SAN FRANCISCO—Chip vendor Microchip Technology Inc. Thursday (Aug. 4) reported sales and profit for the quarter ended June 30 that narrowly exceeded analysts' expectations as the company's CEO warned of softness in demand related to a weak global economic conditions.
Microchip (Chandler, Ariz.) reported sales for the quarter of $374.5 million, down 1 percent compared with the previous quarter and up 5 percent compared with the year-ago quarter. The company report a net income in accordance with generally accepted accounting principles (GAAP) of $99.3 million, or 49 cents per share, down 24 percent compared with the previous quarter but up 8 percent compared with the year-ago quarter.
On a non-GAAP basis, excluding charges, Microchip reported a net income from continuing operations of $111.4 million, or 55 cents per diluted share, down 6 percent from the previous quarter and up 1 percent compared with the year-ago quarter.
Consensus analysts' expectations called for Microchip to report sales of $374.4 million and non-GAAP earnings per share of 54 cents, according to Yahoo Finance.
"We saw broad-based softness in our business due to weak global economic conditions," said Steve Sanghi, Microchip president and CEO, in a statement. "This manifested itself into demand and bookings weakness across multiple market segments and multiple customers in each segment."
Sanghi noted that the weakness Microchip saw has now been reflected in the sales targets provided by several semiconductor industry firms. A number of companies, including most recently ON Semiconductor Corp. and Atmel Corp., have offered guidance for the third quarter that fell below analysts' expectations.
Microchip said it expects sales for the current quarter to decline to between $352 million and $370.8 million. Analysts had expected Microchip to guide for revenue of about $361 million for the current quarter, according to Yahoo Finance.
"While we are obviously disappointed with our June quarter results, we believe we are well-positioned to grow market share over the long term in our microcontroller, analog and licensing product lines," Sanghi said. "However, in the September 2011 quarter we expect to continue to experience the lingering effects of weak global economic conditions."
Ganesh Moorthy, Microchip's chief operating officer said the company's microcontroller business was down 2 percent in the recently concluded quarter, but that 32-bit microcontroller sales improved by 19 percent sequentially.
"Design win momentum in all of our product lines continues to be strong and we expect these wins to contribute to revenue growth as the economic headwinds we are experiencing subside," Moorthy said.
Eric Bjornholt, Microchip’s chief financial officer said the inventory on the company's balance sheet grew to 119 days in the June quarter and that inventory levels at Microchip's distributors grew by three days sequentially to end the quarter at 43 days. Inventory is expected to climb to 130 days in September, Microchip said.
"We are comfortable with these inventory levels given the long life cycle for our products, and we continue to view our short lead times as a competitive advantage," Bjornholt said.
Microchip Technology, Sales, Chip, Microcontroller Microchip Tech sees softer demand
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