Microchip Technology Announces Record Sales and EPS
Microchip Technology Inc. reported results for the three months ended September 30, 2010.
"Microchip acquired Silicon Storage Technology Inc. (SST) on April 8, 2010. At the time of the acquisition the Company determined that it would hold SST’s SuperFlash Memory and RF businesses as assets held for sale, in addition to other businesses that Microchip has sold since the acquisition date," said Steve Sanghi, Microchip’s President and CEO. "After operating the SST business for two quarters, we have found synergies between SST’s RF business and Microchip’s wireless, microcontroller and analog businesses. On the memory side, after divesting the low margin business to PCT in Taiwan in a transaction that was announced in July 2010, we have substantially improved the gross margin for the rest of the SuperFlash Memory business. Additionally, we have found that running some volume on the memory business is critical to proving out the technology before it can be licensed. There are also significant operational synergies with Microchip’s memory business and technology synergies with Microchip’s microcontroller business. Therefore, we have decided to integrate the SuperFlash Memory and RF businesses of SST into the ongoing businesses of Microchip. These businesses added $40.0 million of net sales in the three months ending September 30, 2010, and $76.3 million of net sales in the six months ended September 30, 2010."
As required by GAAP, in this press release and in future filings with the SEC, the first quarter of fiscal 2011 will be presented as if the SST SuperFlash Memory and RF businesses were always included in the continuing operations of Microchip. Microchip’s second quarter fiscal 2011 guidance for continuing operations provided on August 5, 2010 did not include the SuperFlash Memory and RF businesses and without these businesses Microchip guided its net sales to be $340 to $343 million for the September quarter. The actual results for these businesses achieved $342.3 million which is near the high end of the previous guidance.
Consolidated net sales for the second quarter of fiscal 2011 were $382.3 million, up 7.0% sequentially from net sales of $357.1 million in the immediately preceding quarter, and up 68.7% from net sales of $226.7 million in the prior year’s second quarter. GAAP net income from continuing operations for the second quarter of fiscal 2011 was $104.7 million, or 55 cents per diluted share, up 14.0% from GAAP net income from continuing operations of $91.9 million, or 48 cents per diluted share, in the immediately preceding quarter, and up 135.5% from GAAP net income of $44.5 million, or 24 cents per diluted share, in the prior year’s second quarter.
Consolidated non-GAAP net income from continuing operations for the second quarter of fiscal 2011 was $119.6 million, or 63 cents per diluted share, up 8.8% from consolidated non-GAAP net income from continuing operations of $109.9 million, or 58 cents per diluted share, in the immediately preceding quarter, and up 124.9% from consolidated non-GAAP net income of $53.2 million, or 29 cents per diluted share, in the prior year’s second quarter.
Mr. Sanghi said, "The September quarter was an all-time record for Microchip in many respects. Microchip’s net sales for the September quarter were a record $382.3 million and were up 7% sequentially. Non-GAAP operating income was an all-time record high of $138.2 million, at 36.2% of sales. Our August 5, 2010 guidance for non-GAAP earnings per share was 58 cents and our non-GAAP EPS for the September quarter was a record 63 cents. We are proud to present these record breaking results to our stakeholders."
Mr. Sanghi added, "We are excited that we have completed the integration and restructuring of SST and have transformed SST into a very profitable entity that was accretive to Microchip’s non-GAAP earnings per share by about 8 cents for the September quarter. We expect SST to add approximately 32 cents to Microchip’s non-GAAP earnings for fiscal year 2011 and about 40 cents for fiscal year 2012."
"Our microcontroller business delivered another all-time record in net sales for Microchip of $256.7 million and was up 4.7% sequentially. Net sales of our 16-bit microcontrollers were up 22% sequentially and more than doubled from the year ago quarter," said Ganesh Moorthy, Chief Operating Officer. "Net sales of our 32-bit microcontrollers were down 10.9% sequentially, and up 225% year over year. In the first six months of this fiscal year, 32-bit microcontroller sales are up 320% over the same period last year from a small but rapidly growing base. We expect to see significant growth in this product line over the next several years. Our analog products produced the sixth consecutive double-digit sales growth quarter, achieving 11.6% sequential growth, and was up 99.8% from the year ago quarter."
Mr. Sanghi added, "Microchip’s net sales have grown from $226.7 million in the September 2009 quarter to $382.3 million in the September quarter 2010, a growth of 68.7%. Annualizing our September quarter results, we are now over a $1.5 billion sales run rate and we believe we are well on our way to achieving our long-term goal of $2 billion in net sales in the coming years. We are confident that Microchip has continued to gain market share in the microcontroller and analog markets. We did experience a slowdown in bookings activity in the September quarter, as customers and distributors adjust their backlog and inventory. This resulted in a book-to-bill ratio of 0.87 and therefore we are cautious regarding the revenue outlook for the December quarter. We expect net sales to be down approximately 2% to 8% sequentially in the December quarter, which is typically our seasonally weakest quarter of the year."