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Microchip slashes second quarter forecast on soft demand

Published: 14:33 14 Oct 2011 BST

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Microchip Technology (NASDAQ:MCHP), maker of microcontroller and analog semiconductors, said after markets closed Thursday that it has cut its second-quarter adjusted earnings forecast because of soft demand in the chip making industry.

Shares of the Chandler, Arizona-based chip maker lost 31 cents, or 0.88 percent, falling to $35 during pre-market trade Friday morning.

For the three months that ended September 30, the company expects adjusted earnings of 45 to 47 cents on sales of $340.6 million. On August 4, the company initially predicted adjusted earnings of 50 to 54 cents on revenue of $352 to $370 million.

Analysts, on average, had expected earnings of 51 cents a share on sales of $358 million, according to Bloomberg.

With a weak economy, consumer spending has been constrained, hurting computer sales and several companies in the semiconductor business.

Still, Microchip said that net sales from its 32-bit microcontroller business was up 10.4% sequentially, and its licensing business was up 6.4% sequentially, both setting new records in the September quarter.

A microcontroller is a small computer on a single integrated circuit that contains a processor core, memory and programmable peripherals.

In a statement, Microchip’s chief executive, Steve Sanghi, said: "While we are disappointed with our September quarter results, we continue to see excellent design win traction in our microcontroller and analog product lines and maintain a strong competitive position."

"We experienced incrementally stronger headwinds and saw no seasonal Christmas build, which in turn adversely impacted all of our product lines and sales channels."

"The overall global economic outlook continues to be poor and is adversely impacting our business as well as the rest of the semiconductor industry.”

Floods in Thailand, mainly in areas north of Bangkok, have impacted operations at several companies like US chipmaker ON Semiconductor (NASDAQ:ONNN) and Microsemi Corp (NASDAQ:MSCC).

Microchip said that its two facilities are located almost 50 miles east of Bangkok, and are running normally and meeting customer demand.

Sanghi added the company plans to release full second-quarter results on November 3 after markets close.

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