Microchip Technology Inc. (Microchip), a US-based provider of microcontroller and analog semiconductors, has provided guidance for the fourth quarter of fiscal 2009. The company expects net sales for the fourth quarter of fiscal 2009 to be down 8 to 12% from the third quarter of fiscal 2009. On a GAAP basis, the company expects earnings per diluted share to be around 9 to 11 cents for fourth quarter of fiscal 2009, excluding acquisition related expenses and gains or losses on trading securities.
Earnings per diluted share on a non-GAAP basis, excluding the effect of share-based compensation, acquisition related expenses, and gains or losses on trading securities are expected to be about 13 to 15 cents. During its earnings conference call on January 29, 2009, the company did not provide any financial guidance for the quarter ending March 31, 2009, but disclosed its internal plan for the quarter was for net sales of $173 million, or down about 10% from the third quarter of fiscal 2009.
“While general economic and semiconductor industry conditions have continued to be difficult and visibility continues to be limited, we have progressed according to our internal plan for this quarter,” stated Steve Sanghi, Microchip’s president and chief executive officer. “We saw our total backlog bottom out early in the quarter and it has since shown gradual growth. As a result of actions that we implemented during this quarter, we have reduced manufacturing output by around 29% from the December 2008 level or down around 43% from the peak level of September 2008. For the March 2009 quarter, GAAP operating expenses are expected to be down about 7% from the December 2008 quarter and down around 23% from the quarter ending September 30, 2008, excluding acquisition-related expenses. For the March 2009 quarter, non-GAAP operating expenses are expected to be down about 7% from the December 2008 quarter and down around 25% from the quarter ending September 30, 2008,” continued Sanghi.
“We are seeing a high level of expedite requests from our customers, despite relatively short lead times on all of our products. We believe this indicates that customer inventories are depleted and that customer order patterns are now trying to catch up to actual demand. While it is too early to call this a trend, we are encouraged by these signs, and hope that the current quarter can be the bottom of this cycle,” added Sanghi.
“In response to the current environment, Microchip dramatically cut its capital expenditure budget to only $15 million for fiscal year 2010, consisting primarily of maintenance-type capital items. Even under a very conservative revenue scenario we have modeled, we expect our free cash flow for fiscal year 2010 to be sufficient to support the current level of dividend. Although many blue chip companies have significantly cut their dividends, Microchip’s Board of Directors has reaffirmed its commitment to the current dividend levels,” concluded Sanghi.