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Microchip says poor distributor sales will hamper 3Q results

Microchip Technology followed an all-too-familiar path Monday, warning that its third-quarter sales will miss analysts’ estimates.

Company officials said an inventory backup among its distributors will crimp sales and earnings at least until next spring.

Microchip (Nasdaq: MCHP) shares fell $2.69 to $26.81 ahead of the news before falling to $24.63 in after-hours trading.

It now expects third-quarter sales to be flat with the $176.3 million it recorded last quarter.

In its release, Microchip said that while sales into the U.S., Europe, Asia and Japan channels are tracking to earlier guidance, November sales by distributors were lower than it expected. It added that half of all its sales come from distributors.

Microchip officials said it still expects to post gross profit margins of at least 55 percent in the quarter but did not offer any further guidance on third-quarter earnings.

First Call Corp. consensus expects it to earn 36 cents a share in the quarter.

”Although we experienced strong sell-through from distributors in October, the November results were below our expectations,” said CEO Steve Sanghi in a prepared release. “We are disappointed at this recent turn of events at our distribution partners.”

Microchip’s announcement comes in the wake of similar warnings last week from Intel (Nasdaq: INTC) and Monday’s announcement from Advanced Micro Devices (NYSE: AMD).

Last quarter, Microchip posted a profit of 33 cents a share on sales of $176.3 million.

The stock hustled up to a 52-week high of $51.63 in April before falling to a low of $19.50 in November.

Nine of the 11 analysts following the stock rate it either a “buy” or “strong buy.”