Leading chipmaker
Microchip Technology Incorporated
(
MCHP
) recently trimmed its net sales guidance to $407 million - $408
million for the second quarter of fiscal 2013, ending
September 30, 2012, from $412 million - $430 estimated
earlier.
The reduction in guidance was primarily due to weak economic
environment, which continues to adversely impact the company's
business as well as the overall semiconductor industry. Management
stated that the lower-than-anticipated net sales activity in the
September quarter was driven primarily by macroeconomic and
industry conditions.
This apart, Microchip, which competes with companies like
Atmel Corporation
(
ATML
), did not provide any further details. 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 quarter.
Concurrent with the first quarter results, Microchip stated that
it expects a contribution of about $65 million to $70 million from
Standard MicroSystems Corporation products in the September
quarter.
Excluding one-time items, Microchip currently assumes that the
acquisition will contribute approximately 3 cents a share to the
bottom line in the September quarter and 6 cents-7 cents in the
December quarter and 7 cents-8 cents in the March quarter next year
and 8 cents-9 cents in the June quarter next year.
The company's first quarter result missed the Zacks Consensus
Estimate by a penny. Earnings estimates for fiscal 2013 have moved
up marginally thereafter. 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.
We, therefore, prefer to be on the sidelines and maintain a
Neutral recommendation in the long run. Our recommendation is
supported by a Zacks #3 Rank, which translates into a short-term
rating of Hold.
ATMEL CORP (ATML): Free Stock Analysis Report
MICROCHIP TECH (MCHP): Free Stock Analysis
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