Microchip Technology Announces Record Sales and Net Income for Third Quarter Fiscal Year 2006 and Record Quarterly Cash Dividend

CHANDLER, Ariz.—(BUSINESS WIRE)—Jan. 19, 2006— Microchip Technology Inc. (NASDAQ: MCHP)

-- FOR THE QUARTER ENDING DEC. 31, 2005:

-- RECORD NET SALES OF $234.9 MILLION

-- RECORD EARNINGS PER SHARE OF 33 CENTS, UP 7.7% SEQUENTIALLY, AND UP 33.1% FROM THE YEAR AGO QUARTER

-- RECORD SALES OF MICROCONTROLLERS

-- RECORD SALES OF ANALOG PRODUCTS

-- RECORD GROSS MARGIN OF 59.7%

-- RECORD OPERATING PROFIT OF 36.0%

-- RECORD GAAP NET INCOME OF 30.1% AND $70.7 MILLION

-- RECORD NET CASH GENERATED OF $126 MILLION BEFORE DIVIDEND PAYMENT OF $34 MILLION AND $3 MILLION IN STOCK BUYBACK ACTIVITY

-- RECORD NEW BOOKINGS WITH BOOK-TO-BILL RATIO OF 1.04 AND SEQUENTIALLY STRONGER BACKLOG FOR QUARTER ENDING MARCH 31, 2006

-- INCREASED DIVIDEND BY 18.8% SEQUENTIALLY, TO A RECORD 19 CENTS PER SHARE

Microchip Technology Inc. (NASDAQ: MCHP), a leading provider of microcontroller and analog semiconductors, today reported results for the three months ended Dec. 31, 2005. Net sales for the third quarter of fiscal 2006 were a record $234.9 million, up 3.3% sequentially from $227.3 million in the immediately preceding quarter, and up 14.4% from sales of $205.4 million in the prior year's third quarter. GAAP net income for the third quarter of fiscal 2006 was a record $70.7 million, or 33 cents per diluted share, up 7.7% from GAAP net income of $65.7 million, or 31 cents per diluted share, in the immediately preceding quarter; and up 33.1% from GAAP net income of $53.1 million, or 25 cents per diluted share, in the prior year's third quarter.

Microchip also announced today that its board of directors has declared a quarterly cash dividend on its common stock of 19 cents per share. The quarterly dividend is payable on Feb. 16, 2006 to stockholders of record on Feb. 2, 2006. Microchip initiated quarterly cash dividend payments in the third quarter of fiscal 2003.

"Revenue from both our microcontroller and analog products grew sequentially and reached record levels in the December 2005 quarter, allowing Microchip to achieve record net sales levels overall," said Steve Sanghi, Microchip's president and CEO. "Analog products delivered exceptional performance, with revenue growing approximately 18% sequentially, and approximately 40% over the year ago quarter."

Sanghi continued, "From a geographic perspective, Asia was again our fastest growing geography during the December quarter, achieving record sales levels of $108.6 million, representing over 46% of our overall business. A growing portion of our Asian business continues to come from customer design activities in the Americas and Europe."

"We also achieved record gross and operating margins of 59.7%, and 36.0%, respectively, in the third quarter of fiscal year 2006, further reflecting our proprietary business model," Sanghi added. "The record net sales, as well as operating margin percentage, enabled Microchip to achieve record GAAP net income of $70.7 million for the period."

"We are also pleased to be increasing our quarterly dividend payment to our shareholders by 18.8% sequentially to a record 19 cents per share," Sanghi added. "We continue to believe, based on investor feedback, that increasing dividends is a highly desirable way of returning increasing value to our shareholders."

Gordon Parnell, Microchip's chief financial officer, said, "Inventory days on our balance sheet at the end of December were at 111 days, up three days from inventory levels at Sept. 30, 2005. Inventory in the distribution channel at the end of December was essentially the same as levels at the end of September."

"We generated record net cash for the December quarter of $126 million, before the payment of $34 million in dividends and $3 million in stock buyback activity," Parnell added.

Sanghi concluded, "We achieved record new bookings in the December quarter with an overall book-to-bill ratio of 1.04. Our starting backlog in the March quarter is higher than what we experienced in the December quarter, although March is normally a seasonally weak quarter for Microchip. Based on our assessment of the business, we expect net sales in the quarter ending March 31, 2006 to be approximately $242 million, providing sequential growth of 3%. Earnings per share are expected to be 34 cents."

Microchip's Recent Highlights

-- The company launched its microchipDIRECT expanded e-commerce services, located at www.microchipdirect.com. This new, comprehensive online resource provides Microchip's customers worldwide with expanded options previously only available through Microchip sales offices, including competitive pricing from local sales teams, credit-line or credit-card payment, and e-mail notification of orders, deliveries and quote status.

-- Microchip significantly expanded its presence in the growing $4 billion 16-bit microcontroller market space with the announcement of 49 new 16-bit PIC(R) microcontrollers and dsPIC(R) digital signal controllers. Microchip is aggressively pursuing 16-bit design opportunities in a wide range of high-performance applications that are separate from and incremental to those being served by an 8-bit microcontroller today.

-- During the quarter, Microchip shipped its 400,000th development tool. Few semiconductor companies can match Microchip in the total number of tools disseminated to our worldwide customers. This milestone demonstrates the industry's continued acceptance of Microchip's product portfolio and that Microchip's development tools offer world-class performance and quality.

-- Microchip also shipped its one billionth lead (Pb)-free device, which demonstrates the company's early and efficient RoHS conversion process, as well as a commitment to environmental responsibility.

-- At the end of 2005, Microchip was recognized by the following five top industry trade magazines and a prominent Arizona business publication for technology innovation and organizational leadership:

1. Electronic Products selected the new PIC24 16-bit microcontroller family as the co-winner of one of its 2005 "Product of the Year" awards. This marks the second year in a row that Microchip has achieved this honor, having received the recognition in 2004 for the 6-pin PIC10F microcontroller family -- the world's smallest microcontrollers.

2. The PIC24 was also named the "Best Microcontroller of 2005" by EEPN magazine in its 2005 Product Review & Outlook supplement.


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