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Microchip Lifts Q4 Earnings Outlook On Strong Demand


Semiconductor products maker Microchip Technology Inc. (MCHP), Monday raised its earnings outlook for the fourth quarter, due to continuing robust demand for its products, as well as very strong activity in China and Europe.

For the fourth quarter of fiscal year 2010, the company raised its GAAP earnings outlook to $0.37 per share from its prior estimate of $0.34 to $0.36 per share.

Non-GAAP earnings forecast is currently estimated to be $0.42 per share, up from its previous expectation of $0.39 to $0.41 per share. On average, 15 analysts polled by Thomson Reuters currently expect the company to report earnings of $0.36 per share for the fourth quarter. Analysts' estimates typically exclude special items.

The Chandler, Arizona-based company now expects net sales for the fourth quarter to be up about 8% sequentially, compared to prior outlook of a 3% to 7% growth sequentially. Twelve analysts had a consensus revenue estimate of $264.00 million for the fourth quarter.

Steve Sanghi, Microchip's President and CEO said, "We are headed for record bookings this quarter, giving us confidence that the outlook for next quarter looks extremely positive."

Gross margins in the fourth fiscal quarter are expected to be at the high end of the company's prior guidance, or about 59.35% on a GAAP basis and about 60.25% on a non-GAAP basis.

Further, Microchip said that its inventory will be flat to down for the current quarter due to its stronger than expected growth.

Owing to the higher customer demand, the company said it is continuing to add equipment and personnel in its factories.

For the recent third quarter, Microchip reported a 4% decline in profit for the third quarter from last year, which included a higher income tax benefit.

Last month, Microchip agreed to buy flash chip maker Silicon Storage Technology Inc. (SSTI) for $2.85 per share in cash. Microchip expects to gain access to SST's flash technology and patent portfolio through the deal.

Later, the company raised its offer to $3.00 per share, which was further raised to $3.05 per share, bettering an offer made by another potential buyer with Silicon Storage's Strategic Committee.

Microchip also agreed that if the acquisition is not consummated it will not exercise its voting rights to block a transaction that constitutes a superior proposal. The company also has an option to sell its shares back to Silicon Storage at $3.05 per share.

Silicon Storage has scheduled a special meeting of stockholders for April 8, 2010 to consider the transaction.

Microchip closed Monday's regular trading session at $27.84, down 39 cents or 1.38%, on a volume of 3.59 million shares. In after-hours, the shares gained 51 cents or 1.83%. The stock has been moving in a range of $19.66 - $29.56 for the past 52 weeks, with a three-month average volume of about 2.82 million shares.

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