Microchip’s Analog Revenue Boosted Total Revenues in Fiscal 3Q16



Microchip’s segmental revenues

In the preceding part of the series, we discussed how Microchip Technology (MCHP) reported a 3% YoY (year-over-year) growth in revenue in fiscal 3Q16 at a time when other companies posted declines. Let’s see which segment drove growth during the quarter.

Microchip has divided its business into the following three segments based on products:

  • Microcontrollers
  • Analog
  • Memory

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Microcontrollers segment

In fiscal 3Q16, the segment’s revenue fell by 3.5% QoQ (quarter-over-quarter) while its market share grew in the end-consumer market, such as industrial and computing. The revenue fell as the overall weakness in the semiconductor industry hit MCU (microcontroller) sales as well. MCU accounted for 58.5% of the company’s revenue in fiscal 3Q16.

The company is acquiring rival MCU manufacturer Atmel (ATML) to improve revenues. Atmel itself has been posting declining revenues for the past few quarters, which has raised concerns about the growth prospects of the combined company. (We’ll discuss this in greater detail later in this series.)

Analog segment

In fiscal 3Q16, Microchip’s Analog segment’s revenue grew by 4.1% QoQ as Micrel’s revenue was integrated. Rival Linear Technology (LLTC) also posted sequential growth in revenue driven by the automotive market. Analog accounted for 31.2% of Microchip’s revenue in fiscal 3Q16—its highest contribution since the company’s inception.

Memory segment

In fiscal 3Q16, the segment’s revenue fell 8.3% QoQ. The memory market is moving to 3D technology, with memory giants like Intel (INTC) investing in memory plants in places like China (FXI).

Microchip is expanding both organically and through acquisition. In its fiscal 3Q16 earnings call, Microchip CEO Steve Sanghi stated that without acquisitions, the company posted a CAGR (compounded annual growth rate) of 8.3% from calendar 2009 to 2015, and with acquisitions, it posted a CAGR of 17.3%.

Now let’s look at the company’s growth potential through the acquisitions of Atmel and Micrel.


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