By Microchip Technology, a provider of semiconductor products, experienced a decrease in sales during the latest quarter as customers sought to reduce their inventory levels.
Financial Results
In the third quarter, which ended on December 31, the company recorded net income of $419.2 million, or 77 cents per share. This is a decrease from $580.3 million, or $1.04 per share, in the same period last year. Adjusted earnings were $1.08 per share, surpassing analysts’ estimates of $1.04 per share.
Sales declined from $2.17 billion to $1.77 billion, aligning with analysts’ expectations.
CEO’s Comment
Ganesh Moorthy, the Chief Executive of Microchip, stated that sales dropped by nearly 22% sequentially due to weak demand. As a result, customers reduced their shipments and extended shutdowns to protect their inventory levels. This prevented the company from fulfilling previously planned shipments from its backlog.
To mitigate the impact of this downcycle, Microchip is implementing measures to limit discretionary spending and tightly manage inventory levels. The company plans to have two-week shutdowns in its large wafer fabrication facilities during both the March and June quarters, along with reduced activity in other factories. Unfortunately, this will lead to underutilization charges.
Outlook for Q4
For the fourth quarter, Microchip anticipates sales between $1.23 billion and $1.43 billion, with adjusted earnings per share ranging from 46 cents to 68 cents. Analysts had projected sales of $1.66 billion and adjusted earnings of 92 cents for the same period.
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