Microchip Technology cuts forecast; reduces headcount

April 8, 2003 – Chandler, AZ – Microchip Technology Inc. has warned for the second time in three weeks that 4Q results would fall short of expectations, blaming a drop off in business due to the war in Iraq and the spread of SARS.

4Q net sales are now expected to be $159 to $160 million and earnings/share $0.16, up about $0.03, or 28% from a year ago, the company said.

On March 18, Microchip had lowered its estimates to revenue of $164 to $166 million, and earnings/share of $0.17, reported Reuters. Previously, its forecast was for earnings/share of $0.18 on revenue flat to up in the low single digits from 3Q’s $171 million.

The company also said it would combine two fabrication plants, reducing the work force by about 140 employees, and take a restructuring charge in 1Q of between $27 and $33 million.

In the past three weeks, “we have continued to see a sharp drop off in business, which we attribute to the impact of the war in Iraq,” Steve Sanghi, president and CEO, said. “Customers continued to delay purchasing decisions, which we attribute to lingering concerns about demand for their end products in light of the war and continued economic weakness.”

In addition, the spread of SARS in Asia, “is inhibiting business travel and, in some cases, purchasing decisions, as many customers are temporarily closing plants to avoid the spread of the disease,” Sanghi said.

The company is due to report its results on April 23 after the close of market.


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