GAAP earnings per diluted share for the third quarter of fiscal 2009 were 40 cents, down 2.3% from GAAP earnings per diluted share of 41 cents in the immediately preceding quarter, and up 4.9% from GAAP earnings per diluted share of 38 cents in the prior year’s third quarter.

Non-GAAP earnings per diluted share for the third quarter of fiscal 2009 were 23 cents, down 49.5% from non-GAAP earnings per diluted share of 45 cents in the immediately preceding quarter, and down 41.5% from non-GAAP earnings per diluted share of 39 cents in the prior year’s third quarter. Non-GAAP results exclude a favorable settlement with the IRS, a favorable adjustment to tax reserves based on a clarification of tax regulations announced by the IRS, the retroactive reinstatement of the R&D tax credit, a loss on trading securities, the effect of share-based compensation and the impacts of the acquisition of Hampshire Company.

Microchip also announced today that its Board of Directors has declared a quarterly cash dividend on its common stock of 33.9 cents per share. The quarterly dividend is payable on February 27, 2009 to stockholders of record on February 13, 2009. Microchip initiated quarterly cash dividend payments in the third quarter of fiscal 2003.

“General economic and semiconductor industry conditions continued to decline during the December quarter,” said Steve Sanghi, Microchip’s president and chief executive officer. “Our December earnings results are reflective of these conditions, and we have taken actions to moderate expense levels and adjust our capacity. We have instituted pay cuts for all of our employees worldwide, and we are substantially reducing or eliminating discretionary expenses. We were able to reduce non-GAAP operating expenses in the quarter ended December 31, 2008 by $14 million, or 20%, over the operating expenses in the quarter ended September 30, 2008.”

“We are continuing actions to reduce production levels in our wafer fabrication facilities in the U.S. and our assembly and test facility in Thailand to moderate inventory growth. We are lowering our production levels by about 40% in the March quarter from peak levels in the September 2008 quarter. We are charging the underutilization to cost of goods sold to reflect lower than normal production levels. We are also implementing various other actions to further reduce operating expenses,” continued Sanghi.

“We are positioning Microchip to emerge from this economic downturn stronger than our competition by maintaining our focus on product and technology development activities, demand creation initiatives and driving internal efficiencies. We believe that we will continue to expand our market share in our strategic product lines through our focus on design win opportunities and new product introductions,” Sanghi continued.

“Our 16-bit product line revenue was only down 7 percent sequentially and was up 28% from a year ago, which we find encouraging given the depth of the current downturn,” said Ganesh Moorthy, executive vice president. “The number of volume customers in 16-bit continued to grow even in the current environment, and we continue to gain market share and traction in this strategic product line.”

Eric Bjornholt, Microchip’s chief financial officer, said, “Inventory levels on Microchip’s balance sheet grew to 143 days at the end of December compared to 110 days at the end of the September quarter. Deferred income on shipments to distributors fell by $5.1 million in the December quarter while days of inventory in the distribution channel increased from 35 days to 41 days. Despite our actions to reduce our production levels, demand fell so significantly that we were unable to prevent the increase in days of inventory. We are taking actions that over time should adjust our inventory levels to be more in line with our recent history.”

Sanghi concluded, “In light of the unprecedented global economic conditions and limited visibility, Microchip is not providing revenue guidance at this time. However, for our internal activities, we are planning revenue for the quarter ending March 31, 2009 to be approximately $173 million.”

Microchip’s Recent Highlights:

During the quarter, Microchip shipped 32,799 new development systems, demonstrating the continued strong interest in Microchip’s products. The total cumulative number of development systems shipped now stands at 735,802.

Adding to its world-class development systems portfolio, Microchip announced the MPLAB ICD 3 in-circuit debugger—a cost-effective, high-speed development tool that supports in-circuit programming and debugging of Microchip’s Flash-based 8-bit PIC microcontrollers (MCUs), and its entire line of 16- and 32-bit MCUs and 16-bit dsPIC Digital Signal Controllers (DSCs). Additionally, the new PICkit 3 Debug Express kit overcomes the cost and complexity barriers to enter the world of code development and embedded programming, at a very cost-effective price point of $69.99.

Building upon the success of its popular 8-bit Mid-range core microcontrollers, Microchip announced that it has developed an enhanced core to provide additional performance, while maintaining compatibility with existing Mid-range products for true product migration. The enhancements provide users with a boost in performance of up to 50% and code-size reductions of up to 40% for various algorithms and functions.

Microchip announced the world’s first Inductive Touch-Sensing Technology solution, which enables touch sensing capability through a front panel, such as plastic, stainless steel or aluminum, as well as through gloves and on surfaces that contain liquids. With this new technology, Microchip allows designers to integrate inductive touch-sensing functionality with their existing application code in a single standard 8-, 16- or 32-bit PIC MCU or 16-bit dsPIC DSC, thus reducing total system costs.

The company introduced its new MCP3422/3/4 low-power, high-resolution Delta-Sigma Analog-to-Digital Converters which provide 18-bits of resolution and consume only 135 micro Amperes at 3V continuous conversion.

Microchip announced a new MCP9509/10 low-power, resistor-programmable, logic-output temperature switches, which have a threshold that can be programmed with a single external resistor. This means designers can now stock one device for measuring multiple temperature points by varying the external resistance value.

The Company also introduced a family of serial EEPROM devices with built-in EUI-48™ and EUI-64 compatible MAC addresses. Designed to work on standard busses, such as SPI, I2C and the UNI/O bus, the devices provide easy and inexpensive access to MAC addresses, and feature up to 1.5 Kb of EEPROM that can be used for storing configuration and user settings, or as a scratch-pad area for buffering small amounts of data.

Fourth Quarter Fiscal 2009 Outlook:

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

In light of the highly uncertain global economic conditions and limited visibility, Microchip is not providing revenue guidance at this time. However, for our internal activities, we are planning revenue for the quarter ending March 31, 2009 to be about $173 million. All financial information provided below is based on this internal revenue plan of about $173 million.