October 23, 2007 / 11:43 PM / 11 years ago

UPDATE 2-Microchip Technology posts lower Q2 results

(Adds analysts’ comments, other details)

By Purwa Khandelwal

BANGALORE, Oct 23 (Reuters) - Semiconductor maker Microchip Technology Inc (MCHP.O) said second-quarter earnings fell nearly 24 percent due to weakness in the U.S. housing and consumer markets.

The company, which makes embedded chips used in an array of gadgets such as keyless locks and garage door openers, said it sold its idle manufacturing facility in Puyallup, Washington for $30 million, resulting in a charge of 7.4 cents a share in the second quarter.

About 7 percent to 8 percent of the company’s revenue is exposed to housing-related applications like garage door openers, irrigation systems, air conditioning systems, and white good products, Morgan Keegan analyst Harsh Kumar said by phone.

For the second quarter, the company posted net income of $60.7 million, or 27 cents a share, compared with $79.5 million, or 36 cents a share, a year ago.

Net sales fell 3.5 percent to $258.6 million.

For the quarter, analysts on average were expecting earnings of 35 cents a share, before exceptional items, on revenue of $259 million, according to Reuters Estimates.

In a statement, the company said sales in Asia were flat quarter-to-quarter, while the Americas region was down 1 percent sequentially.

“The underlined theme is that the major geographies they serve, North America, Europe and Asia, are seeing a slowdown,” Lehman Brothers analyst Romit Shah, who has a “hold” rating on the stock, said by phone.

Looking ahead, the Chandler, Arizona-based company expects third-quarter earnings of about 34 cents to 37 cents a share. Sales are expected to be flat to down 6 percent sequentially.

Excluding the effects of share-based compensation and a favorable tax settlement, it sees earnings of about 35 cents to 38 cents per share for the third quarter.

Analysts expect earnings of 34 cents a share, before exceptional items, on revenue of $252.4 million.

The company raised its cash dividend by 5.1 percent sequentially to 31 cents per share.

Shares of the company were up 0.1 percent in late electronic trade, after closing at $30.68 on the Nasdaq.


Recently, Caterpillar Inc (CAT.N) Chief Executive James Owens had said that the downturn in the U.S. housing market is the worst it has been since World War II and is likely to weaken further next year.

As for the semiconductor sector, Morgan Keegan analyst Kumar said at this point in time, Microchip is the only company that has come out publicly with its housing woes.

According to Shah, other semi-conductor companies which are exposed to housing-related problems are Fairchild Semiconductor International Inc FCS.N and International Rectifier Corp IRF.N.

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