Microchip Technology Incorporated (MCHP) reported net revenues of $367.8 million in the third quarter of fiscal 2011, down 3.8% sequentially and 47.1% year-over-year, beating the Zacks Consensus Estimate of $362 million.
Quarter in Detail
In terms of product t mix, revenues from microcontrollers were down 2.2% sequentially but up and 24% year-over-year. 8-bit micro controller business performed better than management’s expectations. 16-bit micro controller business was down 2.6% sequentially but up 8.4% year over year.
Microchip stated that new customers and new designs going into production continued to drive significant growth as the number of volume 16-bit customers grew over 3,300. 32-bit micro controller product line grew 45%. Microchip shipped 40,000 development tools in the quarter.
The Analog business was up 67% year-over-year and down 4.7% sequentially. Serial EEPROMs business was down 13.5% sequentially.
Microchip acquired Silicon Storage Technology (SST) in 2010. Excluding stock-based compensation expense and one-time items, gross margins came in at 59.8%, down from 60.2% in the previous quarter but towards the high-end of management’s guidance.
The gross margin was favorably impacted by ongoing cost reductions in our manufacturing processes, a favorable product mix and continued improvements in the product lines that Microchip acquired from SST.
Operating margin came in at 35.6%, down from 36.2% in the previous quarter. Net income from continuing operations came in at $101.9 million or 52 cents compared to a net income of $104.7 million or 55 cents in the previous quarter.
Excluding one-time items and stock-based compensation expense, net income came in at 53 cents per share beating the Zacks Consensus Estimate by a penny. Including the above mentioned items, Microchip generated a gross margin of 58.8%.
Cash Analysis
Capital expenditures were approximately $34.2 million for the December quarter. Microchip ended the quarter with cash and cash equivalents of $1.2 billion, down from $1.4 billion at the end of the previous quarter.
Inventory at the end of the quarter was $177.7 million, up from 166.6 million at the end of the previous quarter. Inventory days (the number of days inventory is held) were approximately 107 days, up ten days from the prior quarter levels. Microchip expects to continue to build inventory levels in the March quarter to improve lead times, and support our customer’s delivery requirements.
Quarter Ahead
Going forward, management expects net sales for the March quarter between $367.8 million and $378.9 million, better than the Zacks Consensus Estimate of $362 million. Gross margin is projected around 59.9% – 60.1%.
Earnings per share are projected between 49 and 52 cents. Excluding special items, earnings per share are projected between 56 cents and 58 cents. SST operations are expected to add approximately 32 cents to Microchip’s bottom-line in 2011 and 40 cents in 2012.
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