UNITED STATES SECURITIES AND EXCHANGE COMMISSION

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 2004

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

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

(408) 441-0311
Registrant’s telephone number

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 x No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No o

On October 27, 2004, Registrant had 477,349,883 outstanding shares of Common Stock.

ATMEL CORPORATION

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2004

INDEX

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

Atmel Corporation

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Atmel Corporation

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Atmel Corporation

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Atmel Corporation

1. Summary of Significant Accounting Policies

     Basis of Presentation

     These unaudited interim financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly, in all material respects, the financial position of Atmel Corporation (“the Company” or Atmel) and its subsidiaries as of September 30, 2004 and the results of operations for the three and nine month periods ended September 30, 2004 and 2003 and the cash flows for the nine month periods ended September 30, 2004 and 2003. All material intercompany balances have been eliminated. Because all of the disclosures required by generally accepted accounting principles are not included, these interim statements should be read in conjunction with the audited financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. The December 31, 2003 year-end condensed balance sheet data was derived from the audited financial statements and does not include all of the disclosures required by generally accepted accounting principles. The 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. Certain prior period amounts have been reclassified to conform to current presentations and such reclassifications did not have any effect on the prior periods’ net loss.

     Stock Based Compensation

     Atmel has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 (SFAS No.123), Accounting for Stock Based Compensation amended by SFAS No. 148. Accordingly, no compensation cost has been recognized for the 1986 Incentive Stock Option Plan or 1996 Stock Plan or for grants made under the 1991 Employee Stock Purchase Plan (ESPP). If the compensation cost for the 1986 Plan, the 1996 Plan and the ESPP had been determined based on the fair value at the grant date consistent with the provisions of SFAS No.123, Atmel’s net income (loss) and net income (loss) per share for the three and nine months ended September 30, 2004 and 2003 would have been adjusted to the pro forma amounts indicated below:

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     The fair value of each option grant for both the 1986 Plan and the 1996 Plan is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

     The fair value of each purchase under the ESPP is estimated on the date at the beginning of the offering period using the Black-Scholes option-pricing model with substantially the same assumptions as the option plans but with expected lives of 0.5 years. The weighted average fair values of ESPP purchases during the first nine months of 2004 and 2003 were $1.54 and $0.98, respectively. The weighted average fair values of ESPP purchases during the third quarter of 2004 and 2003 were $1.81 and $0.89, respectively.

     The effects of applying SFAS No. 123 on the pro forma disclosures for the three and nine months ended September 30, 2004 and 2003 are not likely to be representative of the effects on pro forma disclosures in future periods.

     Derivatives

     The Company uses derivative instruments to manage exposures to foreign currency. The Company’s policy is to use derivatives to minimize the volatility of earnings and cash flows associated with changes in foreign currency. Certain forecasted transactions and foreign currency assets and liabilities expose the Company to foreign currency risk. The Company enters into foreign exchange forward contracts to minimize the short-term impact of currency fluctuations on existing as well as anticipated foreign currency assets and liabilities.

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     For a derivative instrument designated as a cash flow hedge, the effective portion of the derivative’s gain or loss is initially reported as a component of accumulated other comprehensive income (loss) and subsequently reclassified into earnings when the hedged exposure affects earnings. The ineffective portion of the gain or loss is reported in earnings immediately. For derivative instruments not designated as a FAS No. 133 cash flow hedge, the gain or loss is recognized in earnings in the period of the change, offsetting the gain or loss from revaluation.

     Recent Accounting Pronouncements:

     At its November 2003 meeting, the Emerging Issues Task Force (EITF) reached a consensus on disclosure guidance previously discussed under EITF 03-01, “The Meaning of Other Than Temporary Impairment and its Application to Certain Investments”. The consensus clarifies the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity under SFAS No. 115 and investments accounted for under the cost method or the equity method. The consensus provided for disclosure of amounts of impairment of investments in securities not yet recognized in income effective for fiscal years ending after December 15, 2003. The Company adopted the disclosure requirements during its quarter ended September 30, 2004 (See Note 3).

     At its March 2004 meeting, the EITF reached a consensus on recognition and measurement guidance previously discussed under EITF 03-01. The consensus clarifies the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity under SFAS No. 115 and investments accounted for under the cost method or the equity method. The recognition and measurement guidance for which the consensus was reached in the March 2004 meeting is to be applied to other-than-temporary impairment evaluations in reporting periods beginning after June 15, 2004. In September 2004, the FASB issued FASB Staff Position 03-01-1, which delays the effective date of the recognition and measurement guidance. The Company does not believe that this consensus on the recognition and measurement guidance will have a significant impact on its financial position or results of operations.

     In April 2004, the Emerging Issues Task Force reached a consensus on Issue No. 03-06, (EITF 03-06), “Participating Securities and the Two-Class Method Under FASB Statement No. 128, Earnings Per Share”. EITF 03-06 addresses a number of questions regarding the computation of earnings per share by companies that have issued securities other than common stock that contractually entitle the holder to participate in dividends and earnings of the company when, and if, it declares dividends on its common stock. The Issue also provides further guidance in applying the two-class method of calculating earnings per share, clarifying what constitutes a participating security and how to apply the two-class method of computing earnings per share once it is determined that a security is participating, including how to allocate undistributed earnings to such a security. EITF 03-06 is effective for fiscal periods beginning after March 31, 2004. The adoption of EITF 03-06 did not have a material effect on Atmel’s results of operations or financial position.

     In October 2004, the EITF reached a consensus on Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” which addressed the issue of when the dilutive effect of contingently convertible debt instruments (Co-Cos) should be included in diluted earnings per share. EITF 04-8 addresses the issue of when “Co-Cos” should be included in diluted earnings per share computations, regardless of whether the market price trigger has been met. The effective date of this consensus will coincide with the effective date of

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the proposed Statement that revises FASB Statement 128, Earnings per Share, which is expected to be December 15, 2004. If the effective date of Statement 128 (revised) is postponed until after December 15, the staff will ask the Task Force to consider making the Statement effective for fiscal periods beginning after December 15, 2004. The adoption of EITF 04-8 is not expected to have a material effect on Atmel’s results of operations or financial position.

2. Inventories

     Inventories are stated at the lower of cost (determined on a first-in, first-out basis for raw materials and purchased parts; and an average cost basis for work in progress) or market, and are comprised of the following:

     Inventory reserves at September 30, 2004 and December 31, 2003 were $89,529 and $100,686 respectively.

     The Company’s policy is to write down its raw materials, work in progress and finished goods to the lower of cost or market at the close of a period. The Company’s inventory represents high technology integrated circuits that are subject to rapid technological obsolescence and are sold in a highly competitive industry. If actual product demand or selling prices are less favorable than the Company’s estimate, the Company may be required to take additional inventory write-downs. Alternatively, if the Company sells more inventory or achieves better pricing than the Company’s forecast, future margins may be higher.

3. Short Term Investments

     Short term investments at September 30, 2004 and December 31, 2003 are primarily comprised of US and foreign corporate debt securities, US 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 with net unrealized gains or losses reported within stockholders’ equity.

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     Included in Net unrealized gains on Marketable Securities as of September 30, 2004 are $266 of unrealized losses related to Corporate securities purchased in 2004.

4. Accounts Receivable and Allowance for Doubtful Accounts

     Trade accounts receivable are recorded at the invoiced amount and do not bear interest. An allowance for doubtful accounts is calculated based on several factors including historical experience, specific customer or product issues, and management judgment. Past due balances over 90 days are reviewed individually for collectibility on a monthly basis. Account balances are charged off against the allowance after collection efforts are exhausted. There is no off-balance-sheet credit exposure related to our customers.

     Accounts receivable balances consist of the following:

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5. Intangible Assets

     Intangible assets as of September 30, 2004 are included in Intangibles and Other Assets in the condensed consolidated balance sheet and consisted of the following:

     Intangible assets as of December 31, 2003 consisted of the following:

     Intangible amortization expense for the three months ended September 30, 2004 and 2003 totaled $2,792 and $3,481, respectively. Intangible amortization expense for the nine months ended September 30, 2004 and 2003 totaled $8,975 and $9,925, respectively. The following table presents the estimated future amortization of net intangible assets:

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6. Income Taxes

     For the three and nine months ended September 30, 2004, the Company recorded an income tax expense of $17,867 and $25,829, respectively, compared to an income tax expense of $3,000 and $9,000 for the three and nine months ended September 30, 2003, respectively.

     The provision for income taxes for these periods relates to certain profitable foreign subsidiaries as the Company is not recognizing any tax benefits for unprofitable entities due to the full valuation allowance provided against their related deferred tax assets. As a result, the provision for income taxes was at a higher effective rate than the Company expected if all entities were profitable.

7. Net Income (Loss) Per Share

     Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed 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, warrants and convertible securities for all periods.