Net sales expected to be down for Microchip

On May 5, 2011, Microchip provided guidance of net sales increasing 1% to 6% sequentially. Microchip also announced today that first quarter fiscal 2012 GAAP earnings per share is expected to be approximately 47 to 49 cents and non-GAAP earnings per share is expected to be approximately 53 to 55 cents. On May 5, 2011, Microchip provided guidance of GAAP EPS of 52 to 55 cents and non-GAAP EPS of 58 to 62 cents for the first quarter of fiscal 2012. Steve Sanghi, Microchip’s President and CEO, comments "Our net sales activity in the June quarter did not progress as we originally expected. We are seeing broad-based weakness in our business due to a number of factors. In the June quarter, our automotive business was down significantly from the March 2011 quarter due to lower automotive production activities including supply issues from other manufacturers associated with the earthquake in Japan. We also believe that some of the revenue upside that we saw in the March 2011 quarter was the result of customers being cautious and accelerating purchasing activities to minimize supply chain disruptions. Therefore, we believe we were also impacted by the correction of that inventory in the June 2011 quarter. Additionally, our consumer business was soft due to poorer global economic conditions including high unemployment, high oil prices and the resulting low consumer confidence. The computing portion of our business was also lower than our expectations as we saw reduced purchases by multiple large customers in this sector." “While we are obviously disappointed with our June quarter results, we continue to see excellent design win traction in our microcontroller and analog product lines and maintain a strong competitive position. Our 32-bit microcontroller net sales were up 18.7% sequentially and up 108% over the year ago quarter, reaching a new record. We believe that our overall June quarter results reflect weak global market conditions which we believe will impact the broad-based semiconductor industry in the June or September quarter depending on the individual market exposures and revenue recognition practices of the companies." “We are cautiously modeling our September quarter revenue to be sequentially down by low to mid single digits. We will provide updated revenue and full financial guidance for the September quarter during our August 4, 2011 financial results conference call. At the end of the June and September quarters, our inventory is expected to be in the 120 to 130 day range, which is acceptable to us and will enable us to keep our lead times short and help us be more competitive in our markets." "We are taking actions to control our expenses through our variable compensation and other discretionary programs, but do not plan to lay off any employees. Our gross margin in the June quarter is expected to be about 58.4% to 58.8% on GAAP basis and 59.3% to 59.7% on non-GAAP basis and remain in that range in the September quarter. Our long-term target for non-GAAP gross margin remains in the 61% to 62% range. Our operating expenses for the June and September quarters are expected to remain in the range of 24% to 26% of net sales, in line with our long-term model that we have communicated to investors."