Microchip Technology Inc. reported its third quarter results generating what the company called record sales to the tune of $546.2 million, up 2.8 percent sequentially.
During the third quarter, $361.8 million in revenue was generated by microcontrollers, $122.6 million by its analog business, $32.5 million from memory, $22.6 million in licensing and $6.8 million from other revenue sources. Revenue from the recent acquisition of ISSC resulting in net sales of $16.9 million, Microchip said.
The overall microcontroller business for Microchip grew 5.2 percent sequentially for the quarter and was up 12.7 percent from the quarter one year ago. Ganesh Moorthy, COO of Microchip, said during the third quarter conference call that because of an expansion of its product portfolio, Microchip was able to expand into new markets and both the 32-bit and 16-bit MCU business are growing at a rate where it will continue to make a meaningful contribution to future growth.
“We believe we are continuing to gain significant microcontroller market share, and expect the 2014 market share rankings to bear that out when it is published next year,” Moorthy said. “Microcontrollers revenue represented 66.2 percent of Microchip's overall revenue in the September quarter.”
Analog products were down in the third quarter 4.1 percent sequentially, but up 13.2 percent year-on-year. Analog represented 22.4 percent of Microchip’s overall revenue in the quarter and Moorthy said the company’s new analog products will “fuel the future growth of our analog business.”
Meanwhile, memory revenues, comprised of Microchip’s serial E-squared memory and SuperFlash products, was down 2.6 compared to the second quarter and represented 6 percent of Microchip’s overall revenue in the quarter.
Course correction
Recently, Microchip made waves in the news as well as on the stock market for issuing guidance for fourth quarter earnings, stating another correction had already begun and a decline in the fourth quarter was expected. While this was not unexpected, IHS Technology was already anticipating a minor decline in the quarter, it sent Wall Street into a tizzy.
During the third quarter earning call, Steve Sanghi, CEO of Microchip, said the company now expects only a slightly below typical seasonal quarter resulting in revenue to be down 2 percent to 7 percent, sequentially. Sanghi made a point in clarifying his statements in pointing to what some others are saying.
“I have seen an unprecedented amount of spin in explaining the weak guidance of other companies. One company even called it amplified seasonality, with customers wanting to make sure that they position inventory where they're going to be comfortable at,” Sanghi said. “Now what is that? That sounds like a correction.”
He added, “If it turns out that Microchip was wrong in making a cycle call, I would look in the mirror and personally take responsibility to correct whatever may be wrong in our business. However, you are already starting to see commentary from late-reporting companies about bookings weakness; weakness in industrial and consumer markets; inventory management by distributors; weakness in Asia; and some even -- some companies even calling for broad weakness across most end markets; and weak macro conditions, combined with seasonality to cause near-double-digit revenue declines. That is, and I quote, amplified seasonality, unquote.”
Sanghi said Microchip is going to comb through all of its business units, customers, geographic data and more in the event “our call turns out to be wrong, we want to be prepared in understanding what went wrong and already taken steps taken to correct it.”
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