Tags: Microchip | Technology | doldrums | MCHP

Microchip Technology in Tech Doldrums

By    |   Monday, 21 Nov 2011 05:13 PM

Microchip Technology Incorporated (MCHP), a provider of microcontroller, analog and flash IP solutions, is taking a financial hit thanks to global economic fears and a subsequent pullback on microchip, semiconductor and other technology spending.

Net sales for the second quarter of fiscal 2012 ended Sept. 30 came to $340.6 million, down 10.9 percent from revenue of $382.3 million in the prior year's second fiscal quarter. Net income fell 24 percent to $79.3 million during the quarter.

In summary, a weak economy and ongoing uncertainty are hurting overall technology spending, which is trickling down to MCHP's financials.

"Our September quarter results are consistent with what others in the industry have reported. The poor economic conditions are impacting the broader semiconductor industry as can be seen from the earnings reports over the past few weeks," company President and CEO Steve Sanghi says in an earnings statement.

"The overall macroeconomic environment is weak, and the Christmas build season did not materialize as expected during the quarter. We saw broad-based weakness across all sales channels in all geographies," Sanghi adds.

Don't expect this area of the technology market to come roaring back either, experts say.

"Since June, client PC processor demand growth has slowed down modestly," the IDC technology research company says in a recent outlook.

"Combined with a weak macroeconomic outlook — due to sovereign debt issues in Europe and poor job growth in the United States — IDC is reducing its client PC processor (desktop, mobile, x86 server) unit growth forecast for 2011 from 9.3 percent to 7.3 percent."

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While the sector remains weak and mired in economic uncertainty, now may be the time to invest in the company. UBS upgraded MCHP stock to buy from neutral in November. In July, Stifel Nicolaus reiterated a buy recommendation.

Company executives are already looking forward to better days ahead, especially if demand exceeds supply in inventory. “We expect the inventory burn-off to be largely over by the end of the December quarter and anticipate the December quarter to mark the bottom of this industry cycle for revenue, gross margin and earnings per share," Sanghi says.

The company will release earnings on Jan. 26.
 

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Microchip Technology Incorporated (MCHP), a provider of microcontroller, analog and flash IP solutions, is taking a financial hit thanks to global economic fears and a subsequent pullback on microchip, semiconductor and other technology spending. Net sales for the second...
Microchip,Technology,doldrums,MCHP
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2011-13-21
Monday, 21 Nov 2011 05:13 PM
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