Microchip Technology Inc. (MCHP), which designs and markets microcontrollers, is expected to report quarterly results on August 6. Management expects net sales to increase by 8% – 10% sequentially. This implies revenue guidance between $187.2 million and $190.6 million.
Non-GAAP gross margins are estimated between 50.3% and 50.7%. GAAP EPS is expected at $0.12 – $0.13 and Non-GAAP EPS at $0.17 – $0.18. The non-GAAP EPS exclude share-based compensation expense, acquisition-related charges, non-cash interest expense and any mark-to-market adjustment on the value of trading securities.
The company earlier indicated that its total backlog had grown during the June quarter and both direct and distribution business channels have been performing well. Further, the company is increasing its wafer starts and expects improving trends in gross margins in the upcoming quarters.
Effective cost-control measures have been a significant factor in its fourth-quarter operating results and the company expects more of the same in the first quarter. In response to the economic downturn, Microchip implemented certain cost-reduction and capital-containment measures.
Microchip shut down both its fabs at the end of the first quarter. The company also reduced production level by 20% from the peak utilization level in September 2008. It implemented a pay cut for all non-manufacturing employees across the world and eliminated all bonuses. Microchip plans to right-size its manufacturing output in order to maintain operating expenses at reasonable levels.
The global slowdown has adversely affected the company’s business in the past six months. After an unsuccessful attempt to buy Atmel (ATML) in February, Microchip is now focusing on improving profitability. We maintain a HOLD on the stock.
Read the full analyst report on “MCHP”
Read the full analyst report on “ATML”
Zacks Investment Research
