Microchip Tech Exec Insights: Bookings, Trends

On Wednesday, Microchip Technology, Inc. (NASDAQ:MCHP) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Bookings

Uche Orji – UBS: First of all, Steve thanks for the time (indiscernible) how the industry is going to go (indiscernible) recovery. Question for you, as you see bookings, which you commented on the press release as continuing to be good, are there any areas that are kind of falling behind and if you can comment on what you’re seeing regionally, especially Europe, where people are little bit concerned about declining PMI. So if you can just give some color regionally what you’re seeing? I know you don’t talk about end-markets, but to the extent that you have insight on end-markets as well, maybe you can give us some commentary there?

Steve Sanghi – President, CEO: Our bookings were quite strong last quarter, around the world by region including Europe. Europe was actually up the most last quarter if you see and the exact number was 14.5%. Europe is seasonal in that way. We get most of the growth in Europe in the March quarter, and then Europe is seasonally very weak in December quarter and the summer quarter, September and June is kind of so-so. So Europe is very seasonal and we’re basically seeing that seasonal trend and on the top of that, whatever, happens in the eurozone we certainly will not be immune from that effect, but the business in Europe seems fine right now.

Uche Orji – UBS: Separately, let me just ask you as a speculation around MIPs, MIPs going to find buyer and start 32-bits if you sign around MIPS. To what extent is that going to be challenges, if it was acquired by a competitor for example? Will you continue to support that (indiscernible), is it easy for you to switch from MIPS to something else? I’m not sure how that works for you. But any comment here, on what the future of that Company may have without your 32-bits architectural will be helpful?

Steve Sanghi – President, CEO: We obviously don’t want to speculate on what is or is not going on there. We have always maintained that the core is not the critical element of what the solution we deliver is. We have always been clear it’s a PIC32 which has a substantial number of other benefits to the customer that define what value it is to them. If and when whatever plays out, we will play out our hand at that time, but right now there is no change in our strategy.

Uche Orji – UBS: Can I just ask, I mean, I know, Steve we are going to talk about SMSC in another call, but as I look at some of the small acquisitions you have made, cash recognition seems a little bit R&D intensive. How do you see applying that technology to your target markets, (indiscernible) planned expansion into high volume applications that you have typically shied from away from, in the I/O space, because with the cash recognition and some of that will be used more in the consumer devices? So how does this fit in with your strategy when you acquired Hampshire Technology and that was going to be focused on less high volume areas? Thanks.

Steve Sanghi – President, CEO: So if you look at the history we have always been able to take this technology in moving into the broader markets. So when you looked at our touchscreen and buttons and sliders and touch focus, you saw how we have built substantial business in appliances and automotive and touch panels and industrial and on and on and those kind of stuff, without really making a very large portion of our business in consumer devices, fast moving, fast lifecycles and all that. Similarly, as we acquired these technologies, there is a substantial need for all of these technologies in the broad base of the markets that Microchip serves, and as Microchip continues to get larger and larger and will get tucked with the other acquisition in the next hour, there is certainly room for some portion of business in the high volume faster markets, without really overall disturbing Microchip’s (MRG) model. So gesture recognition takes the touch screen experience to the next level. Later on tomorrow, I am presenting to a communication relating to Microchip’s worldwide employees, and the PC that I am going to be using, I can wave my hand and move the slides forward or backward from a distance. That’s the technology I am going to be using and introducing to our employees, and I will try to do the same thing, next time I present to the investors, so you can get a feel for that technology.

Uche Orji – UBS: Just finally on some recent acquisitions. I mean, ZeroG, you did acquire ZeroG in embedded wireless, and I’m just wondering where Roving fits. Would it (Indiscernible) ZeroG, does that supersede or compliment that acquisition, and I’m just trying to understand, how all this wireless technology is going to fit into your strategy? Thanks that’s my last question.

Ganesh Moorthy – EVP and COO: Obviously, it compliments what we have with ZeroG. ZeroG gave us a much lower end product that was in the entry level of where Wi-Fi technologies are at. We get some higher-end technologies, we have some Bluetooth capabilities now that come to us from Roving, and there’s some substantial application expertise that comes with it as well. So all these continue to build our capabilities in the areas of Wi-Fi and Bluetooth, both of which we believe are ubiquitous and the kinds of building block technologies that are in use in a broad range of applications across the market segments we serve.

Competitive Trends in Microcontroller Market

James Schneider – Goldman Sachs: I was wondering if you could talk broadly about the competitive trends you are seeing in the microcontroller market? I know it’s always competitive and there’s always pricing pressure, but have you seen any of your competitors be more aggressive, especially on pricing and do you see any of your competitors struggling to make it in the market currently?

Steve Sanghi – President, CEO: The microcontroller market has lots of different competitors in 8, 16 or 32. There is a long tail of about 20 plus competitors in each of those markets. There are always few people gaining market share. There is never a single person and any time you compare people one could look faster growing for a period of time than the others, but there are handful of four, five people gaining market share in many of these markets. But there is a long tail to take market share from and especially and Microchip, whose business is spread in 70,000 customers, we often gain market share from the tail and lot of the investor and analyst focus sometime tends to be on the top. Atmel and TI (indiscernible) and ST Micro, they are all doing well and you could compare them all you like. If you look at the data year after year after year, when we look at our performance versus the industry average shipments whether you look at SIA, where we overall gained a market share last year from 6.5% to 7.5% or you look at the Dataquest numbers that Ganesh pointed or you look at the EE Times survey in brand preference, we continue to win in every indicator consistently for 20 plus years looking back and looking forward. Microcontroller market has always been competitive, people come and go there is nobody bounding that market destroying the prices, in microcontrollers it just does not work, it is a design win kind of business and anybody is fading away, we could just look at the ranking that plenty of people fading away from the bottom.

James Schneider – Goldman Sachs: Thanks, that’s helpful. Just a follow-up on the geographic color, could you talk about what’s happening in Asia clearly with the New Year, is it seasonally weak quarter or how do you expect that to track in the June quarter?

Steve Sanghi – President, CEO: In June quarter Asia should be very strong, should be the strongest geography both definitely in China and throughout of Asia.