Microchip reports Strong Third Quarter Fiscal for Year 2016

February 04, 2016 by Jeff Shepard

Microchip Technology Incorporated reported results for the three months ended December 31, 2015 including GAAP net sales for the third quarter of fiscal 2016 were $540.3 million, up 2.2% from GAAP net sales of $528.7 million in the prior year's third fiscal quarter. GAAP net income for the third quarter of fiscal 2016 was $61.2 million, or 28 cents per diluted share, down 28.9% from GAAP net income of $86.1 million, or 39 cents per diluted share, in the prior year's third fiscal quarter.

"Our December quarter results were strong amidst a very turbulent macro and semiconductor industry backdrop. The quarterly results in non-GAAP revenue, gross margin percentage, operating expense percentage and operating profit percentage were all better than the midpoint of our guidance given on November 4," said Steve Sanghi, Chairman and CEO. "Additionally, our non-GAAP diluted earnings per share came in at 64 cents which is above the 62 to 63 cents upwardly revised guidance we provided in the announcement of our preliminary results on January 19, 2016."

Mr. Sanghi added, "Our solid financial results in the December quarter position us well as we prepare for our acquisition of Atmel, which we expect to close in the second calendar quarter of 2016."

On January 19, 2016, Microchip announced the signing of a definitive agreement to acquire Atmel Corporation for $8.15 per share in a combination of cash and shares of Microchip common stock. The acquisition price represents a total equity value of about $3.56 billion, and a total enterprise value of about $3.40 billion, after excluding Atmel's cash and investments net of debt on its balance sheet of approximately $155.0 million as of December 31, 2015.

"Our microcontroller revenue was down 3.5% in the December quarter compared to the September quarter. We experienced the same broad-based weakness that the industry is experiencing. In calendar year 2015, our microcontroller business revenue was down 1.4% compared to calendar year 2014, and while we are not happy about the decline, we are confident that we are gaining market share in every microcontroller market that we compete in during what was a difficult year for the overall industry," said Ganesh Moorthy, President and Chief Operating Officer. "We are continuing to deliver innovative new 8-bit, 16-bit and 32-bit microcontrollers that we believe will enable us to grow faster than the market and gain further market-share."

Mr. Moorthy added, "Our analog business revenue, which includes Micrel, was up 4.1% in the December quarter compared to the September quarter, and was up 3.6% compared to the year-ago quarter. In calendar year 2015, our analog business revenue was up 22.4% compared to calendar year 2014. The strong growth and increase in market-share in 2015 was the result of our organic growth initiatives as well as our Micrel acquisition. Our analog business represented 31.2% of Microchip's overall revenue in the December quarter, the highest percentage of our total revenue it has ever been. We continue to develop and introduce a wide range of innovative and proprietary new products to fuel the future growth of our analog business, complemented by the products added to our portfolio through acquisitions."

Eric Bjornholt, Microchip's Chief Financial Officer, said, "Our cash generation in the December quarter excluding our acquisition activities, our dividend payment, and changes in borrowing levels under our revolving line of credit was $172 million. As of December 31, 2015, our consolidated cash and total investment position was $2.40 billion. The dividend we announced today marks the 48th occasion that we have increased our dividend payment, and cumulative dividends paid are now at $2.73 billion."

Mr. Sanghi concluded, "We believe that our business has stabilized and that the majority of the inventory correction is behind us. The March quarter will be impacted negatively by the Chinese New Year holidays in Asia but it is also the strongest quarter of the year for Microchip in Europe. Based on our analysis of economic and semiconductor industry conditions, as well as our own business indicators, we are guiding the March quarter non-GAAP net sales to be flat to up 3% sequentially."