Microchip Tech: In-line Q1 Results

Microchip Technology Inc. (MCHP - Analyst Report, Hold) shares are off nearly 7% in early trading today following the company’s fiscal Q4 and year-end results yesterday. Q4 revenues of $173.3 million were in-line with our $173.2 million expectation, while non-GAAP EPS of $0.15 came ahead of our estimate by a penny.

Although revenues came in better than the mid-point of the company’s guidance and non-GAAP EPS at the high end of guidance, Q4 revenues were down nearly 10% sequentially and 33% year-over-year. The company stated that it is beginning to see improvements in overall business conditions, but it is clear that MCHP is bearing the brunt of the global economic slowdown, and the lack of specific forward guidance implies that revenues may remain at the current depressed levels near-term.

The company, however, provided estimates for “internal” purposes and plans for Q1 revenues of $182 million with non-GAAP EPS of $0.16. This compares to our current estimates of $177 million in revenues and non-GAAP EPS of $0.16.

MCHP expects gross margins to improve in Q1, after bottoming out in Q4, although capacity underutilization will continue to be a drag on margins. Operating expenses are expected to remain at Q4 level and non-GAAP net income will exclude share-based compensation expense, acquisition-related charges, non-cash interest expense and any mark-to-market adjustment on the value of its trading securities. Capex is expected at $4.5 million in Q1, mostly push-outs from FY2009, and the company is targeting $15 million in capex for FY2010.

Effective cost-control measures have been a significant factor in MCHP’s Q4 operating results and the company expects more of the same in Q1. The company exited the quarter with approx. $1.39 billion in cash & short-term investments and $1.15 billion in long-term debt. MCHP also announced a quarterly cash dividend on its common stock of 33.9 cents per share.