Atmel Corporation (NDAQ:ATML) shares rose marginally yesterday after Daniel Loeb’s Third Point LLC disclosed a reduced stake in the company. The activist investor disclosed in a regulatory filing that it had sold large blocks of shares between 10/11/07 and 11/30/07 at prices ranging from $5.80 and $4.39. The move will likely mean a loss for Loeb, who had been purchasing shares at around $5.45 a piece.

The integrated circuit manufacturer recently announced in-line earnings of $16.6 million or 4 cents per share, compared to a gain of 3 cents per share a year earlier (excluding a one-time gain of $120 million). This drop, combined with other news, has led to a drop in the company’s stock of around 30% since the beginning of the year. This may have been one issue that led to the activist liquidating its stake in the company – to cover the losses from the position or others in its portfolio.

So, how does the Atmel’s future look? Well, the company’s top and bottom line growth in recent years seems to be slowing considerably. The company currently trades at a negative PE ratio (since it has experienced losses during the past four quarters) but should stand at around 15x earnings based on its historical EPS growth rate. Meanwhile, the company’s market cap of over $2 billion is over 40x its latest quarterly net income, meaning it is extremely overvalued.

In the end, this stock is a poor investment that Daniel Loeb’s Third Point appears to have given up on. In the past, Loeb has taken action to repair his investments and return them to profitability in order to reap healthy profits for his hedge fund. However, in this case it appears that even he is losing faith. Combined, these factors make ATML a stock worth watching!

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