Microchip Technology, the Chandler-based microcontroller producer, is giving up its efforts to acquire rival Atmel Corp.
This week the local company said it has given up any attempt at a hostile takeover of the Silicon Valley-based firm, also a producer of microcontrollers. Microchip also said it had withdrawn a slate of directors it had nominated for Atmel's board.
In a statement, Microchip Chief Executive Steve Sanghi said the global economy and the semiconductor industry have "deteriorated significantly" since Microchip offered $5 a share for Atmel's stock on Oct. 1.
"In light of the economic uncertainty and the lack of visibility that continues to exist with respect to Atmel's business, Microchip is no longer able to put a value on Atmel," Sanghi said. "Microchip will therefore terminate consideration of a potential acquisition of Atmel."
In a response, Atmel executives said they will focus on carrying out a transformation plan intended to improve the company's stock and business performance.
The San Jose, Calif.-based company said its microcontroller revenue grew 14 percent in 2008, and full-year gross profit margins reached their highest level since 2000, indicating the turnaround effort is working.
"We remain confident that we are on the right track to further enhance shareholder value," the company said in a statement.
Microchip and Phoenix-based ON Semiconductor Corp. made an unsolicited joint proposal to acquire Atmel in October, with Microchip proposing to take the California company's microcontroller business and ON Semiconductor bidding for Atmel's memory, radio-frequency and automotive semiconductor businesses.
Atmel officials rejected the offer, saying it did not give full value to Atmel shareholders.
ON Semiconductor backed out of the deal in November, citing the "unforeseen deterioration in the semiconductor market." At that time Microchip also withdrew its part of the offer but said it would keep open the possibility of an alternative transaction without ON.
This week, however, Microchip officially threw in the towel, saying it would no longer consider any deal.
Atmel's stock has been trading in the $3.50-$4 range.