Thursday, February 4, 2010

Microchip Gains Market Share

Microchip (MCHP) reported impressive results for the December quarter this Wednesday.
Revenues were $250.1 million, up 10% sequentially from $226.7 million and up 30% from $192.2 million in the year-earlier quarter.

Net income was $69.4 million, up 56% sequentially from $44.5 million and down 4% from $72.4 million in the year-earlier quarter. EPS (earnings per share) were $0.37, up 54% sequentially from $0.24, but down 5% from $0.39 year-earlier.

Of course the December quarter of 2008 was an easy comparison, as the recession was in full swing. But the take away should be that Microchip outperformed its rivals in the microcontroller space during 2009. In retrospect it is easy to see why.

Microchip entered the recession with plenty of cash. Rather than laying off large numbers of employees, it retained most but reduced benefits and pay. It kept investing in new product development, and in new customer relationships. It even bought some small companies with key technologies. It kept its lead times short, while rivals underinvested, resulting in long lead times. Microchip gained market share.

Microchip looks ready for strong growth in 2010, but of course that is dependent on the global economy. It is also notable that year/year revenue increases were strongest in Asia, at 12.4%, and weakest in the Americas, at 6.1%. At this point over 50% of sales are to Asia.

For a more detailed report, see my Microchip Fiscal Q3 2010 analyst conference summary.

Normally I classify chip technology companies as having at least a moderate amount of risk, but Microchip is a dividend paying company (typically around 5% of the stock price), so it is a good way to get both growth and safety in the semiconductor sector.

See also

And Keep Diversified!

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