Microchip Hunkers Down for Tough Times

Microchip Technology ( MCHP) boosted its bottom line 26% in the third quarter but said it was taking various steps to help it weather a souring business climate.

The Chandler, Ariz., chipmaker said it will shut down its factories for two weeks in order to reduce its inventory and said that it would implement "reductions in discretionary and variable costs."

Sales in the current quarter will be down between 8% and 16% sequentially, which translates to a range of $226.5 million and $248.1 million.

The average analyst expectation called for fourth-quarter sales of $273.3 million, according to Thomson Reuters.

"Global economic conditions are creating significant difficulties in the market, as consumers and businesses deal with liquidity and credit concerns," said CEO Steve Sanghi in a statement, noting that determining demand levels is "extremely challenging."

Shares of Microchip were off 12 cents at $21.40 in extended trading Thursday.

Microchip is the latest in a string of chipmakers to forecast declining sales in the fourth quarter. Texas Instruments ( TXN) said sales will be down 9.4% to 16.5% sequentially, while Intersil ( ISIL) projected a 20% to 25% decrease.

In the three months ended Sept. 30, Microchip posted net income of $76.5 million, or 41 cents a share, in line with analyst expectations. At this time last year, Microchip's net income was $60.6 million, or 27 cents a share.

The company said that sales of its 16-bit microcontrollers jumped about 17% sequentially in the third quarter, vs. the product's 5% growth in the second quarter.

The company said revenue in the third quarter totaled $269.7 million, vs. the $273 million expected by analysts, and up from $258.6 million at this time last year.

While the company noted that its inventory levels were flat at the end of the third quarter, it projected that its stockpiles would increase by 15 to 25 days worth of chips by the end of the fourth quarter.

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