Microchip Technology Incorporated (MCHP) upgraded its guidance for the third quarter. The company now expects net sales to increase by 6% – 8% sequentially, up from the previous guidance of sales growth around 4% – 8%.
The company had reported revenues of $227 million in the third quarter, and the revised guidance implies revenues between $240 million and $245 million for Q410 (ending January). Microchip continues to see excellent design-win traction in strategic product lines.
Earnings per share are expected around 33 to 35 cents. Management also stated that gross margin will come at the high end of its previous guidance and operating expenses at the low end of the previous guidance. On the last conference call, management stated that it expects gross margin around 57.0% – 57.5% while operating expenses should come around 26.8% – 27.0% of sales.
Last month, the company reported results for the second quarter, which beat expectations. Revenue growth was broad-based. In particular, the microcontroller segment did extremely well in the last quarter, with all the three categories (8-bit, 16-bit and 32-bit) growing very strongly on a sequential basis. Flash microcontrollers made up the bulk of the shipments in the last quarter. The analog business also grew very strongly, driven by strength in linear, mixed signal, interface, and safety and security product lines.
The global slowdown had adversely affected Microchip’s business in late 2008-early 2009. However, the company was able to maintain profitability through effective cost control measures and inventory correction. Management believes the company is over the worst. Indeed, the company saw a steady improvement in the overall business environment despite the continued weakness in the global economy. The dividend yield of 5.12% continues to be the key attractive feature of the stock.
Headquartered in Chandler, Arizona, Microchip Technology Inc. is a leading provider of microcontroller and analog semiconductors, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide.
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