APRIL 7, 2003 PRESS RELEASE
Published on April 7, 2003
EXHIBIT 99.1
[LOGO] NEWS RELEASE
MICROCHIP
INVESTOR RELATIONS CONTACT:
Gordon Parnell - CFO ... (480) 792-7374
MICROCHIP TECHNOLOGY COMMENTS ON FISCAL FOURTH QUARTER
2003; ANNOUNCES CONSOLIDATION OF FABS 1 AND 2
CHANDLER, Arizona - April 7, 2003 -- (NASDAQ:MCHP) - Microchip Technology
Incorporated, a leading provider of microcontroller and analog semiconductors,
announced today that net sales and earnings per share for the fourth quarter of
fiscal 2003 ended March 31, 2003 are expected to be lower than its previous
guidance. Net sales for the fourth quarter are expected to be approximately $159
to $160 million. Earnings per share for the fourth quarter are expected to be
approximately $0.16, up approximately three cents, or approximately 28%, from
the fourth quarter of fiscal 2002. Microchip expects to release its March
quarter and audited fiscal 2003 results after the close of market on Wednesday,
April 23, 2003.
"Since our March 18 Business Update, we have continued to see a sharp drop off
in business, which we attribute to the impact of the war in Iraq. At the time of
our Business Update, we had approximately 95% of the quarter booked, and we
expected to achieve the remaining turns in the balance of the quarter. However,
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. Additionally, the spread throughout Asia of SARS,
an acute respiratory illness, is inhibiting business travel and, in some cases,
purchasing decisions, as many customers are temporarily closing plants to avoid
the spread of the disease. Therefore, we are lowering our estimates for net
sales and earnings per share for the fourth quarter," said Steve Sanghi,
Microchip's President and CEO.
The Company also announced its intention to combine the operations of its Fab 1
(Chandler, AZ) and Fab 2 (Tempe, AZ) into its Fab 2 clean room space. Over the
next few months, Microchip will transfer Fab 1 processes and products to Fab 2.
After that, Fab 1 will cease operations as a wafer fabrication facility. The
newly defined Fab 2 will be staffed with combined personnel from both Fab 1 and
Fab 2.
-- MORE --
MICROCHIP TECHNOLOGY
COMMENTS ON FOURTH QUARTER
OF FISCAL YEAR 2003
Microchip will also offer certain personnel from Fabs 1 and 2 the opportunity to
relocate to Gresham, Oregon to staff Fab 4 which is scheduled for production
commencing in October 2003. It is currently expected that the combination of
Fabs 1 and 2 will result in a reduction in force of approximately 140 employees.
Microchip will incur restructuring charges related to the shut down of Fab 1.
These charges will consist primarily of costs associated with the planned
discontinued use of various Fab 1 assets and salary continuation costs related
to the anticipated reduction in force. We expect the restructuring charges will
be taken in the first quarter of fiscal 2004 ending June 30, 2003, and are
currently expected to be between $27 and $33 million.
"Fab 1 is our oldest manufacturing facility and utilizes our least advanced
process technologies. In this market environment, demand for products using our
older technologies is weakest and, thus, it is prudent to combine the Fab 1 and
2 activities into Fab 2," said Mr. Sanghi. "However, demand for products using
our advanced technology continues to increase, and this demand will require us
to commence production at Fab 4 in the October 2003 timeframe. We believe our
decision to combine Fabs 1 and 2 will enable us to preserve our gross margins at
approximately 54% after the combination is complete and we expect our gross
margins to improve once Fab 4 is in production. The combined capacity of Fabs 2
and 4 will provide sufficient wafer fabrication capacity to allow us to respond
to increases in future demand," added Mr. Sanghi.
"We are very disappointed with the dramatic effect of world events and the
resulting economic uncertainty on our business in the fourth quarter. Despite
this, we are maintaining our long-term strategy and product development
initiatives. We shipped a record of over 10,500 new development systems in the
fourth quarter, up from approximately 6,500 in the immediately preceding third
quarter. In fiscal 2003, we shipped a total of 35,000 development systems, an
increase of approximately 50% over fiscal 2002. We believe the increase in
shipments of development systems demonstrates the continuing solid momentum of
our design win success. Our customer base for Analog products continues to
expand. We are now sampling our Digital Signal Controller product line to our
early adopter customers and are pleased with the very strong reception,"
concluded Mr. Sanghi.
-- MORE --
MICROCHIP TECHNOLOGY
COMMENTS ON FOURTH QUARTER
OF FISCAL YEAR 2003
CONFERENCE CALL, EARNINGS RELEASE AND ADDITIONAL INFORMATION:
This release is posted on the Company's website at www.microchip.com. Those who
do not have access to the Internet may contact Microchip's Investor Relations
department directly at 480-792-7761.
Microchip will host a conference call tomorrow, April 8, 2003 at 9:00 a.m.
(Eastern Time) to discuss this release. This call will be simulcast over the
Internet at www.microchip.com. The webcast will be available for replay until
April 15, 2003.
A telephonic replay of the conference call will be available at approximately
1:00 p.m. (Eastern Time) April 8, 2003 and will remain available until 5:00 p.m.
(Eastern Time) on Tuesday, April 15, 2003. Interested parties may listen to the
replay by dialing 719-457-0820 and entering access code 291042.
Microchip plans to announce March quarter and audited fiscal year 2003 sales and
earnings results after market close on Wednesday, April 23, 2003.
CAUTIONARY STATEMENT:
The statements in this release relating to our expected net sales and earnings
per share for the quarter ended March 31, 2003, our expected net sales and
earnings per share for the quarter ended March 31, 2003 being lower than our
previous guidance, the continued sharp drop off in business being attributable
to the impact of the war in Iraq, the spread of SARS inhibiting business travel
and purchasing decisions, our intention to combine the operations of Fabs 1 and
2, the timing of the transfer of processes and products from Fab 1 to Fab 2, the
relocation of personnel from Fabs 1 and 2 to Fab 4, our expected production
start up date of Fab 4, the timing and expected size of any reduction in force,
the timing, composition and amount of any restructuring charges and salary
continuation costs related to combining Fab 1 and Fab 2 and any associated
reduction in force, demand for products using our older technologies being
weakest, increasing demand for products using our advanced technology and this
demand requiring us to commence production at Fab 4 in the October 2003
timeframe, the combination of Fabs 1 and 2 enabling us to preserve our gross
margins at approximately 54%, our expectation that gross margins will improve
further when Fab 4 is in production, the combined capacity of Fabs 2 and 4
providing sufficient wafer fabrication capacity to allow us to respond to
increases in future demand, maintaining our long-term strategy and product
development initiatives, shipment of development systems in the fourth quarter
-- MORE --
MICROCHIP TECHNOLOGY
COMMENTS ON FOURTH QUARTER
OF FISCAL YEAR 2003
and fiscal 2003 demonstrating continuing solid momentum of our design win
success, our expanding Analog products customer base and the very strong
reception from early adopters of our Digital Signal Controller product line are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These statements involve risks
and uncertainties that could cause actual results to differ materially,
including, but not limited to: the length and outcome of the war with Iraq; our
ability to effectively carry out the planned restructuring activities and
realize the savings and operational efficiencies expected from these actions;
the rate of the recovery in the overall economy and the uncertainty of current
economic and political conditions; the potential for unanticipated results from
our restructuring activities on our performance, including customer concerns,
productivity and the retention of key employees; changes in customer order
patterns and seasonality; changes in demand for our products and the products of
our customers; pricing pressures; levels of inventories at our distributors and
other customers; inventory mix and timing of customer orders; the level of
orders that are received and can be shipped in a quarter; the level and timing
at which design wins become actual orders and sales; fluctuations in our
business during the last month of the quarter; the level of sell-through of our
products through distribution in any particular fiscal period; disruptions in
international transport or delivery occasioned by terrorist activity, armed
conflict, war or an unexpected increase in the price of, or decrease in supply
of, oil; impact of events outside the United States, such as the business impact
of fluctuating currency rates or unrest or political instability; general
industry, economic and political conditions; our ability to maintain operating
margins; market acceptance of our new products and those of our customers;
competitive factors, such as competing architectures and manufacturing
technologies and acceptance of new products in the markets we generally serve;
the costs and outcome of any litigation involving intellectual property,
customer and other issues; changes in utilization of our current manufacturing
capacity; unanticipated costs in bringing Fab 4 on-line; timely facilitization
of Fab 4, including the availability of equipment and other supplies; our
ability to ramp products into volume production at Fab 4; and the ability to
attract and retain qualified personnel in the Gresham, OR area.
For a detailed discussion of these and other risk factors, please refer to
Microchip's filings on Form 10-K and 10-Q. You can obtain copies of Forms 10-K
and 10-Q and any other relevant documents for free at Microchip's Web site
(www.microchip.com) or the SEC's Web site (www.sec.gov) or from commercial
document retrieval services.
-- MORE --
MICROCHIP TECHNOLOGY
COMMENTS ON FOURTH QUARTER
OF FISCAL YEAR 2003
Stockholders of Microchip are cautioned not to place undue reliance on our
forward-looking statements, which speak only as of the date such statements are
made. Microchip does not undertake any obligation to publicly update any
forward-looking statements to reflect events, circumstances or new information
after this release, or to reflect the occurrence of unanticipated events.
ABOUT MICROCHIP:
Microchip Technology Inc. manufactures the popular PICmicro(R)
field-programmable RISC microcontrollers, which serve 8- and 16-bit embedded
control applications, and a broad spectrum of high-performance linear and
mixed-signal, power management and thermal management devices. The Company also
offers complementary microperipheral products including interface devices;
microID(R) RFID devices; serial EEPROMs; and the patented KEELOQ(R) security
devices. This synergistic product portfolio targets thousands of applications
and a growing demand for high-performance designs in the automotive,
communications, computing, consumer and industrial control markets. The
Company's quality systems are ISO 9001 (1994 version) and QS9000 (1998 version)
certified. Microchip is headquartered in Chandler, Arizona with design
facilities in Mountain View, California, Plano, Texas, Bangalore, India, and
Lausanne, Switzerland; semiconductor fabrication facilities in Tempe and
Chandler, Arizona, Puyallup, Washington, and Gresham, Oregon, and assembly and
test operations near Bangkok, Thailand. Microchip employs approximately 3,350
people worldwide and has sales offices throughout Asia, Europe, Japan and the
Americas. More information on the Company can be found at www.microchip.com.
The Microchip logo and name, PICmicro(R), KEELOQ(R) , microID(R)
and PowerSmart(R) are registered trademarks of Microchip Technology
Incorporated. dsPIC(TM)and rfPIC(TM)are trademarks of Microchip Technology
Incorporated. All rights reserved.
-- END --