Microchip FY 3Q17 Earnings Call Notes

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Microchip Technology’s (MCHP) CEO Steve Sanghi On Q3 2017 Results

We continue to see the environment as being pretty good

“Well, I think we have been kind of telling you all along that we see the environment to be pretty good and many of the concerns that Street has shown on the environment or in China in the past a year or so, we have been continuously arguing that we were not seeing those, our results were very good, they were good by month and for the whole quarter. So, true, if you take that 1% away our result would still have been about to flat to the September quarter and we have never had a flat December quarter. It’s always down two percentage points.”

Inwardly focused

“So we have been extremely inward focused lately to make sure all this integration goes flawlessly and while we’re doing all that and basically running two companies. The Microchip core performance is not slip and you have seen that that we have performed miraculously in both end. So there is currently not a company in our funnel, I mean, we have to after we complete the Atmel integration and we have to restart the work of really reenergizing the funnel and look at what is available and start to date and try to find something. So right now we can’t give you any update on next M&A.”

Inventories lighter because orders have outpaced

“Our inventories definitely on the lighter side they are lower than they have been in recent past. But every quarter we have been kind of beating the numbers and honestly not been able to build the inventories we set a target where the inventory would slightly grow and then we ship it all and the inventory does not grow. Last quarter especially we shipped all those product requested by the customers because of the go live shipping out. So that product got shipped otherwise that would have been in the inventory.”

The market is normal

“I mean all this is not strictly speaking about Microchip really nothing to say about the overall semi-industry. We’re finding that demand environment to be normal. Really I mean if you look at the industry numbers for 2015 and 2016, I believe 2015 industry was low single-digit negative and so the numbers I’ve seen for 2016 was plus 1% give or take some. And the numbers for 2017, I’m hearing numbers to be positive. So after two years of really flatter down industry, I’m hitting industry numbers to be positive but not giving any personal view on it. When I look at the Microchip opportunities and we see our markets in U.S., Europe, Asia and Japan, I’m seeing market to be normal.”

Industrial market is true strength of IoT

“So I think we’ve always believe that the industrial market is where the true strength of a IoT fits. It’s where there are very strong business models for the investments that are required in the IoT infrastructure that’s going to be put in. We have many, many designs that I would fit within that category. And we’re optimistic how that growth will be a part of our overall growth going forward.”