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Microchip sees hard times ahead

Posted: 29 Oct 2008     Print Version  Bookmark and Share

Keywords:quarter sales  wafer fab shutdown  microcontrollers  economic conditions 

Microcontroller supplier Microchip Technology Inc. experienced a strong second quarter to its fiscal year, achieving record sales and pushing profit up dramatically. Nonetheless, Steve Sanghi, president and CEO of Microchip, said he expected the next quarter sales to drop between 8 and 16 per cent sequentially and tipped plans to reduce costs including a two-week wafer fab shutdown.

In its fiscal Q2 ended Sept. 30 Microchip made a net profit of Rs.329.03 crore ($76.5 million) on sales revenue of Rs.1,160.00 crore ($269.7 million). Sales were up 4.3 per cent compared with the same quarter a year before and net income was up 26.1 per cent. For the first half of Microchip's fiscal year the company made a net income of Rs.657.20 crore ($152.8 million) on sales revenue of Rs.2,313.54 crore ($537.9 million). Sales were up 2.9 per cent compared with the first half of the previous fiscal year and indicating at Microchip enjoyed a better second quarter than first. First half net income was up 8.4 per cent.

"Despite business conditions being extremely challenging in the September quarter, we were able to grow net sales sequentially to new record levels, with 16-bit microcontrollers and analogue products also achieving new record net sales levels," said Steve Sanghi, Microchip's president and CEO, in a statement.. "Geographically, Asia grew approximately 6 per cent sequentially, but net sales in the Americas and Europe regions were both down sequentially."

Sanghi continued: "Net cash generated in the September quarter was $129.4 million (Rs.556.56 crore), and for the first half of fiscal 2008 net cash generated was $247.7 million (Rs.1,065.37 crore)," Mr. Sanghi added. "Our strong cash flow continues to be the cornerstone of our dividend commitment to our shareholders, allowing an increase in the dividend of 9.4 per cent from the level one year ago, to 33.9 cents per share."

"We achieved several highlights in our September quarter performance, despite challenging business conditions. Our 16-bit microcontroller net sales grew 16.8 per cent sequentially and 76.0 per cent year over year, and analogue net sales grew 11.7 per cent sequentially and 20.7 per cent year over year, both achieving new record levels. Our flash microcontroller net sales also achieved a new record with sequential growth of over 2 per cent and were up 14 per cent year over year," said Ganesh Moorthy, executive vice president, in the same statement. "Market demand for our development tools continued to be very strong, with shipments achieving record levels for the fourth quarter in a row. We shipped 35,282 development tools in the September quarter, with cumulative shipments exceeding 700,000."

Sanghi concluded, "Global economic conditions are creating significant difficulties in the market, as consumers and businesses deal with liquidity and credit concerns. Determining demand levels in the current climate is extremely challenging, as we endeavor to establish customer order patterns based on market conditions. Based on current business conditions, we will be taking actions in the current quarter relating to expenses and inventory levels including a two-week wafer fab shutdown and reductions in discretionary and variable costs. We currently expect net sales in the December quarter to be down 8 per cent to 16 per cent."

-Peter Clarke
EE Times Europe

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