Microchip Technology Incorporated
) expects to report net sales of $407 million - $408 million in
the second quarter of fiscal 2012.
Last month, the company lowered its forecast citing weak
economic environment, which continues to adversely impact the
company's business as well as the overall semiconductor
Microchip had earlier projected sales between $412 million and
$430 in the second quarter. However, management stated that the
lower-than-anticipated net sales activity in the September
quarter was driven primarily by macroeconomic and industry
This apart, Microchip, which competes with companies
), did not provide any further details.
Consequently, earnings estimates for fiscal 2012 have declined
significantly in the last few days as most analysts have
decreased their estimates based on the company's lowered
Six out of the eight analysts have reduced their estimates in
the last 30 days resulting in a 12 cent decline in earnings
estimates for fiscal 2013. For the second quarter of fiscal 2013,
earnings estimates have gone down by 3 cents.
For fiscal 2014, four out of the seven analysts covering the
stock lowered their estimates leading to a 14 cent decline in
On August 2, 2012, Microchip acquired Standard MicroSystems
Corporation to expand its smart mixed-signal connectivity
solutions for embedded applications in markets such as
automotive, industrial, computing, consumer and wireless audio.
The integration process is underway and management expects the
acquisition to be accretive to the bottom line in the September
The company's first quarter result missed the Zacks Consensus
Estimate by a penny. Microchip generated net revenues of $352.1
million, up 3.9% sequentially but down 6.0% from the year-ago
quarter. Europe continues to be weak with no signs of revival in
the coming months. China, which is touted as the company's growth
engine, is also slowing down. Hence, a significant improvement in
business is not in the cards in the near term.
Organic growth also remains a concern. We, therefore, prefer
to be on the sidelines and maintain a Neutral recommendation on
Microchip in the long run. However, we currently have a Zacks #4
Rank, which translates into a short-term rating of Sell.
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