and (4) radio frequency and automotive products (RF and Automotive).

     Net revenues decreased by 3% to $418 million in the three months ended September 30, 2007, compared to $432 million in the three months ended September 30, 2006. Net revenues decreased by 4% to $1,214 million in the nine months ended September 30, 2007, compared to $1,262 million in the nine months ended September 30, 2006. These decreases were primarily a result of declines in our Nonvolatile Memory, RF and Automotive and ASIC segments, partially offset by growth in our Microcontroller segment for the nine months ended September 30, 2007. Nonvolatile Memory net revenues decreased in the nine months ended September 30, 2007 as flash memory products experienced lower revenue compared to the nine months ended September 30, 2006 due to competitive pricing pressures. The decrease in net revenues in the RF and Automotive segment for the three and nine months ended September 30, 2007 is primarily related to a decrease in shipment quantities for BiCMOS foundry products related to communication chipsets for CDMA phones, partially offset by growth in other Automotive products. The decrease in net revenues in the ASIC segment for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, is primarily due to reduced shipments of lower margin commodity telecommunication-market products.

     Gross margin improved to 35.6% and 35.5% in the three and nine months ended September 30, 2007, compared to 35.1% and 33.0% in the three and nine months ended September 30, 2006, respectively. These improvements were primarily due to a more favorable mix of higher margin products sold, improved manufacturing yields, as well as lower depreciation expense following the December 2006 reclassification of assets at our North Tyneside, UK facility as held for sale. However, gross margin was negatively impacted during these periods by unfavorable exchange rates as well as lower factory utilization rates, primarily for our North Tyneside, UK facility.

     We generated income from operations of $25 million in the three months ended September 30, 2007, compared to $26 million in the three months ended September 30, 2006. Income from operations was $45 million in the nine months ended September 30, 2007, compared to $49 million in the nine months ended September 30, 2006. The decrease in income from operations from the comparable prior periods to date resulted primarily from higher legal and accounting costs related to the special shareholder meeting and stock option and other investigations completed in the second quarter of 2007. These costs totaled approximately $20 million for the nine months ended September 30, 2007.

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     Income tax expense totaled $10 million for the three months ended September 30, 2007, compared to $6 million for the three months ended September 30, 2006. Income tax expense results primarily from taxable income in our profitable foreign subsidiaries. As a result, the effective tax rate for the current quarter is higher than expected based on standard rates in effect in each taxable jurisdiction if all entities were operating at a profit. We recognized a benefit of $20 million resulting from the receipt of French research and development tax credits related to prior tax years in the first quarter of 2007, resulting in a net tax expense of $2 million for the nine months ended September 30, 2007, compared to $20 million for the nine months ended September 30, 2006.

     We generated positive cash flow from operations of $105 million for the nine months ended September 30, 2007, compared to $274 million for the same period in 2006. At September 30, 2007, our cash, cash equivalents and short-term investments totaled $251 million, down from $467 million at December 31, 2006, primarily due to $250 million we paid to repurchase 43 million shares of our common stock in the third quarter of 2007. Our total debt decreased to approximately $106 million at September 30, 2007, from $169 million at December 31, 2006. In addition, current liabilities were also reduced significantly to $460 million at September 30, 2007, compared to $567 million at December 31, 2006.

RESULTS OF OPERATIONS

	Three Months Ended
(in thousands, except percentage of net revenue	September 30, 2007					September 30, 2006
Net revenues	$	418,097		100.0	%	$	431,734	100.0	%
Gross profit	$	149,034		35.6	%	$	151,558	35.1	%
Research and development expenses		63,609		15.2	%		75,181	17.4	%
Selling, general and administrative expenses		58,518		14.0	%		50,206	11.6	%
Charges for grant repayments		1,189		0.3	%		—	0.0	%
Restructuring charges		1,386		0.3	%		—	—
Asset impairment recovery		(1,057	)	-0.3	%		—	—
Income from continuing operations	$	25,389		6.1	%	$	26,171	6.1	%

	Nine Months Ended
(in thousands, except percentage of net revenue	September 30, 2007					September 30, 2006
Net revenues	$	1,213,657		100.0	%	$	1,262,006	100.0	%
Gross profit	$	430,613		35.5	%	$	416,968	33.0	%
Research and development expenses		200,174		16.5	%		217,892	17.2	%
Selling, general and administrative expenses		184,458		15.2	%		149,881	11.9	%
Charges for grant repayments		1,189		0.1	%		—	0.0	%
Restructuring charges		528		0.0	%		151	0.0	%
Asset impairment recovery		(1,057	)	-0.1	%		—	0.0	%
Income from continuing operations	$	45,321		3.7	%	$	49,044	3.9	%

Net Revenues

     Net revenues decreased by 3% to $418 million in the three months ended September 30, 2007, compared to $432 million in the three months ended September 30, 2006. Net revenues decreased by 4% to $1,214 million in the nine months ended September 30, 2007, compared to $1,262 million in the nine months ended September 30, 2006. These decreases were primarily a result of declines in our Nonvolatile Memory and RF, Automotive and ASIC segments, partially offset by growth in our Microcontroller segment for the nine months ended September 30, 2007. Nonvolatile Memory net revenues decreased in the nine months ended September 30, 2007 as flash memory products experienced lower revenue compared to the nine months ended September 30, 2006 due to competitive pricing pressures and a decrease in shipment quantities. The decrease in net revenues in the RF and Automotive segment for the three and nine months ended September 30, 2007 is primarily related to a decrease in shipment quantities for BiCMOS foundry products related to communication chipsets for CDMA phones, partially offset by growth in other Automotive products. The decrease in net revenues in the ASIC segment for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, is primarily due to reduced shipments of lower margin commodity telecommunication-market products.

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Net Revenues — By Operating Segment

     Our net revenues by segment for the three and nine months ended September 30, 2007 compared to the three and nine months ended September 30, 2006 are summarized as follows:

	Three Months Ended
(in thousands)	September 30,		September 30,
Segment	2007		2006		Change			% Change
ASIC	$	128,200	$	127,035	$	1,165			1	%
Microcontroller		118,610		107,275		11,335			11	%
Nonvolatile Memory		96,829		93,587		3,242			3	%
RF and Automotive		74,458		103,837		(29,379	)		-28	%
Total net revenues	$	418,097	$	431,734	$	(13,637	)		-3	%

	Nine Months Ended
(in thousands)	September 30,		September 30,
Segment	2007		2006		Change			% Change
ASIC	$	363,695	$	374,822	$	(11,127	)		-3	%
Microcontroller		337,251		309,678		27,573			9	%
Nonvolatile Memory		271,969		282,431		(10,462	)		-4	%
RF and Automotive		240,742		295,075		(54,333	)		-18	%
Total net revenues	$	1,213,657	$	1,262,006	$	(48,349	)		-4	%

     Certain product families have been reassigned between the ASIC and Microcontroller segments to improve organizational efficiency. As a result, prior period net revenues and income from operating segments have been reclassified to conform to the current period presentation of operating segment information.

     Net revenue amounts for 2006 have been adjusted to reflect the divestiture of our Grenoble, France, subsidiary. Net revenues from the Grenoble subsidiary of $11 million and $80 million for the three and nine months ended September 30, 2006 are excluded from consolidated net revenues, and are reclassified to Results from Discontinued Operations. See Note 7 to Notes to Condensed Consolidated Financial Statements for further discussion.

ASIC

     ASIC segment net revenues remained flat at $128 million in the three months ended September 30, 2007, compared to $127 million in the three months ended September 30, 2006. Sequentially, ASIC net revenues increased 3%, or $3 million, from $125 million of net revenues recorded during the three months ended June 30, 2007. ASIC segment net revenues decreased by 3% to $364 million in the nine months ended September 30, 2007, compared to $375 million in the nine months ended September 30, 2006, as smart card product net revenues declined $18 million, or 12%, imaging products net revenues declined $9 million or 94%, along with smaller declines for CPLS and aerospace business, compared to the nine months ended September 30, 2006, offset by an increase in net revenues in Crypto Memory products of $22 million or 140% during the nine months ended September 30, 2007. The decline in Smartcard products is primarily due to reduced shipments of lower margin commodity telecommunication products. The decline in revenues from imaging products resulted from the Company’s decision to exit this business, which was completed in the third quarter of 2007. The increase in Crypto Memory products resulted from increased adoption by customers in the personal computer market.

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Microcontroller

     Microcontroller segment net revenues increased 11% to $119 million in the three months ended September 30, 2007, compared to $107 million in the three months ended September 30, 2006. Sequentially, microcontroller revenues increased 7%, or $8 million, from $111 million of net revenues recorded during the three months ended June 30, 2007. Microcontroller segment net revenues increased 9% or $27 million to $337 million in the nine months ended September 30, 2007, compared to $310 million in the nine months ended September 30, 2006. The growth in net revenues in the three and nine months ended September 30, 2007 compared to the three and nine months ended September 30, 2006 resulted primarily from new customer designs utilizing both our proprietary AVR microcontroller products as well as our ARM-based microcontroller products. AVR microcontroller revenue grew 17% and 11% in the three and nine months ended September 30, 2007, compared to the three and nine months ended September 30, 2006. ARM-based microcontroller products revenue increased 29% and 26% for the three and nine months ended September 30, 2007, compared to the three and nine months ended September 30, 2006. Revenues for Microcontroller products have increased due to market share gains in the 8-bit microcontroller market and ARM-based microcontrollers, growth in the overall microcontroller market including recent high volume customer applications utilized in the consumer and industrial markets, and improved delivery times resulting from higher inventory levels and increased test capacity added during the first half of 2006. Overall demand for microcontrollers is driven by increased use of embedded control systems in consumer, industrial and automotive products.

Nonvolatile Memory

     Nonvolatile Memory segment revenues increased by 3% to $97 million in the three months ended September 30, 2007, compared to $94 million in the three months ended September 30, 2006. Sequentially, Non-volatile Memory revenues increased $8 million, or 9%, from $89 million of net revenues recorded during the three months ended June 30, 2007. Nonvolatile Memory segment revenues decreased by 4% to $272 million in the nine months ended September 30, 2007, compared to $282 million in the nine months ended September 30, 2006. The increase in nonvolatile memory segment revenues in the three months ended September 30, 2007 was primarily due to an increase in serial EEPROM-based product revenues, which increased 10% or $6 million, compared to the three months ended September 30, 2006, offset in part by reduced shipments of lower margin commodity flash memory products. The decrease in nonvolatile memory segment revenues in the nine months ended September 30, 2007 was primarily due to reduced shipments of lower margin commodity flash memory products, which decreased revenues by 16% or $18 million, compared to the nine months ended September 30, 2006, offset by an increase of 5% or $8 million in serial EEPROM-based product revenues. Markets for our nonvolatile memory products are more competitive than other markets we sell in, and as a result, our memory products are subject to greater declines in average selling prices than products in our other segments. Competitive pressures and rapid obsolescence of products are among several factors causing continued pricing declines in 2007. While pricing for serial EEPROM-based products remained steady, unit shipments increased by 14% and 6%, compared to the three and nine months ended September 30, 2006. This product family benefits from significant market share resulting from competitive pricing and a broad range of offerings. Conditions in the non volatile memory segment are expected to remain challenging for the foreseeable future. In an attempt to mitigate the pricing fluctuations in this market, we have shifted our focus away from lower margin commodity parallel Flash products, which tend to experience greater than average sales price fluctuations, to other serial interface nonvolatile memory products.

RF and Automotive

     RF and Automotive segment revenues decreased by 28% to $74 million in the three months ended September 30, 2007, compared to $104 million in the three months ended September 30, 2006. Sequentially, RF and Automotive revenues decreased $6 million, or 7%, from the $80 million recorded during the three months ended June 30, 2007. RF and Automotive segment revenues decreased by 18% to $241 million in the nine months ended September 30, 2007, compared to $295 million in the nine months ended September 30, 2006. These decreases in net revenues in the RF and Automotive segment are primarily related to reduced shipment quantities for BiCMOS foundry products related to communication chipsets for CDMA phones partially offset by growth in other automotive products. For the three and nine months ended September 30, 2007, net revenues decreased approximately $31 million and $67 million, respectively, for BiCMOS foundry products, offset by a $2 million and $13 million increase in net revenues, respectively, from other automotive products. Sequentially, BiCMOS foundry products decreased $3 million in the three months ended September 30, 2007, compared to the three months ended June 30, 2007.

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Net Revenues — By Geographic Area

     Our net revenues by geographic areas for the three and nine months ended September 30, 2007 compared to the three and nine months ended September 30, 2006 are summarized as follows (revenues are attributed to countries based on delivery locations):

	Three Months Ended
(in thousands)	September 30,		September 30,
Region	2007		2006		Change			% Change
United States	$	59,140	$	61,397	$	(2,257	)		-4	%
Europe		142,945		137,100		5,845			4	%
Asia		210,095		229,169		(19,074	)		-8	%
Other *		5,917		4,068		1,849			45	%
Total net revenues	$	418,097	$	431,734	$	(13,637	)		-3	%

	Nine Months Ended
(in thousands)	September 30,		September 30,
Region	2007		2006		Change			% Change
United States	$	165,138	$	190,564	$	(25,426	)		-13	%
Europe		427,966		399,035		28,931			7	%
Asia		605,305		661,627		(56,322	)		-9	%
Other *		15,248		10,780		4,468			41	%
Total net revenues	$	1,213,657	$	1,262,006	$	(48,349	)		-4	%

* Primarily includes South Africa and Central and South America

     Net revenue amounts have been adjusted to reflect the divestiture of our Grenoble, France, subsidiary. Net revenues from the Grenoble subsidiary of $11 million and $80 million for the three and nine months ended September 30, 2006 are excluded from consolidated net revenues, and are reclassified to Results from Discontinued Operations. See Note 7 of Notes to Condensed Consolidated Financial Statements for further discussion.

     Sales outside the United States accounted for 86% of our net revenues in the three and nine months ended September 30, 2007, compared to 86% and 85% of our net revenues in the three and nine months ended September 30, 2006.

     Our sales in the United States decreased by $2 million, or 4%, in the three months ended September 30, 2007, compared to the three months ended September 30, 2006, and decreased by $25 million, or 13%, in the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, primarily due to United States based customers continuing to reduce deliveries to domestic operations and reduced shipments to United States based distributors.

     Our sales in Europe increased by $6 million, or 4%, in the three months ended September 30, 2007, compared to the three months ended September 30, 2006, and increased by $29 million, or 7%, in the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, primarily due to both higher volume shipments of ARM-based microcontrollers and automotive products, as well as higher revenues related to the increase in the value of the euro relative to the U.S. dollar.

     Our sales in Asia decreased by $19 million, or 8%, in the three months ended September 30, 2007, compared to the three months ended September 30, 2006, and decreased by $56 million, or 9% in the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, primarily due to reduced shipment quantities for BiCMOS foundry products related to communication chipsets for CDMA phones. For the three and nine months ended September 30, 2007, net revenues decreased approximately $31 million and $67 million, respectively, for BiCMOS foundry products. Sequentially, BiCMOS foundry products decreased $3 million in the three months ended September 30, 2007, compared to the three months ended June 30, 2007.

     The trend over the last several years has been an increase in revenues in Asia, while revenues from shipments to the United States and Europe have either declined or grown at a much slower rate. We believe that part of this shift reflects changes in customer manufacturing trends, with many customers increasing production in Asia due to lower labor costs. While revenues in Asia declined in 2007 compared to 2006, we expect that Asia revenues will grow more rapidly than other regions in the future. However, in the short-term our revenues in Asia may decrease further as we optimize our distributor base in Asia. It may take time for us to identify financially viable distributors and help them develop high quality support services. There can be no assurances that we will be able to manage this optimization process in an efficient and timely manner.

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Revenues and Costs — Impact from Changes to Foreign Exchange Rates

     During the three months ended September 30, 2007 and 2006, 20% and 18% of net revenues were denominated in foreign currencies, primarily the euro. During the nine months ended September 30, 2007 and 2006, 22% and 18% of net revenues were denominated in foreign currencies, primarily the euro. Sales in euros amounted to approximately 20% and 17% of net revenues in the three months ended September 30, 2007 and 2006, respectively, and 21% and 17% of net revenues in the nine months ended September 30, 2007 and 2006, respectively. Sales in Japanese yen accounted for approximately 1% of net revenues in the three months ended September 30, 2007 and 2006, and 1% of net revenues in the nine months ended September 30, 2007 and 2006,.

     Average exchange rates utilized to translate foreign currency revenues and expenses were approximately $1.36 and approximately $1.34 to the euro for the three and nine months ended September 30, 2007, compared to approximately $1.28 and approximately $1.24 to the euro for the three and nine months ended September 30, 2006.

     During the three and nine months ended September 30, 2007, changes in foreign exchange rates had a favorable impact on revenue and an unfavorable impact on operating costs and income from operations since a greater portion of our operating expenses are denominated in foreign currencies than net revenues. Had average exchange rates remained the same during the three and nine months ended September 30, 2007 as the average exchange rates in effect for the three and nine months ended September 30, 2006, our reported revenues for the three and nine months ended September 30, 2007, would have been $4 million and $19 million lower. However, our foreign currency expenses exceed foreign currency revenues. For the three and nine months ended September 30, 2007, 47% and 51% of our operating expenses were denominated in foreign currencies, primarily the euro. Had average exchange rates for the three and nine months ended September 30, 2007 remained the same as the average exchange rates for the three and the nine months ended September 30, 2006, our operating expenses would have been $10 million and $43 million lower (for the three and nine months ended September 30, 2007 relating to cost of revenues of $6 million and $28 million, respectively; research and development expenses of $3 million and $11 million, respectively; and sales, general and administrative expenses of $1 million and $4 million, respectively). The net effect resulted in a decrease to income from operations of $6 million and $24 million in the three and nine months ended September 30, 2007 as a result of unfavorable exchange rates when compared to the three and nine months ended September 30, 2006.

Cost of Revenues and Gross Margin

     Our cost of revenues includes the costs of wafer fabrication, assembly and test operations, changes in inventory reserves and freight costs. Our gross margin as a percentage of net revenues fluctuates, depending on product mix, manufacturing yields, utilization of manufacturing capacity, and average selling prices, among other factors.

     During the three and nine months ended September 30, 2007, gross margin improved to 35.6% and 35.5%, respectively, compared to 35.1% and 33.0% for the three and nine months ended September 30, 2006, respectively, primarily due to a more favorable mix of higher margin products sold, improved manufacturing yields, as well as lower depreciation expense following the December 2006 decision to reclassify assets at our North Tyneside, UK facility as held for sale. However, gross margin was negatively impacted by unfavorable exchange rates as well as lower factory utilization rates, primarily for our North Tyneside, UK, facility.

     In recent periods, average selling prices for certain semiconductor products have been below manufacturing costs, which has adversely affected our results of operations, cash flows and financial condition. Because inventory reserves are recorded in advance of when the related inventory is sold, subsequent gross margins in the period of sale may be higher than they would be absent the effect of the previous write-downs. The impact on gross margins of the sale of previously written down inventory was not material in the three and nine months ended September 30, 2007 and 2006. Our excess and obsolete inventory reserves taken in prior years relate to all of our product categories, while lower-of-cost or market reserves relate primarily to our non-volatile memory products and smart card products.

     We receive economic assistance grants in some locations as an incentive to achieve certain hiring and investment goals related to manufacturing operations, the benefit for which is recognized as an offset to related costs. We recognized a reduction to cost of revenues for such grants of $1 million and $3 million in the three months ended September 30, 2007 and 2006, respectively, and $1 million and $7 million in the nine months ended September 30, 2007 and 2006, respectively, following the elimination of grant benefits as a result of our December 2006 decision to sell our North Tyneside, UK facility.

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Research and Development

     Research and development (“R&D”) expenses decreased by 15% to $64 million in the three months ended September 30, 2007, compared to $75 million in the three months ended September 30, 2006, and decreased by 8% to $200 million in the nine months ended September 30, 2007, compared to $218 million in the nine months ended September 30, 2006. The decrease in R&D expenses in the three months ended September 30, 2007, compared to the three months ended September 30, 2006 was primarily due to the lower cost of development wafers used in technology development of $2 million, lower depreciation and amortization expense of $4 million and higher research grant benefits of $2 million, offset in part by unfavorable impact of foreign exchange rate fluctuations of $3 million. The decrease in R&D expenses in the nine months ended September 30, 2007 from the nine months ended September 30, 2006 was primarily due the lower cost of development wafers used in technology development of $9 million, lower depreciation and amortization expense of $8 million and higher research grant benefits of $6 million, offset in part by unfavorable impact of foreign exchange rate fluctuations of $11 million. As a percentage of net revenues, R&D expenses totaled 15% and 17% for the three months ended September 30, 2007 and 2006, respectively, and 17% for the nine months ended September 30, 2007 and 2006.

     We have continued to invest in a variety of product areas and process technologies. We have also continued to purchase or license technology when necessary in order to bring products to market in a timely fashion. In the future, we expect to increase R&D investment in our core products, focusing on fewer but more profitable development projects. In addition, we expect to increase both salary and stock-based compensation expense in order to recruit and retain highly skilled engineering resources. We believe that continued strategic investments in process technology and product development are essential for us to remain competitive in the markets we serve.

     We receive R&D grants from various European research organizations, the benefit of which is recognized as an offset to related costs. For the three months ended September 30, 2007, we recognized $5 million in research grant benefits, compared to $3 million recognized in the three months ended September 30, 2006. For the nine months ended September 30, 2007, we recognized $14 million in research grant benefits, compared to $8 million recognized for the nine months ended September 30, 2006.

Selling, General and Administrative

     Selling, general and administrative (“SG&A”) expenses increased by 17% to $59 million in the three months ended September 30, 2007, compared to $50 million in the three months ended September 30, 2006, and by 23% to $184 million in the nine months ended September 30, 2007, compared to $150 million in the nine months ended September 30, 2006. The increase in SG&A expenses for the three months ended September 30, 2007, compared to the three months ended September 30, 2006, was primarily due to an increase in stock option compensation charges of $3 million, higher employee salaries and benefits of $1 million, outside services of $1 million and unfavorable impact of foreign exchange rate fluctuations of $1 million. The increase in SG&A expenses for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006, was primarily due to increased professional services expenses of $19 million primarily related to legal and accounting, increased employee salaries and benefits of $5 million, an increase in stock option compensation charges of $4 million and unfavorable impact of foreign exchange rate fluctuations of $4 million. As a percentage of net revenues, SG&A expenses totaled 14% and 12% for the three months ended September 30, 2007 and 2006, respectively, and 15% and 12% for the nine months ended September 30, 2007 and 2006, respectively.

Stock-Based Compensation

     Effective January 1, 2006, we adopted the provisions of SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R establishes accounting for stock-based awards exchanged for employee services. Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award which is computed using a Black-Scholes option valuation model, and is recognized as expense over the employee’s requisite service period.

     Stock-based compensation was $5 million in the three months ended September 30, 2007, compared to $2 million in the three months ended September 30, 2006. Stock-based compensation was $12 million in the nine months ended September 30, 2007, compared to $7 million in the nine months ended September 30, 2006. Stock-based compensation has increased in 2007 due to stock option replenishment grants for our employees and equity awards related to recently hired executives.

Assets Held for Sale and Asset Impairment Recovery

     Under SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” we assess the recoverability of long-lived assets with finite useful lives whenever events or changes in circumstances indicate that we may not be able to recover the asset’s carrying amount. We measure the amount of impairment of such long-lived assets by the amount by which the carrying value of the asset exceeds the fair market value of the asset, which is generally determined based on projected discounted future cash flows

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or appraised values. We present impairment charges as a separate line item within operating expenses in our condensed consolidated statements of operations. We classify long-lived assets to be disposed of other than by sale as “held-and-used” until they are disposed, including assets not available for immediate sale in their present condition. We report long-lived assets to be disposed of by sale under the caption of “held-for-sale” and recognize those assets on the condensed consolidated balance sheet at the lower of carrying amount or fair value less cost to sell. Assets classified as held for sale are not depreciated.

North Tyneside, United Kingdom, and Heilbronn, Germany, Facilities

     In December 2006, we announced our decision to sell our wafer fabrication facilities in North Tyneside, United Kingdom, and Heilbronn, Germany. It is expected these actions will increase manufacturing efficiencies by better utilizing remaining wafer fabrication facilities, while reducing future capital expenditure requirements. We have classified assets of the North Tyneside site with a net book value of $89 million (excluding cash and inventory, which will not be included in any sale of the facility) as assets held-for-sale on the condensed consolidated balance sheets as of December 31, 2006. Following the announcement of intention to sell the facility in the fourth quarter of 2006, we assessed the fair market value of the facility compared to the carrying value recorded. The fair value was determined using a market-based valuation technique and estimated future cash flows. We recorded a net impairment charge of $72 million in the quarter ended December 31, 2006 related to the write-down of long lived assets to their estimated fair values, less costs to dispose of the assets. The charge included an asset write-down of $170 million for equipment, land and buildings, offset by related currency translation adjustment associated with the assets, of $98 million, as we intend to sell our United Kingdom entity, which contains the facility, and hence the currency translation adjustment related to the assets is included in the impairment calculation.

     We acquired the North Tyneside, United Kingdom, facility in September 2000, including an interest in 100 acres of land and the fabrication facility of approximately 750,000 square feet, for $100 million. We will have the right to acquire title to the land in 2016 for a nominal amount. We sold 40 acres in 2002 for $14 million. We recorded an asset impairment charge of $318 million in the second quarter of 2002 to write-down the carrying value of equipment in the fabrication facilities in North Tyneside, United Kingdom, to its estimated fair value. The estimate of fair value was made based on management’s best estimates based on a number of factors.

     On October 8, 2007, we entered into definitive agreements to sell certain wafer fabrication equipment and real property at North Tyneside to Taiwan Semiconductor Manufacturing Company Limited (“TSMC”) and Highbridge Business Park Limited (“Highbridge”) for a total of approximately $124 million. The disposal group previously classified as held for sale included all fabrication equipment and all liabilities of the North Tyneside legal entity. Upon entering into the agreements noted above, we determined that certain equipment and all of the related liabilities were no longer included in the disposal group. As a result, we reassessed whether the assets to be sold in this transaction continued to meet the criteria for classification as held for sale as of September 30, 2007. We concluded that the assets to be sold under the above agreements were no longer available for immediate sale in their present condition as the terms of the these agreements require us to perform significant additional steps, including the dismantling, decommissioning and testing of the wafer fabrication equipment before TSMC will accept transfer of title of the purchased equipment, as well as the delivery of a vacated building to Highbridge. We had previously expected to sell the assets in the form of the transfer of the legal entity and then enter into a further supply agreement for product wafers with the buyer. However, the agreements noted above require termination of production efforts in order to deliver assets in the condition specified by the buyers. We have determined that we need to continue to operate the facility in order to build sufficient inventory as a result of the closure of the North Tyneside facility, and therefore cannot deliver the assets to be sold in the conditions specified in the sales agreements until production activity is concluded, which is not expect to occur until early 2008. In accordance with SFAS No. 144, we determined that the assets to be sold to TSMC and Highbridge did not meet the criteria for assets held for sale at September 30, 2007. These assets were reclassified as held and used, and were measured at the lower of their adjusted carrying amounts or fair values less cost to sell as of September 30, 2007.

     Assets removed from the disposal group and expected to be retained were reclassified by us to assets held and used as of September 30, 2007. In accordance with SFAS No. 144, these assets are reported individually at the lower of their respective carrying amount before they were initially classified as held for sale, adjusted for any depreciation (amortization) expense that would have been recognized had these assets been continuously classified as held and used or the fair value at the date of the subsequent decision not to sell. As a result of this reclassification, we recorded a credit of $1 million related to the recovery of previous impairment charges recorded for these assets in the third quarter of 2007. This credit was included within Asset Impairment Recovery on the condensed consolidated statements of operations.

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     The Heilbronn, Germany, facility did not meet the criteria for classification as held for sale as of September 30, 2007 and December 31, 2006, due to uncertainties relating to the likelihood of completing the sale within the next twelve months. Long-lived assets of this facility at September 30, 2007 and at December 31, 2006, respectively, remain classified as held and used. After an assessment of expected future cash flows generated by the Heilbronn, Germany facility, we concluded that no impairment exists.

Irving, Texas, Facility

     We acquired our Irving, Texas, wafer fabrication facility in January 2000 for $60 million plus $25 million in additional costs to retrofit the facility after the purchase. Following significant investment and effort to reach commercial production levels, we decided to close the facility in 2002 and it has been idle since then. Since 2002, we recorded various impairment charges, including $4 million during the quarter ended December 31, 2005. In the quarter ended December 31, 2006, we performed an assessment of the market value for this facility based on our estimate, which considered a current offer from a willing third party to purchase the facility, among other factors, in determining fair market value. Based on this assessment, an additional impairment charge of $10 million was recorded.

     We classified the assets of the Irving, Texas, facility as held for sale of $35 million during the quarter ended December 31, 2006. The Irving facility did not qualify as discontinued operations as it is an idle facility and does not constitute a component of an entity in accordance with SFAS No. 144.

     On May 1, 2007, we sold our Irving, Texas, wafer fabrication facility for $37 million in cash ($35 million, net of selling costs). The sale of the facility includes 39 acres of land, the fabrication facility building, and related offices, and remaining equipment. An additional 17 acres was retained by us. No significant gain or loss was recorded upon the sale of the facility.

Charges for Grant Repayments

     In the fourth quarter of 2006, we announced our intention to close our design facility in Greece and our intention to sell our manufacturing facility in North Tyneside, United Kingdom. We recorded a charge of $30 million in the fourth quarter of 2006 associated with the expected repayment of subsidy grants previously received and recognized related to grant agreements with government agencies at these locations. The proceeds of the subsidy grants were originally recorded as either a reduction of cost of revenues or research and development expense when they were recognized during the period from 2001 to 2006. In the third quarter of 2007, we recorded additional accrual interest of $1 million related to the expected grant repayments. All of these charges have been included in “Charges for Grant Repayments” on the condensed consolidated statements of operations.

     See Note 17 to Notes to Condensed Consolidated Financial Statements for further discussion.

Restructuring Charges

     The following table summarizes the activity related to the accrual for restructuring charges detailed by event for the three and nine months ended September 30, 2007 and 2006.

	December 31,							Currency		March 31,								Currency		June 30,							Currency		September 30,
	2006							Translation		2007		Charges/						Translation		2007		Charges/					Translation		2007
(in thousands)	Accrual		Charges		Payments			Adjustment		Accrual		(Credits)			Payments			Adjustment		Accrual		(Credits)		Payments			Adjustment		Accrual
Third quarter of 2002 Termination of contract with supplier	$	8,896	$	—	$	(249	)	$	—	$	8,647	$	(3,071	)	$	(3,984	)	$	—	$	1,592	$	—	$	—		$	—	$	1,592
Fourth quarter of 2005 Nantes fabrication facility sale		115		—		—			—		115		(27	)		—			—		88		—		(90	)		2		—
Fourth quarter of 2006
Employee termination costs		7,490		1,782		(1,743	)		41		7,570		458			(3,899	)		111		4,240		1,386		(3,094	)		284		2,816
Total 2007 activity	$	16,501	$	1,782	$	(1,992	)	$	41	$	16,332	$	(2,640	)	$	(7,883	)	$	111	$	5,920	$	1,386	$	(3,184	)	$	286	$	4,408

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	December 31,							March 31,					June 30,					September 30,
	2005							2006					2006					2006
(in thousands)	Accrual		Charges		Payments			Accrual		Payments			Accrual		Payments			Accrual
Third quarter of 2002 Termination of contract with supplier	$	9,833	$	—	$	(217	)	$	9,616	$	(251	)	$	9,365	$	(225	)	$	9,140
Third quarter of 2005 Employee termination costs		1,246		—		(497	)		749		(672	)		77		(77	)		—
Fourth quarter of 2005 Nantes fabrication facility sale		1,310		—		(873	)		437		(204	)		233		(113	)		120
Employee termination costs		1,223		—		(704	)		519		(492	)		27		(27	)		—
First quarter of 2006 Employee termination costs		—		151		(5	)		146		(65	)		81		(81	)		—
Total 2006 activity	$	13,612	$	151	$	(2,296	)	$	11,467	$	(1,684	)	$	9,783	$	(523	)	$	9,260

2007 Restructuring Charges

     During the three and nine months ended September 30, 2007, we continued to implement the restructuring initiatives announced from 2002 to 2006 and recorded a net restructuring charge of $1 million and $1 million, respectively, consisting primarily of the following:

• Charges of $1 million and $3 million for the three and nine months ended September 30, 2007, respectively, related to one-time minimum statutory termination benefits recorded in accordance with SFAS No. 112, “Employers’ Accounting for Post Employment Benefits” (“SFAS No. 112).

• Charges of $1 million and $2 million for the three and nine months ended September 30, 2007, respectively, related to severance costs for involuntary termination of employees. These employee severance costs were recorded in accordance with SFAS No. 146, “Accounting for Costs Associated with exit or Disposal Activities” (“SFAS No. 146”).

• A credit of $0.1 million and $1 million in the three and nine months ended September 30, 2007 related to changes in estimates of termination benefits originally recorded in accordance with SFAS No. 112, “Employers’ Accounting for Post Employment Benefits” (“SFAS No. 112”).

• A credit of $3 million in the nine months ended September 30, 2007 related to the settlement of a long-term gas supply contract for which the accrual was $12 million originally recorded in the third quarter of 2002. On May 1, 2007, in connection with the sale of the Irving, Texas facility, the Company paid $6 million to terminate this contract, of which $2 million was reimbursed by the buyer of the facility. The remaining balance of $2 million is expected to be paid upon the commencement of volume manufacturing activity by the buyer in 2008.

     With respect to the restructuring initiatives, we believe we are on track to achieve the previously stated costs savings of $70 million to $80 million this year and between $80 million to $95 million annually beginning in 2008.

2006 Restructuring Activities

     In the first quarter of 2006, we incurred $0.2 million in restructuring charges primarily comprised of severance and one-time termination benefits.

     In the three and nine months ended September 30, 2007, we paid $3 million and $9 million related to employee termination costs, respectively. In the three and nine months ended September 30, 2006, we paid $0.2 million and $3 million related to employee termination costs, respectively.

Interest and Other Income (Expenses), Net

     Interest and other income (expenses), net, decreased to $1 million of income in the three months ended September 30, 2007 from $2 million of income in the three months ended September 30, 2006, and improved to $3 million of income in the nine months ended September 30, 2007 from $6 million of expenses in the nine months ended September 30, 2006. These changes to net income from net expense are primarily due to long-term debt reductions in fiscal 2006 and a gain from sale of land for $1 million recorded in the second quarter of 2007. Interest and other income (expenses), net also improved as a result of increased interest income from higher average cash balances in the three and nine months ended September 30, 2007 following the repayment of our convertible bonds in May 2006 as well as the receipt of proceeds from the sale of our Grenoble, France subsidiary in July 2006. In future quarters, we expect interest income to decline due to reduced cash balances as a result of the $250 million repayment for the repurchase of 43 million shares of common stock in the third quarter of 2007.

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     Interest rates on our outstanding borrowings did not change significantly in the three and nine months ended September 30, 2007, compared to the three and nine months ended September 30, 2006.

Income Taxes

     For the three and nine months ended September 30, 2007, we recorded an income tax expense of $10 million and $2 million, respectively, compared to an income tax expense of $6 million and $20 million in the three and nine months ended September 30, 2006, respectively.

     The provision for income taxes for these periods was determined first using the annual effective tax rate method for Atmel entities that are profitable. Entities that had operating losses with no tax benefit were excluded. As a result, excluding the impact of discrete tax events during the quarter, the provision for income taxes was at a higher consolidated effective rate than would have resulted if all entities were profitable or if losses produced tax benefits.

     During the quarter ended March 31, 2007 and the nine months ended September 30, 2007, we recognized a tax benefit of approximately $20 million resulting from the refund of French research tax credits for years 1999 through 2002, which was received during the first quarter of 2007. In addition, in the three months ended March 31, 2007, the Hong Kong tax authorities completed a review of our tax returns for the years 2001 through 2004, which resulted in no adjustments. As a result, during the quarter ended March 31, 2007 and the nine months ended September 30, 2007, we recognized a tax benefit relating to a tax refund of approximately $2 million received in prior years that had been previously accrued as a tax contingency.

     On August 17, 2007, Germany passed new tax legislation which will decrease the corporate income tax rate.  The decrease in the corporate income tax rate is effective for years beginning after January 1, 2008.  Due to the prospective change in the corporate income tax rate, deferred tax assets related to our German operations were revalued resulting in a $1 million charge to tax expense in the quarter.  

     In 2005, the Internal Revenue Service (“IRS”) proposed adjustments to our U.S. income tax returns for the years 2000 and 2001. In January 2007, after subsequent discussions with us, the IRS revised the proposed adjustments for these years. We have protested these proposed adjustments and are currently pursuing administrative review with the IRS Appeals Division.

     In May 2007, the IRS proposed adjustments to our U.S. income tax returns for the years 2002 and 2003. We filed a protest to these proposed adjustments and are pursuing administrative review with the IRS Appeals Division.

     In addition, we have various tax audits in progress in certain U.S. states and foreign jurisdictions. We have accrued taxes, and related interest and penalties that may be due upon the ultimate resolution of these examinations and for other matters relating to open U.S. Federal, state and foreign tax years in accordance with FIN 48.

     While we believe that the resolution of these audits will not have a material adverse impact on our results of operations, cash flows or financial position, the outcome is subject to uncertainty. Should we be unable to reach agreement with the IRS, U.S. state or foreign tax authorities on the various proposed adjustments, there exists the possibility of an adverse material impact on our results of operations, cash flows and financial position.

     We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. We are no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 1999. Tax years for significant foreign jurisdictions including Germany, France, United Kingdom, and Switzerland are closed through 2002, 2001, 2004 and 2001 respectively; subsequent tax years for these jurisdictions remain subject to tax authority review. Hong Kong tax years are closed for years through 2004 and subsequent tax years remain subject to tax authority review.

     On January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). Under FIN 48, the impact of an uncertain income tax position on income tax expense must be recognized at the largest amount that is more-likely-than-not to be sustained. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Upon review of our reserves, there were no changes to our reserves for uncertain tax positions upon adoption. At the adoption date of January 1, 2007, we had $176 million of unrecognized tax benefits, all of which would affect our income tax expense if recognized. Material changes in unrecognized tax benefits in the nine months ended September 30, 2007 totaling $21 million are described above.

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     Management believes that events that could occur in the next 12 months and cause a material change in unrecognized tax benefits include, but are not limited to, the following:

• completion of examination of the our tax returns by the U.S. or foreign tax authorities;

• expiration of statute of limitations on our tax returns; and

• recording taxable income in certain unprofitable entities.

     The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business. Management determined that an estimate of the range of reasonably possible material changes in the unrecognized tax benefits within the next 12 months can not be made.

     Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of January 1, 2007, we had approximately $31 million of accrued interest and penalties related to uncertain tax positions. Interest and penalties of $5 million have been expensed in the nine months ended September 30, 2007.

Discontinued Operations

Grenoble, France, Subsidiary Sale

     Our condensed consolidated financial statements and related footnote disclosures reflect the results of our Grenoble, France, subsidiary as Discontinued Operations, net of applicable income taxes, for all reporting periods presented.

     In July 2006, we completed the sale of our Grenoble, France, subsidiary to e2v technologies plc, a British corporation (“e2v”). On August 1, 2006, we received $140 million in cash upon closing ($120 million, net of working capital adjustments and costs of disposition).

     The facility was originally acquired in May 2000 from Thomson-CSF, and was used to manufacture image sensors, as well as analog, digital and radio frequency ASICs.

     Technology rights and certain assets related to biometry or “Finger Chip” technology were excluded from the sale. As of July 31, 2006, the facility employed a total of 519 employees, of which 14 employees primarily involved with the Finger Chip technology were retained, and the remaining 505 employees were transferred to e2v.

     In connection with the sale, we agreed to provide certain technical support, foundry, distribution and other services extending up to four years following the completion of the sale, and in turn e2v has agreed to provide certain design and other services to us extending up to 5 years following the completion of the sale. The financial statement impact of these agreements is not expected to be material to us. The ongoing cash flows between us and e2v are not significant and as a result, the Company has no significant continuing involvement in the operations of the subsidiary. Therefore, we have met the criteria in SFAS No. 144, which were necessary to classify the Grenoble, France, subsidiary as discontinued operations.

     Included in other currents assets on the condensed consolidated balance sheet as of September 30, 2007 is an outstanding receivable balance due from e2v of $2 million related to payments advanced to e2v to be collected from customers of e2v by Atmel. The transitioning of the collection of trade receivables on behalf of e2v is expected to be completed in 2007.

Liquidity and Capital Resources

     At September 30, 2007, we had $251 million of cash and cash equivalents and short-term investments compared to $467 million at December 31, 2006. Our current ratio, calculated as total current assets divided by total current liabilities, was 1.96 at September 30, 2007, a decrease of 0.07 from 2.03 at December 31, 2006. During 2007, we continue to generate positive cash flow from operating activities. We have reduced our debt obligations to $106 million at September 30, 2007 from $169 million at December 31, 2006, a decrease of $63 million. Working capital (calculated as total current assets less total current liabilities) decreased by $143 million to $442 million at September 30, 2007, compared to $585 million at December 31, 2006 primarily due to the $250 million used for the repurchase of 43 million shares of our common stock in the three months ended September 30, 2007.

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     Operating Activities: Net cash provided by operating activities was $105 million in the nine months ended September 30, 2007, resulting primarily from net income of $46 million, adjusted for depreciation and amortization expense of $94 million and reduced by changes in operating assets and liabilities and other net non-cash expenses of $35 million. Net cash provided by operating activities declined to $106 million from $274 million generated during the nine months ended September 30, 2006. The change in cash flow from operations was a result of lower operating results excluding the impact of depreciation and amortization expense, reduction of accounts payable and accrued expense liabilities, and an increase in inventory levels for the nine months ended September 30, 2007, compared to the nine months ended September 30, 2006.

     Accounts receivable decreased by less than 1% or $1 million to $226 million at September 30, 2007, from $227 million at December 31, 2006. The average days of accounts receivable outstanding (“DSO”) was 49 days at September 30, 2007, almost flat with the level of 50 days for the three months ended December 31, 2006. Our accounts receivable and DSO are primarily impacted by shipment linearity, payment terms offered, and collection performance. Should we need to offer longer payment terms in the future due to competitive pressures or longer customer payment patterns, our DSO and cash flows from operating activities would be negatively affected.

     Increases in inventories utilized $6 million of operating cash flows in the nine months ended September 30, 2007, compared to contributing to an increase in operating cashflows of $14 million in the nine months ended September 30, 2006. Inventory levels increased slightly to 117 days at September 30, 2007, compared to 116 days at December 31, 2006. This increase is primarily related to higher stock levels required to improve customer delivery times, and reduced shipment levels experienced during the first half of 2007 compared to the prior year. Inventories consist of raw wafers, purchased specialty wafers, work-in-process and finished units. We are continuing to take measures to reduce manufacturing cycle times and improve production planning efficiency. However, the strategic need to offer competitive lead times may result in an increase in inventory levels in the future.

     Decreases in current and other assets generated $47 million of operating cash flows in the nine months ended September 30, 2007, primarily due to payments received for trade receivables advanced to e2v technologies PLC related to the sale of the Grenoble, France, subsidiary and the receipt of $20 million in research and development income tax credits in the first quarter of 2007.

     Decreases in accounts payable utilized $18 million of operating cash flows in the nine months ended September 30, 2007, primarily related to reduced payments to suppliers for fixed asset acquisitions and lower assembly production activity levels in 2007, due to reduced shipment levels compared to the prior year.

     Decreases in accrued and other liabilities utilized $70 million of operating cash flows in the nine months ended September 30, 2007 compared to $48 million of cash generated from the increase in accrued and other liabilities in the nine months ended September 30, 2006. The decrease in accrued liabilities resulted from cash paid for litigation settlements, income and other tax payments, annual management incentive payments and payments on long-term supplier obligations. We do not expect to further significantly reduce accrued and other liabilities in future quarters.

     Investing Activities: Net cash used in investing activities was $11 million in the nine months ended September 30, 2007, compared to $59 million in the nine months ended September 30, 2006. During the nine months ended September 30, 2007, we made additional investments in wafer fabrication equipment to advance our process technologies and in test equipment to process higher unit volumes. For the nine months ended September 30, 2007 and 2006, we paid $53 million and $64 million, respectively, for capital equipment acquisitions.

     On May 1, 2007, we sold our Irving, TX wafer fabrication facility for approximately $37 million ($35 million, net of selling costs).

     Financing Activities: Net cash used in financing activities was $311 million in the nine months ended September 30, 2007, compared to $208 million in the nine months ended September 30, 2006. In August 2007, we entered into an Accelerated Share Repurchase program (“ASR”) with third-party investment banks and used $250 million to repurchase our common stock. During the three months ended September 2007 we physically received and retired approximately 43 million shares under the ASR, which reduced our shares outstanding as of September 30, 2007. The entire $250 million was recorded as a reduction of additional paid-in capital in the Company’s condensed consolidated balance sheets.

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     We continued to pay down debt, with repayments of principal balances on capital leases and other debt totaling $69 million for the nine months ended September 30, 2007, compared to $244 million in the nine months ended September 30, 2006. Proceeds from equipment financing and other debt totaled $25 million for the nine months ended September 30, 2006. We received $8 million in cash from the issuance of common stock in the nine months ended September 30, 2007. Issuance of common stock totaled $11 million for the nine months ended September 30, 2006.

     We believe that our existing balances of cash, cash equivalents and short-term investments, together with anticipated cash flow from operations, equipment lease financing, and other short-term and medium-term bank borrowings, will be sufficient to meet our liquidity and capital requirements over the next twelve months.

     The increase in cash and cash equivalents in the nine months ended September 30, 2007 and 2006 due to the effect of exchange rate changes on cash balances was $5 million and $0.1 million, respectively. These cash balances were primarily held in certain subsidiaries in euro denominated accounts and increased in value due to the strengthening of the euro compared to the U.S. dollar during these periods.

     During the next twelve months, we expect our operations to generate positive cash flow; however, a significant portion of cash will be used to repay debt and make capital investments. We expect that we will have sufficient cash from operations and financing sources to meet all debt obligations. We made $53 million in cash payments for capital equipment in the nine months ended September 30, 2007. Debt obligations outstanding at September 30, 2007, which is expected to be repaid in the twelve months ended September 30, 2008, totaled $84 million. In 2007 and future years, our capacity to make necessary capital investments will depend on our ability to continue to generate sufficient cash flow from operations and on our ability to obtain adequate financing if necessary.

     As of September 30, 2007, we did not have any material changes to our contractual obligations that were disclosed in the Liquidity section of our Form 10-K for the fiscal year ended December 31, 2006, other than the adoption of FIN 48. Under FIN 48 the total liabilities associated with uncertain tax positions was $94 million on January 1, 2007, of which $2 million was included in “Accrued and other liabilities”, as it is expected to be paid within the next twelve months. The remainder of our liabilities associated with uncertain tax positions of $92 million was included in “Other long-term liabilities”. Due to the complexity associated with our tax uncertainties, we cannot make a reasonably reliable estimate of the period in which cash settlement will be made for our liabilities associated with uncertain tax positions in “Other Long-term liabilities.” There were no material changes in liabilities associated with uncertain tax positions in the nine months ended September 30, 2007.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our Condensed Consolidated Financial Statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Management believes that there have been no significant changes during the three and nine months ended September 30, 2007 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2006, except for accounting for income taxes as follows:

Accounting for income taxes

     In calculating our income tax expense, it is necessary to make certain estimates and judgments for financial statement purposes that affect the recognition of tax assets and liabilities.

     We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event that we determine that we would be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to the net deferred tax asset would decrease income tax expense in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of the net deferred tax asset in the future, an adjustment to the net deferred tax asset would increase income tax expense in the period such determination is made.

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     Effective January 1, 2007, we adopted the provisions of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement no. 109. FIN 48 prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of this Interpretation. FIN 48 also provides guidance on accounting for derecognition, interest and penalties, and classification and disclosure of matters related to uncertainty in income taxes.

     Income tax positions are recorded based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements.

     An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably likely to occur could materially impact the financial statements. Management believes that other than the adoption of FIN 48, there have been no significant changes during the three and nine months ended September 30, 2007 to the items that we had disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. See Note 13 to Notes to Condensed Consolidated Financial Statements for further discussion of the adoption of FIN 48.

Recent Accounting Pronouncements

     In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The provisions of SFAS No. 157 should be applied prospectively as of the beginning of the fiscal year in which SFAS No. 157 is initially applied, except in limited circumstances. We expect to adopt SFAS No. 157 beginning January 1, 2008. We are currently evaluating the impact that this pronouncement may have on our consolidated financial statements.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157. We expect to adopt SFAS No. 159 beginning January 1, 2008. We are currently evaluating the impact that this pronouncement may have on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

     We maintain investment portfolio holdings of various issuers, types and maturities whose values are dependent upon short-term interest rates. We generally classify these securities as available-for-sale, and consequently record them on the condensed consolidated balance sheet at fair value with unrealized gains and losses being recorded as a separate part of stockholders’ equity. We do not currently hedge these interest rate exposures. Given our current profile of interest rate exposures and the maturities of our investment holdings, we believe that an unfavorable change in interest rates would not have a significant negative impact on our investment portfolio or statements of operations through September 30, 2008. In addition, certain of our borrowings are at floating rates, so this would act as a natural hedge.

     We have short-term debt, long-term debt and capital leases totaling $106 million at September 30, 2007. Approximately $28 million of these borrowings have fixed interest rates. We have $78 million of floating interest rate debt, of which approximately $31 million is euro denominated. We do not hedge against the risk of interest rate changes for our floating rate debt and could be negatively affected should these rates increase significantly. While there can be no assurance that these rates will remain at current levels, we believe that any rate increase will not cause a significant adverse impact to our results of operations, cash flows or to our financial position.

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     The following table summarizes our variable-rate debt exposed to interest rate risk as of September 30, 2007. All fair market values are shown net of applicable premium or discount, if any:

													Total
													Variable-rate
													Debt
	Payments by Due Year												Outstanding at
(in thousands)	Remainder of 2007*		2008		2009		2010		2011		Thereafter		September 30, 2007
30 day USD LIBOR weighted-average interest rate basis (1) — Capital Leases	$	556	$	—	$	—	$	—	$	—	$	—	$	556
Total of 30 day USD LIBOR rate debt	$	556	$	—	$	—	$	—	$	—	$	—	$	556
90 day USD LIBOR weighted-average interest rate basis (1) — Revolving Line of Credit Due 2008	$	—	$	25,000	$	—	$	—	$	—	$	—	$	25,000
Senior Secured Term Loan Due 2009	$	2,083	$	8,333	$	4,167	$	—	$	—	$	—	$	14,583
Total of 90 day USD LIBOR rate debt	$	2,083	$	33,333	$	4,167	$	—	$	—	$	—	$	39,583
90 day USD LIBOR weighted-average interest rate basis (1) — Capital Leases	$	6,213	$	9,713	$	4,592	$	4,592	$	4,592	$	1,148	$	30,850
Total of 90 day USD LIBOR rate debt	$	6,213	$	9,713	$	4,592	$	4,592	$	4,592	$	1,148	$	30,850
360 day USD LIBOR weighted-average interest rate basis (1) — Senior Secured Term Loan Due 2008	$	1,250	$	3,749	$	—	$	—	$	—	$	—	$	4,999
Total of 360 day USD LIBOR rate debt	$	1,250	$	3,749	$	—	$	—	$	—	$	—	$	4,999
30/60/90 day EURIBOR interest rate basis (1) — Senior Secured Term Loan Due 2007	$	1,787	$	—	$	—	$	—	$	—	$	—	$	1,787
Total of 30/60/90 day EURIBOR debt rate	$	1,787	$	—	$	—	$	—	$	—	$	—	$	1,787
Total variable-rate debt	$	11,889	$	46,795	$	8,759	$	4,592	$	4,592	$	1,148	$	77,775

*	Represents payments due over the three months remaining for 2007.
(1)	Actual interest rates include a spread over the basis amount.

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     The following table presents the hypothetical changes in interest expense, for the three month period ended September 30, 2007, related to the $78 million in outstanding borrowings that are sensitive to changes in interest rates as of September 30, 2007. The modeling technique used measures the change in interest expense arising from hypothetical parallel shifts in yield, of plus or minus 50 Basis Points (“BPS”), 100 BPS and 150 BPS (in thousands).

     For the three months ended September 30, 2007:

	Interest Expense Given an Interest						Interest Expense		Interest Expense Given an Interest
	Rate Decrease by X Basis Points						with No Change in		Rate Increase by X Basis Points
(in thousands)	150 BPS		100 BPS		50 BPS		Interest Rate		50 BPS		100 BPS		150 BPS
Interest expense	$	1,558	$	1,973	$	2,387	$	2,802	$	3,217	$	3,632	$	4,047

     For the nine months ended September 30, 2007:

	Interest Expense Given an Interest						Interest Expense		Interest Expense Given an Interest
	Rate Decrease by X Basis Points						with No Change in		Rate Increase by X Basis Points
(in thousands)	150 BPS		100 BPS		50 BPS		Interest Rate		50 BPS		100 BPS		150 BPS
Interest expense	$	7,940	$	8,408	$	8,877	$	9,345	$	9,814	$	10,282	$	10,751

Foreign Currency Risk

     When we take an order denominated in a foreign currency we will receive fewer dollars than we initially anticipated if that local currency weakens against the dollar before we ship our product, which will reduce revenue. Conversely, revenues will be positively impacted if the local currency strengthens against the dollar. In Europe, where our significant operations have costs denominated in European currencies, costs will decrease if the local currency weakens. Conversely, costs will increase if the local currency strengthens against the dollar. The net effect of unfavorable exchange rates for the three and nine months ended September 30, 2007, compared to the average exchange rates for the three and nine months ended September 30, 2006, resulted in a decrease in income from operations of $6 million and $24 million (as discussed in this report in Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations). This impact is determined assuming that all foreign currency denominated transactions that occurred in the three and nine months ended September 30, 2007 were recorded using the average foreign currency exchange rates for the same period in 2006. Sales denominated in foreign currencies were 20% and 18% in the three months ended September 30, 2007 and 2006, respectively, and 22% and 18% in the nine months ended September 30, 2007 and 2006, respectively. Sales denominated in euros were 20% and 17% in the three months ended September 30, 2007 and 2006, respectively, and 21% and 17% in the nine months ended September 30, 2007 and 2006, respectively. Sales denominated in yen were 1% in the three months ended September 30, 2007 and 2006, and 1% in the nine months ended September 30, 2007 and 2006. Costs denominated in foreign currencies, primarily the euro, were 47% and 49% in the three months ended September 30, 2007 and 2006, respectively, and 51% in the nine months ended September 30, 2007 and 2006.

     We also face the risk that our accounts receivables denominated in foreign currencies will be devalued if such foreign currencies weaken quickly and significantly against the dollar. Approximately 21% and 26% of our accounts receivable are denominated in foreign currency as of September 30, 2007 and December 31, 2006, respectively.

     We also face the risk that our accounts payable and debt obligations denominated in foreign currencies will increase if such foreign currencies strengthen quickly and significantly against the dollar. Approximately 57% and 48% of our accounts payable were denominated in foreign currency as of September 30, 2007 and December 31, 2006, respectively. Approximately 52% and 60% of our debt obligations were denominated in foreign currency as of September 30, 2007 and December 31, 2006, respectively.

Item 4. Controls and Procedures

Evaluation of Effectiveness of Disclosure Controls and Procedures

     As of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision of our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures, as such terms are defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities and Exchange Act of 1934 (“Disclosure Controls”). Based on this evaluation our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information we are required to disclose in reports that we file or submit under the Securities and Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

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Limitations on the Effectiveness of Controls

     The Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Control over Financial Reporting.

     During the period covered by this Quarterly Report on Form 10-Q, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

     Atmel currently is party to various legal proceedings. While management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or overall trends in results of operations, litigation is subject to inherent uncertainties. If an unfavorable ruling were to occur, there exists the possibility of a material adverse impact on the results of operations, cash flows and financial position of Atmel. The estimate of the potential impact on the Company’s financial position or overall results of operations or cash flows for the legal proceedings described below could change in the future. The Company has accrued for all losses related to litigation that the Company considers probable and for which the loss can be reasonably estimated.

     On August 7, 2006, George Perlegos, Atmel’s former President and Chief Executive Officer, and Gust Perlegos, Atmel’s former Executive Vice President, Office of the President, filed three actions in Delaware Chancery Court against Atmel and some of its officers and directors under Sections 211, 220 and 225 of the Delaware General Corporation Law. In the Section 211 action, plaintiffs alleged that on August 6, 2006, the Board of Directors wrongfully cancelled or rescinded a call for a special meeting of Atmel’s stockholders, and sought an order requiring the holding of the special meeting of stockholders. In the Section 225 action, plaintiffs alleged that their termination was the product of an invalidly noticed board meeting and improperly constituted committees acting with gross negligence and in bad faith. They further alleged that there was no basis in law or fact to remove them from their positions for cause, and sought an order declaring that they continue in their positions as President and Chief Executive Officer, and Executive Vice President, Office of the President, respectively. The Section 225 action concluded with the court finding that the plaintiffs had not demonstrated any right to hold any office of Atmel. For both actions, plaintiffs sought costs, reasonable attorneys’ fees and any other appropriate relief. The Section 220 action, which sought access to corporate records, was dismissed in 2006.

     Regarding the Section 211 action, a trial was held in October 2006, the court held argument in December 2006, issued a Memorandum Opinion in February 2007, and granted a Final Order on March 15, 2007. The Court ruled in favor of the plaintiffs with regards to calling a Special Meeting of Stockholders. The Perlegoses subsequently made a motion in the Chancery Court for attorneys’ fees and expenses, based on their having prevailed in the Section 211 action. On October 8, 2007, that motion was withdrawn, thus ending the proceeding, and the parties are in the process of filing a proposed final order on the matter.

     In January 2007, the Company received a subpoena from the Department of Justice (“DOJ”) requesting information relating to its past stock option grants and related accounting matters. Also, in August 2006, the Company received a letter from the SEC making an informal inquiry and request for information on the same subject matters. In August 2006, the Company received Information Document Requests from the IRS regarding the Company’s investigation into misuse of corporate travel funds and investigation into backdating of stock options. The Company is cooperating fully with the DOJ, SEC and IRS inquiries and intends to continue to do so. These inquiries likely will require the Company to expend significant management time and incur significant legal and other expenses, and could result in civil and criminal actions seeking, among other things, injunctions against the Company and the payment of significant fines and penalties by the Company, which may adversely affect our results of operations and cash flows. The Company cannot predict how long it will take or how much more time and resources it will have to expend to resolve these government inquiries, nor can the Company predict the outcome of these inquiries.

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     From July through September 2006, six stockholder derivative lawsuits were filed (three in the U.S. District Court for the Northern District of California and three in Santa Clara County Superior Court) by persons claiming to be Company stockholders and purporting to act on Atmel’s behalf, naming Atmel as a nominal defendant and some of its current and former officers and directors as defendants. The suits contain various causes of action relating to the timing of stock option grants awarded by Atmel. The federal cases were consolidated and an amended complaint was filed on November 3, 2006. Atmel and the individual defendants have each moved to dismiss the consolidated amended complaint on various grounds. On July 16, 2007, the Court issued an order dismissing the complaint but granting the plaintiffs leave to file an amended complaint. In August 2007, the plaintiffs filed an amended complaint, and the Company and individual defendants moved to dismiss it. The state derivative cases have also been consolidated. In April 2007, a consolidated derivative complaint was filed in the state court action, and the Company moved to stay it. The court granted Atmel’s motion to stay on June 14, 2007. Atmel believes that the filing of the derivative actions was unwarranted and intends to vigorously contest them.

     On March 23, 2007, Atmel filed a complaint in the U.S. District Court for the Northern District of California against George Perlegos and Gust Perlegos. In the lawsuit, Atmel asserted that the Perlegoses used false and misleading proxy materials in violation of Section 14(a) of the federal securities laws to wage their proxy campaign to replace Atmel’s President and Chief Executive Officer and all of Atmel’s independent directors. Further, Atmel asserted that the Perlegos group, in violation of federal securities laws, failed to file a Schedule 13D as required, leaving stockholders without the information about the Perlegoses and their plans that is necessary for stockholders to make an informed assessment of the Perlegoses’ proposal. In its complaint, Atmel asked the Court to require the Perlegoses to comply with their disclosure obligations, and to enjoin them from using false and misleading statements to improperly solicit proxies as well as from voting any Atmel shares acquired during the period the Perlegoses were violating their disclosure obligations under the federal securities laws. On April 11, 2007, George Perlegos and Gust Perlegos filed a counterclaim with respect to such matters in the U.S. District Court for the Northern District of California seeking an injunction (a) prohibiting Atmel from making false and misleading statements and (b) requiring Atmel to publish and publicize corrective statements, and requesting an award of reasonable expenses and costs of this action. Atmel disputed this counterclaim. On July 3, 2007, this action, including the counterclaim, was dismissed.

     In October 2006, an action was filed in First Instance labour court, Nantes, France on behalf of 46 former employees of Atmel’s Nantes facility, claiming that the sale of the Nantes facility to MHS (XbyBus SAS) in December 2005 was not a valid sale, and that these employees should still be considered employees of Atmel, with the right to claim social benefits from Atmel. The action is for unspecified damages. A hearing took place on October 17, 2007 and Atmel is awaiting judgment. Atmel believes that the filing of this action is without merit and intends to vigorously defend this action.

     In January 2007, Quantum World Corporation filed a patent infringement suit in the United States District Court, Eastern District of Texas naming Atmel as a co-defendant, along with a number of other electronics manufacturing companies. The plaintiff claims that the asserted patents allegedly cover a true random number generator and that the patents are infringed by the manufacture, use importation and offer for sale of certain Atmel products. The suit seeks damages for infringement and recovery of attorneys’ fees and costs incurred. In March 2007, Atmel filed a counterclaim for declaratory relief that the patents are neither infringed nor valid. Atmel believes that the filing of this action is without merit and intends to vigorously defend against this action.

     In March 2006, Atmel filed suit against AuthenTec in the United States District Court, Northern District of California, San Jose Division, alleging infringement of U.S. Patent No. 6,289,114, and on November 1, 2006, Atmel filed a First Amended Complaint adding claims for infringement of U.S. Patent No. 6,459,804 (the “‘804 Patent”). In November 2006, AuthenTec answered denying liability and counterclaimed seeking a declaratory judgment of non-infringement and invalidity, its attorneys’ fees and other relief. In April 2007, AuthenTec filed an action against Atmel for declaratory relief in the United States District Court for the Middle District of Florida that the patents asserted against it by Atmel in the action pending in the Northern District of California are neither infringed nor valid, and amended that complaint in May 2007 to add claims for declaratory relief that the ‘804 Patent is unenforceable, alleged interference with business relationships, and abuse of process. AuthenTec sought declaratory relief and unspecified damages. On June 25, 2007, the action pending in the Middle District of Florida was transferred to the Northern District of California. On July 3, 2007, Atmel filed an answer to the claims for declaratory relief that the patents were neither valid nor infringed, and also added counterclaims of infringement. Also on July 3, 2007, Atmel moved to dismiss the remaining claims for declaratory relief that the ‘804 Patent is unenforceable, alleged interference with business relationships, and alleged abuse of process. On August 2, 2007 the parties agreed to the dismissal with prejudice of AuthenTec’s claims for alleged interference with business relationships and alleged abuse of process. The parties also agreed to grant AuthenTec leave to amend its counterclaim to add the claim for alleged unenforceability of the ‘804 Patent. Atmel believes that AuthenTec’s claims are without merit and intends to vigorously pursue and defend these actions.

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     On September 28, 2007, Matheson Tri-Gas filed suit in Texas state court in Dallas County. Plaintiff alleges a claim for breach of contract for alleged failure to pay minimum payments under a purchase requirements contract. Matheson seeks unspecified damages, pre- and post-judgment interest, attorneys’ fees and costs. The Company believes that Matheson’s claims are without merit and intends to vigorously defend this action.

     From time to time, the Company may be notified of claims that the Company may be infringing patents issued to other parties and may subsequently engage in license negotiations regarding these claims.

Indemnification Obligations

     As is customary in the Company’s industry, as provided for in local law in the United States and other jurisdictions, the Company’s standard contracts provide remedies to its customers, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of the Company’s products. From time to time, the Company will indemnify customers against combinations of loss, expense, or liability arising from various trigger events related to the sale and the use of the Company’s products and services, usually up to a specified maximum amount. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws permit the indemnification of the Company’s agents. In the Company’s experience, claims made under such indemnifications are rare and the associated estimated fair value of the liability is not material.

     Subject to certain limitations, the Company is obligated to indemnify its current and former directors, officers and employees in connection with the investigation of the Company’s historical stock option practices and related government inquiries and litigation. These obligations arise under the terms of the Company’s certificate of incorporation, its bylaws, applicable contracts, and Delaware and California law. The obligation to indemnify generally means that the Company is required to pay or reimburse the individuals’ reasonable legal expenses and possibly damages and other liabilities incurred in connection with these matters. The Company is currently paying or reimbursing legal expenses being incurred in connection with these matters by a number of its current and former directors, officers and employees. The Company believes the fair value of any required future payments under this liability is adequately provided for within the reserves it has established for currently pending legal proceedings.

Item 1A. Risk Factors

     The following trends, uncertainties and risks may impact the “forward-looking” statements described elsewhere in this Form 10-Q and in the documents incorporated herein by reference. They could affect our actual results of operations, causing them to differ materially from those expressed in “forward-looking” statements.

OUR REVENUES AND OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY DUE TO A VARIETY OF FACTORS, WHICH MAY RESULT IN VOLATILITY OR A DECLINE IN OUR STOCK PRICE.

     Our future operating results will be subject to quarterly variations based upon a wide variety of factors, many of which are not within our control. These factors include:

• the nature of both the semiconductor industry and the markets addressed by our products;

• our transition to a fab-lite strategy;

• our increased dependence on outside foundries and their ability to meet our volume, quality, and delivery objectives, particularly during times of increasing demand;

• inventory excesses or shortages due to reliance on third party manufacturers;

• our compliance with U.S. trade and export laws and regulations;

• fluctuations in currency exchange rates;

• ability of independent assembly contractors to meet our volume, quality, and delivery objectives;

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• success with disposal or restructuring activities, including disposition of our North Tyneside and Heilbronn facilities;

• fluctuations in manufacturing yields;

• third party intellectual property infringement claims;

• the highly competitive nature of our markets;

• the pace of technological change;

• political and economic risks;

• natural disasters or terrorist acts;

• assessment of internal controls over financial reporting;

• ability to meet our debt obligations;

• availability of additional financing;

• our ability to maintain good relationships with our customers;

• integration of new businesses or products;

• our compliance with international, federal and state export, environmental, privacy and other regulations;

• personnel changes;

• business interruptions;

• system integration disruptions; and

• changes in accounting rules, such as recording expenses for employee stock option grants.

     Any unfavorable changes in any of these factors could harm our operating results.

     We believe that our future sales will depend substantially on the success of our new products. Our new products are generally incorporated into our customers’ products or systems at their design stage. However, design wins may precede volume sales by a year or more. We may not be successful in achieving design wins or design wins may not result in future revenues, which depend in large part on the success of the customer’s end product or system. The average selling price of each of our products usually declines as individual products mature and competitors enter the market. To offset average selling price decreases, we rely primarily on reducing costs to manufacture those products, increasing unit sales to absorb fixed costs and introducing new, higher priced products which incorporate advanced features or integrated technologies to address new or emerging markets. Our operating results could be harmed if such cost reductions and new product introductions do not occur in a timely manner. From time to time, our quarterly revenues and operating results can become more dependent upon orders booked and shipped within a given quarter and, accordingly, our quarterly results can become less predictable and subject to greater variability.

     In addition, our future success will depend in large part on the continued economic growth generally and of growth in various electronics industries that use semiconductors, including manufacturers of computers, telecommunications equipment, automotive electronics, industrial controls, consumer electronics, data networking equipment and military equipment. The semiconductor industry has the ability to supply more products than demand requires. Our ability to return to profitability will depend heavily upon a better supply and demand balance within the semiconductor industry.

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THE CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY CREATES FLUCTUATIONS IN OUR OPERATING RESULTS.

     The semiconductor industry has historically been cyclical, characterized by wide fluctuations in product supply and demand. The industry has also experienced significant downturns, often in connection with, or in anticipation of, maturing product cycles and declines in general economic conditions. The semiconductor industry faced severe business conditions with global semiconductor revenues for the industry declining 32% to $139 billion in 2001, compared to revenues in 2000. The semiconductor industry began to turn around in 2002 with global semiconductor sales increasing modestly by 1% to $141 billion. Global semiconductor sales increased 18% to $166 billion in 2003, 27% to $211 billion in 2004, 8% to $228 billion in 2005, 9% to $248 billion in 2006 and are estimated to increase 2% to $252 billion in 2007.

     Atmel’s operating results have been harmed by industry-wide fluctuations in the demand for semiconductors, which resulted in under-utilization of our manufacturing capacity and declining gross margins. In the past we have recorded significant charges to recognize impairment in the value of our manufacturing equipment, the cost to reduce workforce, and other restructuring costs. Our business may be harmed in the future not only by cyclical conditions in the semiconductor industry as a whole but also by slower growth in any of the markets served by our products.

WE COULD EXPERIENCE DISRUPTION OF OUR BUSINESS AS WE TRANSITION TO A FAB-LITE STRATEGY.

     As part of our fab-lite strategy, we have reduced and plan to further reduce the number of our owned manufacturing facilities. In December 2005, we sold our Nantes, France fabrication facility and the related foundry activities, to XybyBus SAS. In July 2006, we sold our Grenoble, France subsidiary (including the fabrication facility in Grenoble) to e2v technologies plc. In December 2006, we announced the planned sale of our North Tyneside, United Kingdom and Heilbronn, Germany wafer fabrication facilities. On May 1, 2007, we announced the sale of our Irving, Texas, wafer fabrication facility. On October 8, 2007, we announced that we had entered into agreements for the sale of certain wafer equipment and real property in North Tyneside, United Kingdom. As a result of the sale (or planned sale) of such fabrication facilities, we will be increasingly relying on the utilization of third-party foundry manufacturing and assembly and test capacity. As part of this transition we must expand our foundry relationships by entering into new agreements with third-party foundries. If these agreements are not completed on a timely basis, or the transfer of production is delayed for other reasons, the supply of certain of our products could be disrupted, which would harm our business. In addition, difficulties in production yields can often occur when transitioning to a new third-party manufacturer. If such foundries fail to deliver quality products and components on a timely basis, our business could be harmed.

     Implementation of our new fab-lite strategy will expose us to the following risks:

• reduced control over delivery schedules and product costs;

• manufacturing costs that are higher than anticipated;

• inability of our manufacturing subcontractors to develop manufacturing methods appropriate for our products and their unwillingness to devote adequate capacity to produce our products;

• possible abandonment of fabrication processes by our manufacturing subcontractors for products that are strategically important to us;

• decline in product quality and reliability;

• inability to maintain continuing relationships with our suppliers;

• restricted ability to meet customer demand when faced with product shortages; and

• increased opportunities for potential misappropriation of our intellectual property.

     If any of the above risks are realized, we could experience an interruption in our supply chain or an increase in costs, which could delay or decrease our revenue or harm our business.

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AS WE INCREASE DEPENDENCE ON OUTSIDE FOUNDRIES, SUCH FOUNDRIES MAY NOT HAVE ADEQUATE CAPACITY TO FULFILL OUR NEEDS AND MAY NOT MEET OUR QUALITY AND DELIVERY OBJECTIVES OR MAY ABANDON FABRICATION PROCESSES THAT WE REQUIRE.

     We expect to increase our utilization of outside foundries to expand our capacity in the future, especially for high volume commodity type products and certain aggressive technology ASIC products. Reliance on outside foundries to fabricate wafers involves significant risks, including reduced control over quality and delivery schedules, a potential lack of capacity, and a risk the subcontractor may abandon the fabrication processes we need from a strategic standpoint, even if the process is not economically viable. We hope to mitigate these risks with a strategy of qualifying multiple subcontractors. However, there can be no guarantee that any strategy will eliminate these risks. Additionally, since most of such outside foundries are located in foreign countries, we are subject to certain risks generally associated with contracting with foreign manufacturers, including currency exchange fluctuations, political and economic instability, trade restrictions and changes in tariff and freight rates. Accordingly, we may experience problems in timelines and the adequacy or quality of product deliveries, any of which could have a material adverse effect on our results of operations.

INCREASING DEPENDENCE ON THIRD PARTY MANUFACTURERS COULD HARM OUR BUSINESS IN TIMES OF INCREASING DEMAND IN OUR INDUSTRY.

     We currently manufacture our products at our facilities in Colorado Springs, Colorado; Heilbronn, Germany; Rousset, France; and North Tyneside, United Kingdom. In December 2006, we announced our plan to sell the Heilbronn and North Tyneside facilities to optimize our manufacturing operations as part of our adoption of a fab-lite strategy. On October 8, 2007, we announced that we had entered into agreements for the sale of certain wafer fabrication equipment and real property in North Tyneside, United Kingdom. In order to shift from a manufacturing-based business model to an outsourcing business model, we will need to substantially expand our foundry relationships. The terms on which we will be able to obtain wafer production for our products, and the timing and volume of such production will be substantially dependent on agreements to be negotiated with semiconductor foundries. We cannot be certain that the agreements we reach with such foundries will be on terms reasonable to us. Therefore, any agreements reached with semiconductor foundries may be short-term and possibly non-renewable, and hence provide less certainty regarding the supply and pricing of wafers for our products.

     During economic upturns in the semiconductor industry we will not be able to guarantee that our third party foundries will be able to increase manufacturing capacity to a level that meets demand for our products, which would prevent us from meeting increased customer demand and harm our business. Also during times of increased demand for our products, if such foundries are able to meet such demand, it may be at higher wafer prices, which would reduce our gross margins on such products or require us to offset the increased price by increasing prices for our customers, either of which would harm our business and operating results.

AS A RESULT OF INCREASED DEPENDENCE ON THIRD PARTY MANUFACTURERS, WE MAY INCUR INVENTORY EXCESSES OR SHORTAGES

     As we increase our reliance on third party manufacturers and subcontractors, we acknowledge that the lead times required by such foundries have increased in recent years and is likely to increase in the future. However, market conditions and intense competition in the semiconductor industry require that we be prepared to ship products to our customers with much shorter lead times. Consequently, to have product inventory to meet potential customer purchase orders, we may have to place purchase orders for wafers from our manufacturers in advance of having firm purchase orders from our customers, which from time- to-time will cause us to have an excess or shortage of wafers for a particular product. If we do not have sufficient demand for our products and cannot cancel our current and future commitments without material impact, we may experience excess inventory, which will result in a write-off affecting gross margin and results of operations. If we cancel a purchase order, we may have to pay cancellation penalties based on the status of work in process or the proximity of the cancellation to the delivery date. As a result of the long lead-time for manufacturing wafers and the increase in “just in time” ordering by customers, semiconductor companies from time-to-time may need to record additional expense for the write-down of excess inventory. Significant write-downs of excess inventory could have a material adverse effect on our consolidated financial condition and results of operations.

     Conversely, failure to order sufficient wafers would cause us to miss revenue opportunities and, if significant, could impact sales by our customers, which could adversely affect our customer relationships and thereby materially adversely affect our business, financial condition and results of operations.

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OUR INTERNATIONAL SALES AND OPERATIONS ARE SUBJECT TO APPLICABLE LAWS RELATING TO TRADE AND EXPORT CONTROLS, THE VIOLATION OF WHICH COULD ADVERSELY AFFECT OUR OPERATIONS.

     For products and technology exported from the U.S. or otherwise subject to U.S. jurisdiction, we are subject to U.S. laws and regulations governing international trade and exports, including, but not limited to the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and trade sanctions against embargoed countries and destinations administered by the Office of Foreign Assets Control (“OFAC”), U.S. Department of the Treasury. We have recently discovered shortcomings in our export compliance procedures. We are currently analyzing product shipments and technology transfers, working with U.S. government officials to ensure compliance with applicable U.S. export laws and regulations, and developing an enhanced export compliance system. A determination by the U.S. government that we have failed to comply with one or more of these export controls or trade sanctions could result in civil or criminal penalties, including the imposition of significant fines, denial of export privileges, and debarment from U.S. participation in government contracts. Any one or more of these sanctions could have a material adverse effect on our business, financial condition and results of operations.

WE ARE EXPOSED TO FLUCTUATIONS IN CURRENCY EXCHANGE RATES THAT COULD NEGATIVELY IMPACT OUR FINANCIAL RESULTS AND CASH FLOWS.

     Because a significant portion of our business is conducted outside the United States, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results and cash flows. Our primary exposure relates to operating expenses in Europe, where a significant amount of our manufacturing is located.

     We have in the past entered into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on certain foreign currency assets and liabilities. In addition, we have periodically hedged certain anticipated foreign currency cash flows. We do not plan to hedge against either of these risks in the foreseeable future, but if we should, our attempts to hedge against these risks may not be successful, resulting in an adverse impact on our net income. In addition, our net income may be subject to greater foreign currency gains and losses on certain foreign currency assets and liabilities during times in which we have not entered into foreign exchange forward contracts.

REVENUES AND COSTS DENOMINATED IN FOREIGN CURRENCIES COULD ADVERSELY IMPACT OUR OPERATING RESULTS WITH CHANGES IN THESE FOREIGN CURRENCIES AGAINST THE DOLLAR.

     When we take an order denominated in a foreign currency we may receive fewer dollars than initially anticipated if that local currency weakens against the dollar before we collect our funds. Conversely, when we incur a cost denominated in a foreign currency we may pay more dollars than initially anticipated if that local currency strengthens against the dollar before we pay the costs. In addition to reducing revenues or increasing our costs, this risk can negatively affect our operating results. In Europe, where our significant operations have costs denominated in European currencies, a negative impact on expenses can be partially offset by a positive impact on revenues. Sales denominated in European currencies as a percentage of net revenues were 20% and 21% in the three and nine months ended September 30, 2007. Sales denominated in yen as a percentage of net revenues were 1% in the three and nine months ended September 30, 2007. Operating expenses denominated in foreign currencies as a percentage of total operating expenses, primarily the euro, were 47% and 49% in the three months ended September 30, 2007 and 2006, respectively, and 51% in the nine months ended September 30, 2007 and 2006. We also face the risk that our accounts receivable denominated in foreign currencies could be devalued if such foreign currencies weaken quickly and significantly against the dollar. Conversely, we face the risk that our accounts payable denominated in foreign currencies could increase in value if such foreign currencies strengthen against the dollar.

     We also face the risk that our accounts receivables denominated in foreign currencies will be devalued if such foreign currencies weaken quickly and significantly against the dollar. Approximately 21% and 26% of our accounts receivable are denominated in foreign currency as of September 30, 2007 and December 31, 2006, respectively.

     We also face the risk that our accounts payable and debt obligations denominated in foreign currencies will increase if such foreign currencies strengthen quickly and significantly against the dollar. Approximately 57% and 48% of our accounts payable were denominated in foreign currency as of September 30, 2007 and December 31, 2006, respectively. Approximately 52% and 60% of our debt obligations were denominated in foreign currency as of September 30, 2007 and December 31, 2006, respectively.

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WE DEPEND ON INDEPENDENT ASSEMBLY CONTRACTORS WHICH MAY NOT HAVE ADEQUATE CAPACITY TO FULFILL OUR NEEDS AND WHICH MAY NOT MEET OUR QUALITY AND DELIVERY OBJECTIVES.

     We currently manufacture a majority of the wafers for our products at our fabrication facilities, and the wafers are then sorted and tested at our facilities. After wafer testing, we ship the wafers to one of our independent assembly contractors located in China, Hong Kong, Indonesia, Japan, Malaysia, the Philippines, South Korea, Taiwan or Thailand where the wafers are separated into die, packaged and, in some cases, tested. Our reliance on independent contractors to assemble, package and test our products involves significant risks, including reduced control over quality and delivery schedules, the potential lack of adequate capacity and discontinuance or phase-out of the contractors’ assembly processes. These independent contractors may not continue to assemble, package and test our products for a variety of reasons. Moreover, because our assembly contractors are located in foreign countries, we are subject to certain risks generally associated with contracting with foreign suppliers, including currency exchange fluctuations, political and economic instability, trade restrictions, including export controls, and changes in tariff and freight rates. Accordingly, we may experience problems in timelines and the adequacy or quality of product deliveries, any of which could have a material adverse effect on our results of operations.

WE FACE RISKS ASSOCIATED WITH DISPOSAL OR RESTRUCTURING ACTIVITIES.

     As part of our fab-lite strategy, in December 2006, we announced plans to sell our Heilbronn, Germany, and North Tyneside, United Kingdom, manufacturing facilities. On October 8, 2007, we announced that we had entered into agreements for the sale of certain wafer fabrication equipment and real property in North Tyneside, United Kingdom. However, reducing our wafer fabrication capacity involves significant potential costs and delays, particularly in Europe, where the extensive statutory protection of employees imposes substantial restrictions on their employers when the market requires downsizing. Such costs and delays include compensation to employees and local government agencies, requirements and approvals of governmental and judicial bodies, and the potential requirement to repay governmental subsidies. We may experience labor union or workers council objections, or other difficulties, while implementing a reduction of the number of employees. Significant difficulties that we experience could harm our business and operating results, either by deterring needed headcount reduction or by the additional employee severance costs of resulting from employee reduction actions in Europe relative to America or Asia.

     We continue to evaluate the existing restructuring and asset impairment reserves related to previously implemented restructuring plans. As a result, there may be additional restructuring charges or reversals or recoveries of previous charges. However, we may incur additional restructuring and asset impairment charges in connection with additional restructuring plans adopted in the future. Any such restructuring or asset impairment charges recorded in the future could significantly harm our business and operating results. See Notes 6 and 8 to Notes to Condensed Consolidated Financial Statements for further discussion.

IF WE ARE UNABLE TO IMPLEMENT NEW MANUFACTURING TECHNOLOGIES OR FAIL TO ACHIEVE ACCEPTABLE MANUFACTURING YIELDS, OUR BUSINESS WOULD BE HARMED.

     Whether demand for semiconductors is rising or falling, we are constantly required by competitive pressures in the industry to successfully implement new manufacturing technologies in order to reduce the geometries of our semiconductors and produce more integrated circuits per wafer. We are developing processes that support effective feature sizes as small as 0.13-microns, and we are studying how to implement advanced manufacturing processes with even smaller feature sizes such as 0.065-microns.

     Fabrication of our integrated circuits is a highly complex and precise process, requiring production in a tightly controlled, clean environment. Minute impurities, difficulties in the fabrication process, defects in the masks used to print circuits on a wafer or other factors can cause a substantial percentage of wafers to be rejected or numerous die on each wafer to be nonfunctional. Whether through the use of our foundries or third party manufacturers, we may experience problems in achieving acceptable yields in the manufacture of wafers, particularly during a transition in the manufacturing process technology for our products.

     We have previously experienced production delays and yield difficulties in connection with earlier expansions of our wafer fabrication capacity or transitions in manufacturing process technology. Production delays or difficulties in achieving acceptable yields at any of our fabrication facilities or at the fabrication facilities of our third party manufacturers could materially and adversely affect our operating results. We may not be able to obtain the additional cash from operations or external financing necessary to fund the implementation of new manufacturing technologies.

WE MAY FACE THIRD PARTY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT COULD BE COSTLY TO DEFEND AND RESULT IN LOSS OF SIGNIFICANT RIGHTS.

     The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights or positions, which on occasion have resulted in significant and often protracted and expensive litigation. We have from time to time received, and may in the future receive, communications from third parties asserting patent or other intellectual property rights covering our products or processes. In the past, we have received specific allegations from major companies alleging that certain of our products infringe patents owned by such companies. In order to avoid the significant costs associated with our defense in litigation involving such claims, we may license the use of the technologies that are the subject of these claims from such companies and be required to make corresponding royalty payments, which may harm our operating results.

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     We have in the past been involved in intellectual property infringement lawsuits, which harmed our operating results and are currently involved in intellectual property infringement lawsuits, which may harm our future operating results. We are currently involved in several intellectual property infringement lawsuits. Although we intend to vigorously defend against any such lawsuits, we may not prevail given the complex technical issues and inherent uncertainties in patent and intellectual property litigation. Moreover, the cost of defending against such litigation, in terms of management time and attention, legal fees and product delays, could be substantial, whatever the outcome. If any patent or other intellectual property claims against us are successful, we may be prohibited from using the technologies subject to these claims, and if we are unable to obtain a license on acceptable terms, license a substitute technology, or design new technology to avoid infringement, our business and operating results may be significantly harmed.

     We have several cross-license agreements with other companies. In the future, it may be necessary or advantageous for us to obtain additional patent licenses from existing or other parties, but these license agreements may not be available to us on acceptable terms, if at all.

OUR MARKETS ARE HIGHLY COMPETITIVE, AND IF WE DO NOT COMPETE EFFECTIVELY, WE MAY SUFFER PRICE REDUCTIONS, REDUCED REVENUES, REDUCED GROSS MARGINS, AND LOSS OF MARKET SHARE.

     We compete in markets that are intensely competitive and characterized by rapid technological change, product obsolescence and price decline. Throughout our product line, we compete with a number of large semiconductor manufacturers, such as AMD, Cypress, Freescale, Fujitsu, Hitachi, IBM, Infineon, Intel, LSI Logic, Microchip, Philips, Renesas, Samsung, Sharp, Spansion, STMicroelectronics, Texas Instruments and Toshiba. Some of these competitors have substantially greater financial, technical, marketing and management resources than we do. As we have introduced new products we are increasingly competing directly with these companies, and we may not be able to compete effectively. We also compete with emerging companies that are attempting to sell products in specialized markets that our products address. We compete principally on the basis of the technical innovation and performance of our products, including their speed, density, power usage, reliability and specialty packaging alternatives, as well as on price and product availability. During the last several years, we have experienced significant price competition in several business segments, especially in our nonvolatile memory segment for EPROM, Serial EEPROM, and Flash memory products, as well as in our commodity microcontrollers and smart cards. We expect continuing competitive pressures in our markets from existing competitors and new entrants, new technology and cyclical demand, which, among other factors, will likely maintain the recent trend of declining average selling prices for our products.

     In addition to the factors described above, our ability to compete successfully depends on a number of factors, including the following:

• our success in designing and manufacturing new products that implement new technologies and processes;

• our ability to offer integrated solutions using our advanced nonvolatile memory process with other technologies;

• the rate at which customers incorporate our products into their systems;

• product introductions by our competitors;

• the number and nature of our competitors in a given market;

• the incumbency of our competitors at potential new customers;

• our ability to minimize production costs by outsourcing our manufacturing, assembly and testing functions; and

• general market and economic conditions.

     Many of these factors are outside of our control, and we may not be able to compete successfully in the future.

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THE RESULTS OF OUR AUDIT COMMITTEE INVESTIGATION INTO OUR HISTORICAL STOCK OPTION PRACTICES AND RESULTING RESTATEMENTS MAY CONTINUE TO HAVE ADVERSE EFFECTS ON OUR FINANCIAL RESULTS.

     The Audit Committee investigation into our historical stock option practices and the resulting restatement of our historical financial statements have required us to expend significant management time and incur significant accounting, legal, and other expenses. The resulting restatements have had a material adverse effect on our results of operations. We have recorded additional non-cash, stock-based compensation expense of $116 million for the periods from 1993 to 2005 (excluding the impact of related payroll and income taxes). In addition, several lawsuits have been filed against us, our current directors and officers and certain of our former directors and officers relating to our historical stock option practices and related accounting. See Part II, Item 1 Legal Proceedings, for a more detailed description of these proceedings. We may become the subject of additional private or government actions regarding these matters in the future. These actions are in the preliminary stages, and their ultimate outcome could have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price for our securities. Litigation may be time-consuming, expensive and disruptive to normal business operations, and the outcome of litigation is difficult to predict. The defense of these lawsuits could result in significant expenditures and the continued diversion of our management’s time and attention from the operation of our business, which could impede our business. All or a portion of any amount we may be required to pay to satisfy a judgment or settlement of any or all of these claims may not be covered by insurance.

WE MAY BE SUBJECT TO ADVERSE FINDINGS FROM ADDITIONAL AUDIT COMMITTEE INVESTIGATIONS INTO IMPROPER BUSINESS PRACTICES.

     In addition to the investigation into stock option granting practices, the Audit Committee of Atmel’s Board of Directors, with the assistance of independent legal counsel and forensic accountants, conducted independent investigations into (a) certain proposed investments in high yield securities that were being contemplated by our former Chief Executive Officer during the period from 1999 to 2002 and bank transfers related thereto, and (b) alleged payments from certain of our customers to employees at one of our Asian subsidiaries. The Audit Committee has completed its investigations, including its review of the impact on our condensed consolidated financial statements for the three and nine months ended September 30, 2007 and prior periods, and concluded that there was no impact on such consolidated financial statements. However, we can give no assurances that subsequent information will not be discovered that may cause the Audit Committee to reopen such reviews. In addition, government agencies, including local authorities in Asia, may initiate their own review into these and related matters. At this time, we cannot predict the outcome of such reviews, if any. An adverse finding in any of these matters could lead to future delays in filing our subsequent SEC reports and delisting of our common stock from the NASDAQ Global Select Market, and result in additional management time being diverted and additional legal and other costs that could have a material adverse effect on our business, financial condition and results of operations.

WE MUST KEEP PACE WITH TECHNOLOGICAL CHANGE TO REMAIN COMPETITIVE.

     The average selling prices of our products historically have decreased over the products’ lives and are expected to continue to do so. As a result, our future success depends on our ability to develop and introduce new products which compete effectively on the basis of price and performance and which address customer requirements. We are continually designing and commercializing new and improved products to maintain our competitive position. These new products typically are more technologically complex than their predecessors, and thus have increased potential for delays in their introduction.

     The success of new product introductions is dependent upon several factors, including timely completion and introduction of new product designs, achievement of acceptable fabrication yields and market acceptance. Our development of new products and our customers’ decision to design them into their systems can take as long as three years, depending upon the complexity of the device and the application. Accordingly, new product development requires a long-term forecast of market trends and customer needs, and the successful introduction of our products may be adversely affected by competing products or by technologies serving the markets addressed by our products. Our qualification process involves multiple cycles of testing and improving a product’s functionality to ensure that our products operate in accordance with design specifications. If we experience delays in the introduction of new products, our future operating results could be harmed.

     In addition, new product introductions frequently depend on our development and implementation of new process technologies, and our future growth will depend in part upon the successful development and market acceptance of these process technologies. Our integrated solution products require more technically sophisticated sales and marketing personnel to market these products successfully to customers. We are developing new products with smaller feature sizes, the fabrication of which will be substantially more complex than fabrication of our current products. If we are unable to design, develop, manufacture, market and sell new products successfully, our operating results will be harmed. Our new product development, process development, or marketing and sales efforts may not be successful, our new products may not achieve market acceptance, and price expectations for our new products may not be achieved, any of which could harm our business.

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OUR OPERATING RESULTS ARE HIGHLY DEPENDENT ON OUR INTERNATIONAL SALES AND OPERATIONS, WHICH EXPOSES US TO VARIOUS POLITICAL AND ECONOMIC RISKS.

     Sales to customers outside the U.S. accounted for 86% of net revenues in the three months ended September 30, 2007 and 2006, and 86% and 85% in the nine months ended September 30, 2007 and 2006, respectively. We expect that revenues derived from international sales will continue to represent a significant portion of net revenues. International sales and operations are subject to a variety of risks, including:

• greater difficulty in protecting intellectual property;

• reduced flexibility and increased cost of staffing adjustments, particularly in France and Germany;

• longer collection cycles;

• potential unexpected changes in regulatory practices, including export license requirements, trade barriers, tariffs and tax laws, environmental and privacy regulations; and

• general economic and political conditions in these foreign markets.

     Further, we purchase a significant portion of our raw materials and equipment from foreign suppliers, and we incur labor and other operating costs in foreign currencies, particularly at our French, German and U.K. manufacturing facilities. As a result, our costs will fluctuate along with the currencies and general economic conditions in the countries in which we do business, which could harm our operating results.

     Approximately 20% and 18% of our net revenues in the three months ended September 30, 2007 and 2006, respectively, and 22% and 18% of our net revenues in the nine months ended September 30, 2007 and 2006, respectively, were denominated in foreign currencies.

OUR OPERATIONS AND FINANCIAL RESULTS COULD BE HARMED BY NATURAL DISASTERS OR TERRORIST ACTS.

     Since the terrorist attacks on the World Trade Center and the Pentagon in 2001, certain insurance coverage has either been reduced or made subject to additional conditions by our insurance carriers, and we have not been able to maintain all necessary insurance coverage at reasonable cost. Instead, we have relied to a greater degree on self-insurance. For example, we now self-insure property losses up to $10 million per event. Our headquarters, some of our manufacturing facilities, the manufacturing facilities of third party foundries and some of our major vendors’ and customers’ facilities are located near major earthquake faults and in potential terrorist target areas. If a major earthquake or other disaster or a terrorist act impacts us and insurance coverage is unavailable for any reason, we may need to spend significant amounts to repair or replace our facilities and equipment, we may suffer a temporary halt in our ability to manufacture and transport product and we could suffer damages of an amount sufficient to harm our business, financial condition and results of operations.

A LACK OF EFFECTIVE INTERNAL CONTROL OVER FINANCIAL REPORTING COULD RESULT IN AN INABILITY TO ACCURATELY REPORT OUR FINANCIAL RESULTS, WHICH COULD LEAD TO A LOSS OF INVESTOR CONFIDENCE IN OUR FINANCIAL REPORTS AND HAVE AN ADVERSE EFFECT ON OUR STOCK PRICE.

     Effective internal controls are necessary for us to provide reliable financial reports. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed. We have in the past discovered, and may in the future discover, deficiencies in our internal controls. Evaluations of the effectiveness of our internal controls in the future may lead our management to determine that internal control over financial reporting is no longer effective. Such conclusions may result from our failure to implement controls for changes in our business, or deterioration in the degree of compliance with our policies or procedures.

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     A failure to maintain effective internal control over financial reporting, including a failure to implement effective new controls to address changes in our business could result in a material misstatement of our consolidated financial statements or otherwise cause us to fail to meet our financial reporting obligations. This, in turn, could result in a loss of investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on our stock price.

OUR DEBT LEVELS COULD HARM OUR ABILITY TO OBTAIN ADDITIONAL FINANCING, AND OUR ABILITY TO MEET OUR DEBT OBLIGATIONS WILL BE DEPENDENT UPON OUR FUTURE PERFORMANCE.

     As of September 30, 2007, our total debt was $106 million, compared to $169 million at December 31, 2006. Our long-term debt less current portion to equity ratio was 0.03 and 0.06 at September 30, 2007 and December 31, 2006, respectively. Increases in our debt-to-equity ratio could adversely affect our ability to obtain additional financing for working capital, acquisitions or other purposes and make us more vulnerable to industry downturns and competitive pressures.

     Certain of our debt facilities contain terms that subject us to financial and other covenants. We were in compliance with our covenants as of September 30, 2007, except for the non-compliance with one financial covenant related to a revolving line of credit. This default provision, if not cured during the applicable cure period, may also trigger cross default provisions on other debt and capital leases that are classified as current liabilities as of September 30, 2007. We expect to regain compliance during the cure period stated in the borrowing agreement.

     We were previously not in compliance with covenants requiring timely filing of U.S. GAAP financial statements as of December 31, 2006, and, as a result, requested waivers from our lenders to avoid default under these facilities. Waivers were not received from all lenders, and as a result, we had previously classified $23 million of non-current liabilities to current liabilities on our condensed consolidated balance sheet as of December 31, 2006. As a result of our return to compliance to the related financial and filing requirement covenants in June 2007, these liabilities are classified as non-current liabilities as of September 30, 2007.

     From time to time our ability to meet our debt obligations will depend upon our ability to raise additional financing and on our future performance and ability to generate substantial cash flow from operations, which will be subject to financial, business and other factors affecting our operations, many of which are beyond our control. If we are unable to meet debt obligations or otherwise are obliged to repay any debt prior to its due date, our available cash would be depleted, perhaps seriously, and our ability to fund operations harmed. In addition, our ability to service long-term debt in the U.S. or to obtain cash for other needs from our foreign subsidiaries may be structurally impeded, as a substantial portion of our operations are conducted through our foreign subsidiaries. Our cash flow and ability to service debt are partially dependent upon the liquidity and earnings of our subsidiaries as well as the distribution of those earnings, or repayment of loans or other payments of funds by those subsidiaries, to the U.S. parent corporation. These foreign subsidiaries are separate and distinct legal entities and may have limited or no obligation, contingent or otherwise, to pay any amounts to us, whether by dividends, distributions, loans or any other form.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE.

     Although in July 2006 we sold our Grenoble, France, subsidiary and in December 2006 we announced our plan to sell the Heilbronn and North Tyneside fabrication facilities, (and on October 8, 2007, we announced that we had entered into agreements for the sale of our fabrication facility in North Tyneside, United Kingdom) we intend to continue to make capital investments to support new products and manufacturing processes that achieve manufacturing cost reductions and improved yields. We may seek additional equity or debt financing to fund operations or to fund other projects. The timing and amount of such capital requirements cannot be precisely determined at this time and will depend on a number of factors, including demand for products, product mix, changes in semiconductor industry conditions and competitive factors. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms.

PROBLEMS THAT WE EXPERIENCE WITH KEY CUSTOMERS OR DISTRIBUTORS MAY HARM OUR BUSINESS.

     Our ability to maintain close, satisfactory relationships with large customers is important to our business. A reduction, delay, or cancellation of orders from our large customers would harm our business. The loss of one or more of our key customers, or reduced orders by any of our key customers, could harm our business and results of operations. Moreover, our customers may vary order levels significantly from period to period, and customers may not continue to place orders with us in the future at the same levels as in prior periods.

     We sell many of our products through distributors. Our distributors could experience financial difficulties or otherwise reduce or discontinue sales of our products. Our distributors could commence or increase sales of our competitors’ products. In any of these cases, our business could be harmed. In addition, in the short-term our revenues in Asia may decrease as we optimize our distributor base in Asia. It may take time for us to identify financially viable distributors and help them develop quality support services. This process may result in short-term revenue loss, particularly in the fourth quarter of fiscal 2007. There can be no assurances that we will be able to manage this optimization process in an efficient and timely manner.

57

WE ARE NOT PROTECTED BY LONG-TERM CONTRACTS WITH OUR CUSTOMERS.

     We do not typically enter into long-term contracts with our customers, and we cannot be certain as to future order levels from our customers. When we do enter into a long-term contract, the contract is generally terminable at the convenience of the customer. In the event of an early termination by one of our major customers, it is unlikely that we will be able to rapidly replace that revenue source, which would harm our financial results.

OUR FAILURE TO SUCCESSFULLY INTEGRATE BUSINESSES OR PRODUCTS WE HAVE ACQUIRED COULD DISRUPT OR HARM OUR ONGOING BUSINESS.

     We have from time to time acquired, and may in the future acquire additional, complementary businesses, facilities, products and technologies. Achieving the anticipated benefits of an acquisition depends, in part, upon whether the integration of the acquired business, products or technology is accomplished in an efficient and effective manner. Moreover, successful acquisitions in the semiconductor industry may be more difficult to accomplish than in other industries because such acquisitions require, among other things, integration of product offerings, manufacturing operations and coordination of sales and marketing and research and development efforts. The difficulties of such integration may be increased by the need to coordinate geographically separated organizations, the complexity of the technologies being integrated, and the necessity of integrating personnel with disparate business backgrounds and combining two different corporate cultures.

     The integration of operations following an acquisition requires the dedication of management resources that may distract attention from the day-to-day business, and may disrupt key research and development, marketing or sales efforts. The inability of management to successfully integrate any future acquisition could harm our business. Furthermore, products acquired in connection with acquisitions may not gain acceptance in our markets, and we may not achieve the anticipated or desired benefits of such transactions.

WE ARE SUBJECT TO ENVIRONMENTAL REGULATIONS, WHICH COULD IMPOSE UNANTICIPATED REQUIREMENTS ON OUR BUSINESS IN THE FUTURE. ANY FAILURE TO COMPLY WITH CURRENT OR FUTURE ENVIRONMENTAL REGULATIONS MAY SUBJECT US TO LIABILITY OR SUSPENSION OF OUR MANUFACTURING OPERATIONS.

     We are subject to a variety of international, federal, state and local governmental regulations related to the discharge or disposal of toxic, volatile or otherwise hazardous chemicals used in our manufacturing processes. Increasing public attention has been focused on the environmental impact of semiconductor operations. Although we have not experienced any material adverse effect on our operations from environmental regulations, any changes in such regulations or in their enforcement may impose the need for additional capital equipment or other requirements. If for any reason we fail to control the use of, or to restrict adequately the discharge of, hazardous substances under present or future regulations, we could be subject to substantial liability or our manufacturing operations could be suspended.

     We also could face significant costs and liabilities in connection with product take-back legislation. We record a liability for environmental remediation and other environmental costs when we consider the costs to be probable and the amount of the costs can be reasonably estimated. The EU has enacted the Waste Electrical and Electronic Equipment Directive, which makes producers of electrical goods, including computers and printers, financially responsible for specified collection, recycling, treatment and disposal of past and future covered products. The deadline for the individual member states of the EU to enact the directive in their respective countries was August 13, 2004 (such legislation, together with the directive, the “WEEE Legislation”). Producers participating in the market became financially responsible for implementing these responsibilities beginning in August 2005. Our potential liability resulting from the WEEE Legislation may be substantial. Similar legislation has been or may be enacted in other jurisdictions, including in the United States, Canada, Mexico, China and Japan, the cumulative impact of which could be significant.

WE DEPEND ON CERTAIN KEY PERSONNEL, AND THE LOSS OF ANY KEY PERSONNEL MAY SERIOUSLY HARM OUR BUSINESS.

     Our future success depends in large part on the continued service of our key technical and management personnel, and on our ability to continue to attract and retain qualified employees, particularly those highly skilled design, process and test engineers involved in the manufacture of existing products and in the development of new products and processes. The competition for such personnel is intense, and the loss of key employees, none of whom is subject to an employment agreement for a specified term or a post-employment non-competition agreement, could harm our business.

58

BUSINESS INTERRUPTIONS COULD HARM OUR BUSINESS.

     Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure and other events beyond our control. We do not have a detailed disaster recovery plan. In addition, business interruption insurance may not be enough to compensate us for losses that may occur and any losses or damages incurred by us as a result of business interruptions could significantly harm our business.

SYSTEM INTEGRATION DISRUPTIONS COULD HARM OUR BUSINESS.

     We periodically make enhancements to our integrated financial and supply chain management systems. This process is complex, time-consuming and expensive. Operational disruptions during the course of this process or delays in the implementation of these enhancements could impact our operations. Our ability to forecast sales demand, ship products, manage our product inventory and record and report financial and management information on a timely and accurate basis could be impaired due to these enhancements.

PROVISIONS IN OUR RESTATED CERTIFICATE OF INCORPORATION, BYLAWS AND PREFERRED SHARES RIGHTS AGREEMENT MAY HAVE ANTI-TAKEOVER EFFECTS.

     Certain provisions of our Restated Certificate of Incorporation, Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, voting rights, preferences and privileges and restrictions of those shares without the approval of our stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control, by making it more difficult for a third party to acquire a majority of our stock. In addition, the issuance of preferred stock could have a dilutive effect on our stockholders. We have no present plans to issue shares of preferred stock.

     We also have a preferred shares rights agreement with Equiserve Trust Company, N.A., as rights agent, dated as of September 4, 1996, amended and restated on October 18, 1999 and amended as of November 7, 2001, which gives our stockholders certain rights that would likely delay, defer or prevent a change of control of Atmel in a transaction not approved by our board of directors.

OUR STOCK PRICE HAS FLUCTUATED IN THE PAST AND MAY CONTINUE TO FLUCTUATE IN THE FUTURE.

     The market price of our common stock has experienced significant fluctuations and may continue to fluctuate significantly. The market price of our common stock may be significantly affected by factors such as the announcement of new products or product enhancements by us or our competitors, technological innovations by us or our competitors, quarterly variations in our results of operations, changes in earnings estimates by market analysts and general market conditions or market conditions specific to particular industries. Statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to the market in which we do business or relating to us specifically could result in an immediate and adverse effect on the market price of our stock. In addition, in recent years the stock market has experienced extreme price and volume fluctuations. These fluctuations have had a substantial effect on the market prices for many high technology companies, often unrelated to the operating performance of the specific companies.

     ACCOUNTING FOR EMPLOYEE STOCK OPTIONS USING THE FAIR VALUE METHOD COULD SIGNIFICANTLY REDUCE OUR NET INCOME OR INCREASE OUR NET LOSS.

     In December 2004, the FASB issued SFAS No. 123R, which is a revision of SFAS No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”), and supersedes our previous accounting under APB No. 25.

     We adopted SFAS No. 123R effective January 1, 2006, using the modified prospective transition method and our condensed consolidated financial statements as of September 30, 2007 and December 31, 2006 are based on this method. In accordance with the modified prospective transition method, our condensed consolidated financial statements for prior periods have not been restated to reflect the impact of SFAS No. 123R.

     We have elected to adopt FSP No. FAS 123(R)-3 to calculate our pool of windfall tax benefits.

59

     SFAS No. 123R requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest will be recognized as expense over the requisite service periods in our consolidated statements of operations. Prior to January 1, 2006, we accounted for stock-based awards to employees using the intrinsic value method in accordance with APB No. 25 as allowed under SFAS No. 123 (and further amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of FASB Statement No. 123”). Under the intrinsic value method, stock-based compensation expense was recognized in our condensed consolidated statements of operations for stock based awards granted to employees when the exercise price of these awards was less than the fair market value of the underlying stock at the date of grant.

     Income from continuing operations in the three and nine months ended September 30, 2007 was reduced by stock-based compensation of $5 million and $12 million, respectively. Income from continuing operations in the three and nine months ended September 30, 2006 was reduced by stock-based compensation of $2 million and $7 million, respectively. These charges were calculated in accordance with SFAS No. 123R.

OUR FOREIGN PENSION PLANS ARE UNFUNDED, AND ANY REQUIREMENT TO FUND THESE PLANS IN THE FUTURE COULD NEGATIVELY IMPACT OUR CASH POSITION AND OPERATING CAPITAL.

     We sponsor defined benefit pension plans that cover substantially all our French and German employees. Plan benefits are managed in accordance with local statutory requirements. Benefits are based on years of service and employee compensation levels. Pension benefits payable totaled $51 million and $53 million at September 30, 2007 and December 31, 2006, respectively. The plans are non-funded, in compliance with local statutory regulations, and we have no immediate intention of funding these plans. Benefits are paid when amounts become due, commencing when participants retire. Cash funding for benefits to be paid for 2007 is estimated to be approximately $1 million. Should legislative regulations require complete or partial funding of these plans in the future, it could negatively impact our cash position and operating capital.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     The following table provides information about the repurchase of our common stock during the three months ended September 30, 2007 pursuant to our Accelerated Share Repurchase Program. See Note 16 for further discussion.

						Total Number of
						Shares Purchased		Maximum Number
						as Part of		of Shares that May
	Total Number of					Publicly		Yet Be Purchased
	Shares		Average Price			Announced Plans		Under the Plans or
Period	Purchased		Paid per Share ($)			or Programs		Programs
July 1 to July 31		—		—			—		—
Aug. 1 to Aug. 30		—		—			—		—
Sept. 1 to Sept. 30		43,366,088		(1	)		43,366,088		(1	)
Total		43,366,088		(1	)		43,366,088		(1	)

(1) On August 26, 2007, Atmel entered into collared accelerated share repurchase transactions with each of Morgan Stanley & Co. Incorporated and Credit Suisse, New York Branch (the “dealers”) under which Atmel intends to repurchase up to an aggregate of $250 million of its common stock. Pursuant to the terms of the transactions, Atmel prepaid $125 million to each dealer shortly after execution of the transactions, and Atmel will purchase up to $125 million of its common stock from each dealer. The aggregate number of shares actually purchased will be determined based on the volume weighted average share price of Atmel’s common stock during a specified period of time, subject to certain provisions that establish a minimum and maximum number of shares that may be repurchased by Atmel. In September 2007, the dealers delivered an aggregate of 43,366,088 shares to Atmel, which is the minimum number of shares to be repurchased by Atmel. On November 5, 2007, Atmel received approximately 2.8 million additional shares from Morgan Stanley & Co. Incorporated. Atmel may receive additional shares from Credit Suisse, New York Branch depending on the average price of Atmel’s common stock over a period of time following delivery of the minimum number of shares (no later than January 22, 2007), subject to a maximum number of shares. In certain circumstances the completion dates of the transactions may be shortened or extended from the periods described above. Shares repurchased under the transactions have been and will be retired.

60

Item 3. Defaults upon Senior Securities

     None.

Item 4. Submission of Matters to a Vote of Security Holders

     At our Annual Meeting of Stockholders held on July 25, 2007, proxies representing 427,459,949 shares of Common Stock or 87% of the total outstanding shares were voted at the meeting. The table below presents the voting results of the election of the Company’s Board of Directors:

	Total votes for		Total votes against
	each director		each director		Total abstentions
Tsung-Ching Wu		362,599,146		38,791,294		26,069,509
T. Peter Thomas		331,355,932		70,176,150		25,927,867
Pierre Fougere		334,747,486		66,586,214		26,126,249
Dr. Chaiho Kim		335,410,810		66,070,787		25,978,352
David Sugishita		362,051,071		39,474,051		25,934,827
Steven Laub		360,800,083		40,651,885		26,007,981
Papken Der Torossian		364,492,825		37,044,595		25,922,529
Jack L. Saltich		364,165,275		37,271,571		26,023,103

     The stockholders approved an amendment to the Atmel Corporation 2005 Stock Plan to permit a Section 409A Exchange Offer. The proposal received 241,548,231 votes for, 49,740,605 votes against and 25,192,769 abstentions and no broker non votes.

     The stockholders ratified the appointment of PricewaterhouseCoopers LLP as independent auditors of the Company for the fiscal year 2007. The proposal received 388,544,657 votes for, 38,173,071 votes against and 742,221 abstentions and no broker non votes.

Item 5. Other Information

     None.

Item 6. Exhibits

     The following Exhibits have been filed with, or incorporated by reference into, this Report:

3.1	Amended and Restated Bylaws of Registrant, effective as of July 25, 2007.
10.1	Amendment to the Atmel Corporation 2005 Stock Plan (which is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on July 31, 2007).
10.2	Form of Collared Accelerated Share Repurchase Confirmation (which is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on August 27, 2007).
10.3	Description of 2007 Executive Bonus Plan (which is incorporated herein by reference to item 5.02 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on August 31, 2007).
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

61

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ATMEL CORPORATION
	(Registrant)
November 8, 2007	/s/ STEVEN LAUB
	Steven Laub
	President & Chief Executive Officer (Principal Executive Officer)
November 8, 2007	/s/ ROBERT AVERY
	Robert Avery
	Vice President Finance & Chief Financial Officer (Principal Financial and Accounting Officer)

62

EXHIBIT INDEX

3.1	Amended and Restated Bylaws of Registrant, effective as of July 25, 2007.
10.1	Amendment to the Atmel Corporation 2005 Stock Plan (which is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on July 31, 2007).
10.2	Form of Collared Accelerated Share Repurchase Confirmation (which is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on August 27, 2007).
10.3	Description of 2007 Executive Bonus Plan (which is incorporated herein by reference to item 5.02 to the Registrant’s Current Report on Form 8-K (Commission File No. 0-19032) filed on August 31, 2007).
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

BYLAWS

OF

ATMEL CORPORATION
(a Delaware corporation)

(as amended July 25, 2007)

AMENDED AND RESTATED

BYLAWS OF

ATMEL CORPORATION
(a Delaware corporation)

(as amended July 25, 2007)

TABLE OF CONTENTS

			Page
ARTICLE I CORPORATE OFFICES				1
	1.1	Registered Office		1
	1.2	Other Offices		1
ARTICLE II MEETINGS OF STOCKHOLDERS				1
	2.1	Place Of Meeting		1
	2.2	Annual Meeting		1
	2.3	Special Meeting		2
	2.4	Notice Of Stockholders’ Meetings		3
	2.5	Manner Of Giving Notice; Affidavit Of Notice		3
	2.6	Quorum		3
	2.7	Adjourned Meeting; Notice		3
	2.8	Voting		4
	2.9	Validation Of Meetings; Waiver Of Notice; Consent		4
	2.10	No Stockholder Action By Written Consent		4
	2.11	Record Date For Stockholder Notice; Voting		4
	2.12	Proxies		5
	2.13	Organization		5
	2.14	List Of Stockholders Entitled To Vote		5
	2.15	Inspectors Of Election		5
ARTICLE III DIRECTORS				6
	3.1	Powers		6
	3.2	Number Of Directors		6
	3.3	Election And Term Of Office Of Directors		6
	3.4	Resignation And Vacancies		7
	3.5	Removal Of Directors		8
	3.6	Place Of Meetings; Meetings By Telephone		8
	3.7	First Meetings		8
	3.8	Regular Meetings		9
	3.9	Special Meetings; Notice		9
	3.10	Quorum		9
	3.11	Waiver Of Notice		9
	3.12	Adjournment		9
	3.13	Notice Of Adjournment		9
	3.14	Board Action By Written Consent Without A Meeting		10

-i-

TABLE OF CONTENTS
(Continued)

			Page
	3.15	Fees And Compensation Of Directors		10
	3.16	Approval Of Loans To Officers		10
	3.17	Sole Director Provided By Certificate Of Incorporation		10
ARTICLE IV COMMITTEES				10
	4.1	Committees Of Directors		10
	4.2	Meetings And Action Of Committees		10
	4.3	Committee Minutes		11
ARTICLE V OFFICERS				11
	5.1	Officers		11
	5.2	Election Of Officers		11
	5.3	Subordinate Officers		11
	5.4	Removal And Resignation Of Officers		11
	5.5	Vacancies In Offices		12
	5.6	Chairman Of The Board		12
	5.7	President		12
	5.8	Vice Presidents		12
	5.9	Secretary		12
	5.10	Chief Financial Officer		13
	5.11	Assistant Secretary		13
	5.12	Administrative Officers		13
	5.13	Authority And Duties Of Officers		13
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS				13
	6.1	Indemnification Of Directors And Officers		13
	6.2	Indemnification Of Others		14
	6.3	Insurance		14
	6.4	Expenses		15
	6.5	Non-Exclusivity Of Rights		15
	6.6	Survival Of Rights		15
	6.7	Amendments		15
ARTICLE VII RECORDS AND REPORTS				16
	7.1	Maintenance And Inspection Of Records		16
	7.2	Inspection By Directors		16
	7.3	Representation Of Shares Of Other Corporations		16
	7.4	Certification And Inspection Of Bylaws		16
ARTICLE VIII GENERAL MATTERS				16
	8.1	Record Date For Purposes Other Than Notice And Voting		16
	8.2	Checks; Drafts; Evidences Of Indebtedness		17
	8.3	Corporate Contracts And Instruments: How Executed		17
	8.4	Stock Certificates; Transfer; Partly Paid Shares		17
	8.5	Special Designation On Certificates		18

-ii-

TABLE OF CONTENTS
(Continued)

			Page
	8.6	Lost Certificates		18
	8.7	Transfer Agents And Registrars		18
	8.8	Construction; Definitions		18
	8.9	Provisions Additional to Provisions of Law		18
	8.10	Provisions Contrary To Provisions Of Law		18
	8.11	Notices		19
ARTICLE IX AMENDMENTS				19

-iii-

AMENDED AND RESTATED

BYLAWS

OF

ATMEL CORPORATION
(a Delaware corporation)

ARTICLE I

CORPORATE OFFICES

     1.1 Registered Office. The registered office of the corporation shall be fixed in the Certificate of Incorporation of the corporation.

     1.2 Other Offices. The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

     2.1 Place Of Meeting. Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the board of directors. In the absence of any such designation, stockholders’ meetings shall be held at the principal executive office of the corporation.

     2.2 Annual Meeting.

          (a) The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the fourth Wednesday in April in each year at 2:00 p.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected, and any other proper business may be transacted.

          (b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (B) otherwise properly brought before the meeting by or at the direction of the board of directors, or (C) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than one hundred twenty (120) calendar days in advance of the date specified in the corporation’s proxy statement released to stockholders in connection with the previous year’s annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s proxy

statement, notice by the stockholder to be timely must be so received not later than the close of business on the later of one hundred twenty (120) calendar days in advance of such annual meeting or ten (10) calendar days following the date on which public announcement of the date of the meeting is first made. A stockholder’s notice to the secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the corporation’s books, of the stockholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the stockholder, (iv) any material interest of the stockholder in such business, and (v) any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “1934 Act”), in his capacity as a proponent to a stockholder proposal. Notwithstanding the foregoing, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholder’s meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph (b). The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph (b), and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

          (c) Only persons who are nominated in accordance with the procedures set forth in this paragraph (c) shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of stockholders by or at the direction of the board of directors or by any stockholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph (c). Such nominations, other than those made by or at the direction of the board of directors, shall be made pursuant to timely notice in writing to the secretary of the corporation in accordance with the provisions of paragraph (b) of this Section 2.2. Such stockholder’s notice shall set forth (i) as to each person, if any, whom the stockholder proposes to nominate for election or re—election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of the corporation which are beneficially owned by such person, (D) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such stockholder giving notice, the information required to be provided pursuant to paragraph (b) of this Section 2.2. At the request of the board of directors, any person nominated by a stockholder for election as a director shall furnish to the secretary of the corporation that information required to be set forth in the stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph (c). The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded.

     2.3 Special Meeting. A special meeting of the stockholders may be called at any time by the board of directors, by the chairman of the board, or by the president, but such special meetings may not be

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called by any other person or persons. Only such business shall be considered at a special meeting of stockholders as shall have been stated in the notice for such meeting.

     2.4 Notice Of Stockholders’ Meetings. All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws not less than ten (10) (or, if sent by third-class mail pursuant to Section 2.5 of these Bylaws, thirty (30)) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the purpose or purposes for which the meeting is called (no business other than that specified in the notice may be transacted) or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the stockholders (but any proper matter may be presented at the meeting for such action). The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees who, at the time of the notice, the board intends to present for election.

     2.5 Manner Of Giving Notice; Affidavit Of Notice. Written notice of any meeting of stockholders shall be given either (i) personally, (ii) by private courier, (iii) by first- or third-class United States mail, (iv) by telegraphic communication, (v) by other written communication or (vi) by other electronic or wireless means. Notices not personally delivered shall be sent charges prepaid and shall be addressed to the stockholder at the address of that stockholder appearing on the books of the corporation or given by the stockholder to the corporation for the purpose of notice. Notice shall be deemed to have been given at the time when delivered personally or by courier or deposited in the mail or sent by telegram or other means of written communication or other electronic or wireless means.

     An affidavit of the mailing or other means of giving any notice of any stockholders’ meeting, executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, shall be prima facie evidence of the giving of such notice.

     2.6 Quorum. The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting in accordance with Section 2.7 of these Bylaws.

     When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by express provision of the laws of the State of Delaware or of the Certificate of Incorporation or these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of the question.

     If a quorum be initially present, the stockholders may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken is approved by a majority of the stockholders initially constituting the quorum.

     2.7 Adjourned Meeting; Notice. When a meeting is adjourned to another time and place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the

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corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     2.8 Voting. The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these Bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners, and to voting trusts and other voting agreements).

     Except as may be otherwise provided in the Certificate of Incorporation or these Bylaws, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.

     2.9 Validation Of Meetings; Waiver Of Notice; Consent. The transactions of any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of stockholders. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

     Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.

     2.10 No Stockholder Action By Written Consent. Subject to the rights of the holders of the shares of any series of Preferred Stock or any other class of stock or series thereof having a preference over the Common Stock as dividend or upon liquidation, the stockholders of the corporation may not take action by written consent without a meeting but must take any such actions at a duly called annual or special meeting.

     2.11 Record Date For Stockholder Notice; Voting. For purposes of determining the stockholders entitled to notice of any meeting or to vote thereat, the board of directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors and which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting, and in such event only stockholders of record on the date so fixed are entitled to notice and to vote, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Certificate of Incorporation, by these Bylaws, by agreement or by applicable law.

     If the board of directors does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

     A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting unless the board of directors fixes a new record date for the

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adjourned meeting, but the board of directors shall fix a new record date if the meeting is adjourned for more than thirty (30) days from the date set for the original meeting.

     The record date for any other purpose shall be as provided in Section 8.1 of these Bylaws.

     2.12 Proxies. Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, telefacsimile or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware (relating to the irrevocability of proxies).

     2.13 Organization. The president, or in the absence of the president, the chairman of the board, shall call the meeting of the stockholders to order, and shall act as chairman of the meeting. In the absence of the president, the chairman of the board, and all of the vice presidents, the stockholders shall appoint a chairman for such meeting. The chairman of any meeting of stockholders shall determine the order of business and the procedures at the meeting, including such matters as the regulation of the manner of voting and the conduct of business. The secretary of the corporation shall act as secretary of all meetings of the stockholders, but in the absence of the secretary at any meeting of the stockholders, the chairman of the meeting may appoint any person to act as secretary of the meeting.

     2.14 List Of Stockholders Entitled To Vote. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

     2.15 Inspectors Of Election. Before any meeting of stockholders, the board of directors may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may, and on the request of any stockholder or a stockholder’s proxy shall, appoint an inspector or inspectors of election to act at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting pursuant to the request of one (1) or more stockholders or proxies, then the holders of a majority of the voting power of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.

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          Such inspectors shall:

          (a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

          (b) receive votes, ballots or consents;

          (c) hear and determine all challenges and questions in any way arising in connection with the right to vote;

          (d) count and tabulate all votes or consents;

          (e) determine when the polls shall close;

          (f) determine the result; and

          (g) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

ARTICLE III

DIRECTORS

     3.1 Powers. Subject to the provisions of the General Corporation Law of Delaware and to any limitations in the Certificate of Incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

     3.2 Number Of Directors. The board of directors shall consist of eight (8) members. The number of directors may be changed by an amendment to this bylaw, duly adopted by the board of directors or by the stockholders, or by a duly adopted amendment to the Certificate of Incorporation.

     3.3 Election And Term Of Office Of Directors.

          (a) Except as provided in Section 3.4 of these Bylaws, at each annual meeting of stockholders, directors of the corporation shall be elected to hold office until the expiration of the term for which they are elected, and until their successors have been duly elected and qualified; except that if any such election shall not be so held, such election shall take place at a stockholders’ meeting called and held in accordance with the General Corporation Law of Delaware. The term of office of a director shall begin immediately after election. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws, wherein other qualifications for directors may be prescribed.

          (b) Each director to be elected by stockholders shall be elected by the vote of the majority of the votes cast at any meeting for the election of directors at which a quorum is present, subject to the rights of the holders of any series of preferred stock to elect directors in accordance with the terms thereof. For purposes of this bylaw, a majority of votes cast shall mean that the number of shares voted “for” a director’s election exceeds 50% of the number of votes cast with respect to that director’s election. Votes cast

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shall include votes to withhold authority in each case and exclude abstentions with respect to that director’s election. Notwithstanding the foregoing, in the event of a contested election of directors, directors shall be elected by the vote of a plurality of the votes cast at any meeting for the election of directors at which a quorum is present. For purposes of this bylaw, a contested election shall mean any election of directors in which the number of candidates for election as directors exceeds the number of directors to be elected.

          (c) If a nominee for director who is an incumbent director is not elected and no successor has been elected at such meeting, the director shall promptly tender his or her resignation to the board of directors in accordance with the agreement to be executed by each such nominee as a condition of such nomination. The Corporate Governance and Nominating Committee shall make a recommendation to the board of directors as to whether to accept or reject the tendered resignation, or whether other action should be taken. The board of directors shall act on the tendered resignation, taking into account the Corporate Governance and Nominating Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. The Corporate Governance and Nominating Committee in making its recommendation, and the board of directors in making its decision, may each consider any factors or other information that it considers appropriate and relevant. The director who tenders his or her resignation shall not participate in the recommendation of the Corporate Governance and Nominating Committee or the decision of the board of directors with respect to his or her resignation. If such incumbent director’s resignation is not accepted by the board of directors, such director shall continue to serve until the end of his or her term and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation is accepted by the board of directors pursuant to this bylaw, or if a nominee for director is not elected and the nominee is not an incumbent director, then the board of directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 3.4 or may decrease the size of the board of directors pursuant to the provisions of Section 3.2.

     3.4 Resignation And Vacancies. Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective. Each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced and until a successor has been elected and qualified.

     Unless otherwise provided in the Certificate of Incorporation or by these Bylaws, vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote of the stockholders or by court order may be filled only by the affirmative vote of a majority of the voting power of shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum). Each director so elected shall hold office until the expiration of the term of office of the director whom he has replaced and until a successor has been elected and qualified.

     Unless otherwise provided in the Certificate of Incorporation or these Bylaws:

                    (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may

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be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

                    (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.

                    (iii) If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware (relating to meetings of stockholders).

     If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10%) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware (relating to meetings of stockholders) as far as applicable.

     3.5 Removal Of Directors. Unless otherwise restricted by statute, by the Certificate of Incorporation or by these Bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

     3.6 Place Of Meetings; Meetings By Telephone. Regular meetings of the board of directors may be held at any place within or outside the State of Delaware that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of Delaware that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.

     Any meeting of the board, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another; and all such participating directors shall be deemed to be present in person at the meeting.

     3.7 First Meetings. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.

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     3.8 Regular Meetings. Regular meetings of the board of directors may be held without notice at such time as shall from time to time be determined by the board of directors. If any regular meeting day shall fall on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day.

     3.9 Special Meetings; Notice. Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, or any two directors.

     Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail, telecopy or telegram, or other electronic or wireless means, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone, telecopy or telegram, it shall be delivered personally or by telephone or to the telegraph company at least twenty-four (24) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. Moreover, a notice of special meeting need not state the purpose of such meeting, and, unless indicated in the notice thereof, any and all business may be transacted at a special meeting.

     3.10 Quorum. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.12 of these Bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of the Certificate of Incorporation and applicable law.

     A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the quorum for that meeting.

     3.11 Waiver Of Notice. Notice of a meeting need not be given to any director (i) who signs a waiver of notice, whether before or after the meeting, or (ii) who attends the meeting other than for the express purposed of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. All such waivers shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.

     3.12 Adjournment. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting of the board to another time and place.

     3.13 Notice Of Adjournment. Notice of the time and place of holding an adjourned meeting of the board need not be given unless the meeting is adjourned for more than twenty-four (24) hours. If the meeting is adjourned for more than twenty-four (24) hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.9 of these Bylaws, to the directors who were not present at the time of the adjournment.

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     3.14 Board Action By Written Consent Without A Meeting. Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof shall be filed with the minutes of the proceedings of the board of directors.

     3.15 Fees And Compensation Of Directors. Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.15 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.

     3.16 Approval Of Loans To Officers. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or any of its subsidiaries, including any officer or employee who is a director of the corporation or any of its subsidiaries, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

     3.17 Sole Director Provided By Certificate Of Incorporation. In the event only one director is required by these Bylaws or the Certificate of Incorporation, then any reference herein to notices, waivers, consents, meetings or other actions by a majority or quorum of the directors shall be deemed to refer to such notice, waiver, etc., by such sole director, who shall have all the rights and duties and shall be entitled to exercise all of the powers and shall assume all the responsibilities otherwise herein described as given to the board of directors.

ARTICLE IV

COMMITTEES

     4.1 Committees Of Directors. The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of one or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any committee, to the extent provided in the resolution of the board, shall have and may exercise all the powers and authority of the board, but no such committee shall have the power or authority to (i) approve or adopt or recommend to the stockholders any action or matter that requires the approval of the stockholders or (ii) adopt, amend or repeal any Bylaw of the corporation.

     4.2 Meetings And Action Of Committees. Meetings and actions of committees shall be governed by, and held and taken in accordance with, the following provisions of Article III of these Bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8 (regular meetings), Section 3.9 (special meetings; notice), Section 3.10 (quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section 3.13 (notice of adjournment) and Section 3.14 (board action by written consent without meeting), with such

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changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws.

     4.3 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

ARTICLE V

OFFICERS

     5.1 Officers. The Corporate Officers of the corporation shall be a president, a secretary and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents (however denominated), one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these Bylaws. Any number of offices may be held by the same person.

     In addition to the Corporate Officers of the Company described above, there may also be such Administrative Officers of the corporation as may be designated and appointed from time to time by the president of the corporation in accordance with the provisions of Section 5.12 of these Bylaws.

     5.2 Election Of Officers. The Corporate Officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these Bylaws, shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment, and shall hold their respective offices for such terms as the board of directors may from time to time determine.

     5.3 Subordinate Officers. The board of directors may appoint, or may empower the president to appoint, such other Corporate Officers as the business of the corporation may require, each of whom shall hold office for such period, have such power and authority, and perform such duties as are provided in these Bylaws or as the board of directors may from time to time determine.

     The president may from time to time designate and appoint Administrative Officers of the corporation in accordance with the provisions of Section 5.12 of these Bylaws.

     5.4 Removal And Resignation Of Officers. Subject to the rights, if any, of a Corporate Officer under any contract of employment, any Corporate Officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of a Corporate Officer chosen by the board of directors, by any Corporate Officer upon whom such power of removal may be conferred by the board of directors.

     Any Corporate Officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make

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it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the Corporate Officer is a party.

     Any Administrative Officer designated and appointed by the president may be removed, either with or without cause, at any time by the president. Any Administrative Officer may resign at any time by giving written notice to the president or to the secretary of the corporation.

     5.5 Vacancies In Offices. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to that office.

     5.6 Chairman Of The Board. The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise such other powers and perform such other duties as may from time to time be assigned to him by the board of directors or as may be prescribed by these Bylaws. If there is no president, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 of these Bylaws.

     5.7 President. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation. He or she shall preside at all meetings of the stockholders and, in the absence or non-existence of a chairman of the board, at all meetings of the board of directors. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these Bylaws.

     5.8 Vice Presidents. In the absence or disability of the president, and if there is no chairman of the board, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these Bylaws, the president or the chairman of the board.

     5.9 Secretary. The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of the board of directors, committees of directors and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings and the proceedings thereof.

     The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares and the number and date of cancellation of every certificate surrendered for cancellation.

     The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these Bylaws. He or she shall keep the seal of the

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corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these Bylaws.

     5.10 Chief Financial Officer. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director for a purpose reasonably related to his position as a director.

     The chief financial officer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He or she shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these Bylaws.

     5.11 Assistant Secretary. The assistant secretary, if any, or, if there is more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

     5.12 Administrative Officers. In addition to the Corporate Officers of the corporation as provided in Section 5.1 of these Bylaws and such subordinate Corporate Officers as may be appointed in accordance with Section 5.3 of these Bylaws, there may also be such Administrative Officers of the corporation as may be designated and appointed from time to time by the president of the corporation. Administrative Officers shall perform such duties and have such powers as from time to time may be determined by the president or the board of directors in order to assist the Corporate Officers in the furtherance of their duties. In the performance of such duties and the exercise of such powers, however, such Administrative Officers shall have limited authority to act on behalf of the corporation as the board of directors shall establish, including but not limited to limitations on the dollar amount and on the scope of agreements or commitments that may be made by such Administrative Officers on behalf of the corporation, which limitations may not be exceeded by such individuals or altered by the president without further approval by the board of directors.

     5.13 Authority And Duties Of Officers. In addition to the foregoing powers, authority and duties, all officers of the corporation shall respectively have such authority and powers and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS

     6.1 Indemnification Of Directors And Officers. The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware as the same now exists or may hereafter be amended, indemnify any person against expenses (including attorneys’ fees), judgments, fines,

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and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit, or proceeding in which such person was or is a party or is threatened to be made a party by reason of the fact that such person is or was a director or officer of the corporation. For purposes of this Section 6.1, a “director” or “officer” of the corporation shall mean any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

     The corporation shall be required to indemnify a director or officer in connection with an action, suit, or proceeding (or part thereof) initiated by such director or officer only if the initiation of such action, suit, or proceeding (or part thereof) by the director or officer was authorized by the board of Directors of the corporation.

     The corporation shall pay the expenses (including attorney’s fees) incurred by a director or officer of the corporation entitled to indemnification hereunder in defending any action, suit or proceeding referred to in this Section 6.1 in advance of its final disposition; provided, however, that payment of expenses incurred by a director or officer of the corporation in advance of the final disposition of such action, suit or proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should ultimately be determined that the director or officer is not entitled to be indemnified under this Section 6.1 or otherwise.

     The rights conferred on any person by this Article shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the corporation’s Certificate of Incorporation, these Bylaws, agreement, vote of the stockholders or disinterested directors or otherwise.

     Any repeal or modification of the foregoing provisions of this Article shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.

     6.2 Indemnification Of Others. The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware as the same now exists or may hereafter be amended, to indemnify any person (other than directors and officers) against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred in connection with any threatened, pending or completed action, suit, or proceeding, in which such person was or is a party or is threatened to be made a party by reason of the fact that such person is or was an employee or agent of the corporation. For purposes of this Section 6.2, an “employee” or “agent” of the corporation (other than a director or officer) shall mean any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

     6.3 Insurance. The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power

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to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware.

     6.4 Expenses. The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding, upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under this Bylaw or otherwise; provided, however, that the corporation shall not be required to advance expenses to any director or officer in connection with any proceeding (or part thereof) initiated by such person unless the proceeding was authorized in advance by the board of directors of the corporation.

     Notwithstanding the foregoing, unless otherwise determined pursuant to Section 6.5, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (i) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.

     6.5 Non-Exclusivity Of Rights. The rights conferred on any person by this bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the General Corporation Law of Delaware.

     6.6 Survival Of Rights. The rights conferred on any person by this bylaw shall continue as to a person who has ceased to be a director, officer, employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

     6.7 Amendments. Any repeal or modification of this bylaw shall only be prospective and shall not affect the rights under this bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.

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ARTICLE VII

RECORDS AND REPORTS

     7.1 Maintenance And Inspection Of Records. The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books and other records of its business and properties.

     Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.

     7.2 Inspection By Directors. Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to his or her position as a director.

     7.3 Representation Of Shares Of Other Corporations. The chairman of the board, if any, the president, any vice president, the chief financial officer, the secretary or any assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of the stock of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

     7.4 Certification And Inspection Of Bylaws. The original or a copy of these Bylaws, as amended or otherwise altered to date, certified by the secretary, shall be kept at the corporation’s principal executive office and shall be open to inspection by the stockholders of the corporation, at all reasonable times during office hours.

ARTICLE VIII

GENERAL MATTERS

     8.1 Record Date For Purposes Other Than Notice And Voting. For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted and which shall not be more than sixty (60) days before any such action. In that case, only stockholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such

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rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided by law.

     If the board of directors does not so fix a record date, then the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the applicable resolution.

     8.2 Checks; Drafts; Evidences Of Indebtedness. From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

     8.3 Corporate Contracts And Instruments: How Executed. The board of directors, except as otherwise provided in these Bylaws, may authorize and empower any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such power and authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

     8.4 Stock Certificates; Transfer; Partly Paid Shares. The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to have a certificate signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

     Certificates for shares shall be of such form and device as the board of directors may designate and shall state the name of the record holder of the shares represented thereby; its number; date of issuance; the number of shares for which it is issued; a summary statement or reference to the powers, designations, preferences or other special rights of such stock and the qualifications, limitations or restrictions of such preferences and/or rights, if any; a statement or summary of liens, if any; a conspicuous notice of restrictions upon transfer or registration of transfer, if any; a statement as to any applicable voting trust agreement; and, if the shares be assessable, or, if assessments are collectible by personal action, a plain statement of such facts.

     Upon surrender to the secretary or transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

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     The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

     8.5 Special Designation On Certificates. If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware (relating to transfers of stock, stock certificates and uncertificated stock), in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

     8.6 Lost Certificates. Except as provided in this Section 8.6, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.

     8.7 Transfer Agents And Registrars. The board of directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, each of which shall be an incorporated bank or trust company — either domestic or foreign, who shall be appointed at such times and places as the requirements of the corporation may necessitate and the board of directors may designate.

     8.8 Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the General Corporation Law of Delaware shall govern the construction of these Bylaws. Without limiting the generality of this provision, as used in these Bylaws, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both an entity and a natural person.

     8.9 Provisions Additional to Provisions of Law. All restrictions, limitations, requirements and other provisions of these Bylaws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal.

     8.10 Provisions Contrary To Provisions Of Law. Any article, section, subsection, subdivision, sentence, clause or phrase of these Bylaws which upon being construed in the manner provided in Section 8.9

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hereof, shall be contrary to or inconsistent with any applicable provisions of law, shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these Bylaws, it being hereby declared that these Bylaws would have been adopted and each article, section, subsection, subdivision, sentence, clause or phrase thereof, irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.

     8.11 Notices. Any reference in these Bylaws to the time a notice is given or sent means, unless otherwise expressly provided, the time a written notice by mail is deposited in the United States mails, postage prepaid; or the time any other written notice is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient; or the time any oral notice is communicated, in person or by telephone or wireless means, to the recipient or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient.

ARTICLE IX

AMENDMENTS

     Subject to Section 6.7 hereof, the original or other Bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its Certificate of Incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

     Whenever an amendment or new bylaw is adopted, it shall be copied in the book of Bylaws with the original Bylaws, in the appropriate place. If any bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or the filing of the operative written consent(s) shall be stated in said book.

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Steven Laub, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Atmel Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2007	/s/ Steven Laub
	Steven Laub
	President & Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Robert Avery, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Atmel Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2007	/s/ Robert Avery
	Robert Avery
	Vice President Finance & Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, Steven Laub, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Atmel Corporation on Form 10-Q for the quarterly period ended September 30, 2007 (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Atmel Corporation.

November 8, 2007	By:	/s/ Steven Laub
		Steven Laub
		President & Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     I, Robert Avery, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Atmel Corporation on Form 10-Q for the quarterly period ended September 30, 2007 (i) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Atmel Corporation.

November 8, 2007	By:	/s/ Robert Avery
		Robert Avery
		Vice President Finance & Chief Financial Officer