Microchip Technologies (MCHP) recently increased its guidance for Q4:FY10 driven by increased demand from customers in Asia and Europe. In particular, China continues to be strong after the New Year while Europe is expected to exceed seasonally strong March quarter results.

The company now expects sales to be up 8% sequentially compared to the previous guidance of 3-7%. Microchip expects record bookings in the quarter, which bodes well for the next quarter. Inventory is expected to be flat to down in the March quarter.

With signs of recovery, we raise our estimates following management’s upbeat guidance and expect Microchip to deliver solid results in the coming quarters. The dividend yield of 4.49% continues to be the key attractive feature of the stock. Hence, we upgrade our rating to Outperform from Neutral.Zacks Investment Research