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Microchip Technology Announces Strong Third Quarter Fiscal 2003 Results

1/30/2003 - Microchip Technology Incorporated reported net sales and earnings for the third fiscal quarter ended December 31, 2002. Net sales for the quarter were $171.0 million, an increase of approximately 1% from sales of $169.7 million in the immediately preceding quarter, and an increase of approximately 21% from sales of $141.9 million in the quarter ended December 31, 2001. Net income for the quarter was $37.0 million, or 18 cents per diluted share, up approximately 5% from pro-forma net income of $35.2 million (prior to the effects of net impairment charges of $24.9 million), or 17 cents per diluted share in the immediately preceding quarter, and up approximately 56% from net income of $23.6 million, or 11 cents per diluted share in the quarter ended December 31, 2001. During the quarter ended December 31, 2002, the Company generated net positive cash flow of approximately $57 million. Total cash and cash equivalents as of December 31, 2002 were $198 million.

The Company expects to declare a quarterly cash dividend within the next week. The Company initiated cash dividend payments in the third quarter of fiscal 2003, and paid its first quarterly cash dividend in the amount of $.02 per share on December 6, 2002.

“We met the high end of our earnings per share guidance despite net sales being at the lower end of our expectations, primarily driven by strong gross margins, which were up 100 basis points sequentially from the quarter ended September 30, 2002. Our revenue from commodity serial EEPROM products was down 15% sequentially from the quarter ended September 30, 2002, this being the principal area of weakness in our sales performance. However, revenue from our proprietary product lines of both microcontroller and analog products grew by approximately 3% each, from the quarter ended September 30, 2002. Our microcontrollers also achieved record sales levels in the December quarter, with revenues of approximately $137 million, a year over year increase of over 24%. Our analog products continue to benefit from sales opportunities attached to our microcontrollers, and achieved a year over year sales increase of approximately 34%,” said Steve Sanghi, Microchip’s President and CEO.

“We were very encouraged with the increasing proprietary content of our product sales mix and our manufacturing performance. Our gross margins reached record levels of 54.9%, driven by these factors. Our product gross margins, excluding approximately $3 million in start-up expenses of Fab 4, were 56.7%,” added Mr. Sanghi.

“As we enter our final quarter of fiscal year 2003, which has historically been the seasonally weakest quarter for Microchip, we continue to focus on demand creation for our proprietary products. The economic climate continues to be challenging. We are expecting net sales for the fourth fiscal quarter ending March 31, 2003 to be approximately flat to up low single digits, and earnings per share for the fourth quarter of fiscal 2003 to be flat at 18 cents,” concluded Mr. Sanghi.

Microchip’s Third Quarter Highlights:

• In October, Microchip introduced the MCP201 device, a single-chip Local Interconnect Network (LIN) bus interface transceiver with an integrated voltage regulator. By combining the MCP201 with virtually any of the company’s PICmicro® microcontrollers, designers can build a complete LIN bus solution. The integrated voltage regulator eliminates the need for an additional external regulator IC, saves board space and meets the LIN bus specification of V1.2.
• In October, Microchip announced that its PIC18FXX8 family of high-performance, self-programmable Flash microcontrollers with an intelligent CAN 2.0B active interface has achieved conformance with the ISO DIS 16845 standard, as tested by the Communication and Systems (C&S) Group in Germany. The CAN protocol conformance test defined as ISO DIS 16845 ensures interoperability within a CAN network.
• Also, in October, Microchip expanded its cost-competitive, low pin-count PICmicro Flash microcontroller offerings with a family of 14-pin devices that feature an analog-to-digital converter (ADC), internal oscillator, comparator and quick start-up. Available in volume production today, the PIC16F630 and PIC16F676 devices feature Microchip’s PMOS Electrically Erasable Cell (PEEC) process technology, which provides best-in-class erase/write endurance, retention, and disturb reliability for both program and on-chip data EEPROM memory.
• In November, Microchip earned the 2002 Best Supplier Award from Noticiário de Produtos Eletrônicos-Brazil (NPE) magazine for its success in delivering top-quality microcontrollers. The 2002 NPE award recognizes organizations around the world that excel in supplying premium products and consistently delivering on time.
• In November, Microchip announced a new PIC18F family of six PICmicro Flash microcontrollers, featuring Microchip’s nanoWatt Technology, that enable designers to command complete control of overall system power consumption. Our nanoWatt Technology refers to advanced PEEC process technology, circuit design and manufacturing techniques unique to Microchip, utilized in designing these devices. Referred to as the PIC18F4320/1320 family, the microcontrollers feature six enhanced power-managed modes, power consumption as low as 0.1 microamps in standby mode and a wide operating voltage range from 2- to 5.5-volts, making them ideal for battery managed applications. The new family of microcontrollers was recognized for its innovative features in a variety of trade publications, including the cover of the December issue of EE Product News.
• In November, Microchip expanded its temperature sensor product portfolio with two high-accuracy, high-resolution digital thermal sensors, both featuring an SPI^TM interface, which are ideal for a wide range of wireless, networking, handheld and computing applications. Referred to as the TC77 and the TC72, the thermal sensors are able to read temperature without the need for any external components and communicate thermal data via 3- and 4-wire industry standard interfaces, respectively.
• Designing its latest Microwire^TM serial EEPROMs into the smallest package available, Microchip announced in November the addition of a 6-lead SOT-23 package in densities that range from 1k through 4kbits. Utilizing Microchip’s advanced PEEC process technology, the 93XX46A/B, 93XX56A/B and 93XX66A/B devices are the first serial EEPROMs to be offered in this package. Representing the smallest standard package offered for a serial EEPROM today, the 6-lead SOT-23 package is well suited for portable and handheld applications.
• In December, Microchip introduced its new powerful MPLAB® Integrated Development Environment (IDE) v6.10 software. The MPLAB IDE is a 32-bit desktop development environment that can decrease design time by offering the flexibility to edit, compile, debug and emulate embedded designs without ever leaving the MPLAB environment. Available at no cost, the software provides increased code writing efficiency, intuitive graphical user interface (GUI) for ease-of-use, easier interfacing of third party tools, USB to MPLAB In-Circuit Debugger (ICD) 2 interface, faster operating speed and full memory emulation for all supported devices.
• In December, Microchip expanded its power management portfolio with two new regulated charge pump DC-to-DC converters. The MCP1252 and MCP1253 120mA regulated charge pump devices give users a space saving, power management product that accomplish DC-to-DC conversions in a battery-operated environment without the need of an inductor. These devices require fewer external components than many other charge pump devices and, unlike switching regulators, do not require an inductor. From a 2.7 through 5.5 V input source, theses devices provide either a fixed 3.3Vor 5.0V output or an adjustable output voltage of 1.5V to 5.5V. The products were featured in a full-page article in the December issue of Portable Design.
• In October, a Microchip employee began publishing a contributed, monthly column for EDN Magazine. EDN is a highly respected, biweekly publication that specifically targets electronics professionals who want to keep current on the latest products, design techniques, emerging technologies and industry trends. More than 200,000 design engineers and engineering managers worldwide turn to EDN and its sister publications for solutions to the toughest design problems.
• The TC72/77 thermal sensors, released November 12, were selected by the editors of analogZONE as product of the year. The devices, featured for innovative design and concept, were recognized on analogZONE’s website with a link to the article previously written by Paul McGoldrick, executive editor of analogZONE.

About Microchip
Microchip Technology Inc. manufactures the popular PICmicro® 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® RFID devices; serial EEPROMs; and the patented KEELOQ® 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, 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®, MPLAB®, KEELOQ® , microID® and PowerSmart® are registered trademarks of Microchip Technology Incorporated. dsPIC^TM and rfPIC^TM are trademarks of Microchip Technology Incorporated. SPI is a trademark of Motorola Inc. Microwire is a trademark of National Semiconductor Corporation.

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