Microchip Revises Q2 View on Accretive Micrel Integration

Leading semiconductor manufacturer Microchip Technology Inc. MCHP recently revised its second-quarter fiscal 2016 guidance to better reflect an improving business environment and strong earnings potential with the expedited integration of the Micrel acquisition.

Earlier in concurrence with the first-quarter fiscal 2016 earnings release, management had provided initial guidance for the second quarter. Management had then expected non-GAAP net sales between $532 million and $569 million, while non-GAAP gross margin was expected in the range of 57.6% to 57.8%. Non-GAAP net income was anticipated in the range of $127.3 million to $145.4 million, with non-GAAP earnings per share of 58 cents to 66 cents per share.

Along with the first-quarter fiscal 2016 earnings release, Microchip had also announced the acquisition of Micrel for approximately $430 million in cash and issuance of 8,626,795 shares of Microchip's stock. Consequently, based on the current projections, Microchip now anticipates non-GAAP earnings per share to lie within 60 and 66 cents on revenues of $545 million to $563 million. Non-GAAP gross margin is currently expected in the range of 57.5% to 57.7%, while non-GAAP net income is anticipated to come in the band of $129.2 million to $143.0 million.

With better-than-expected bookings and expediting requests in its business, driven by strong demand and robust product designs, Microchip anticipates continuing its bull run in the coming quarters. We also remain encouraged by its bullish guidance.

Microchip develops and manufactures microcontrollers, memory and analog and interface products for embedded-control systems, which are small, low-power computers designed to perform specific tasks. Striking features like quality, performance, reliability, ease of use, pricing and diversity of products have been the forte of Microchip and helped it to become one of the better-positioned companies in the semiconductor universe.

Microchip presently has a Zacks Rank #4 (Sell). Other players in the industry that are worth mentioning include Pixelworks, Inc. PXLW, Maxim Integrated Products, Inc. MXIM and EZchip Semiconductor Ltd. EZCH, each carrying a Zacks Rank #2 (Buy).

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