Microchip Technology Q3 2012 Earnings Conference Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Venk Nathamuni - JPMorgan - Analyst : This is Venk Nathamuni in for Chris Danely. Thanks for taking my question. First question is how does -- you said you have lowered inventory, combined inventory of both Microchip and distributors, but how does inventory now compare to what it was during the 2008, 2009 downturn?

Question: Venk Nathamuni - JPMorgan - Analyst : Okay. Thanks. And then as my follow-up, you talked about recovery in orders. Is it, in your opinion driven primarily by demand coming back, or is it more from the inventory restocking phenomenon that's going on? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Venk Nathamuni - JPMorgan - Analyst : Okay. Thank you.

Question: James Schneider - Goldman Sachs - Analyst : Good afternoon. Thanks for taking my question. Realizing it's still very early post the Chinese or Lunar New Year, can you give us any kind of sense of color from your customers in terms of bookings levels after the Chinese New Year holiday versus the ones you were seeing in the rates in January before the holiday?

Question: James Schneider - Goldman Sachs - Analyst : Okay. Understand. And then on the white goods market, I think some of your peers have talked about somewhat mixed results out of that market in terms of the demand that they're seeing, and I think the retail results over Chinese New Year were also somewhat mixed. Can you talk about that vertical in particular for you?

Question: James Schneider - Goldman Sachs - Analyst : That's helpful. Thanks very much.

Question: Chris Caso - Susquehanna Financial Group - Analyst : With respect to the gross margins and the gross margin improvement that you're expecting in the March quarter, what does that imply with respect to your own inventory levels and the channel inventory levels as you go forward? Do you plan to keep the inventory flattish from here, or do you anticipate some replenishment going on, going forward?

Question: Chris Caso - Susquehanna Financial Group - Analyst : Okay. Great. And just as a follow-on, a clarification. I thought I heard you say back at the 61% gross margin rate by the end of the fiscal year. Just confirming that my understanding is right. And if that's the case, and as you grow back to the 61% level, is that predicated on a certain revenue run rate level in order to get back to those levels, to that gross margin level?

Question: Chris Caso - Susquehanna Financial Group - Analyst : Okay.

Question: Chris Caso - Susquehanna Financial Group - Analyst : 60% by the end of fiscal 2013 non-GAAP and 61% eventually.

Question: Chris Caso - Susquehanna Financial Group - Analyst : Okay. That's fine. Thank you.

Question: Kevin Cassidy - Stifel Nicolaus - Analyst : Thanks for taking my question. On your 32 bit results, can you say what applications were you winning the most with your 32 bit processor?

Question: Kevin Cassidy - Stifel Nicolaus - Analyst : How about with the analog being up quarter-over-quarter, far exceeding the market. Are they being tied to the same 32 bit controllers, or is it just the general lift that you're getting in the new products?

Question: Kevin Cassidy - Stifel Nicolaus - Analyst : Okay. Great. Thank you.

Question: Brendan Furlong - Miller Tabak - Analyst : The inventory in the channel at 35 days, how does that compare to previous bottoms in the cycle?

Question: Brendan Furlong - Miller Tabak - Analyst : Okay. Great. Thank you. And then the other question I have, some of your peers have noted a particular weakness out of China in the December quarter, and also in the March quarter. I'm just curious what you're seeing in the Chinese market in particular?

Question: Brendan Furlong - Miller Tabak - Analyst : Understood. Thank you. My last question, if I look at the tax rate for fiscal '13, should we consider it staying more or less at 13% level?

Question: Brendan Furlong - Miller Tabak - Analyst : Thank you.

Question: Terence Whalen - Citigroup - Analyst : Good afternoon. Thanks for taking the question, and congratulations on the results. The first question relates to a higher level of thinking on the business. It's been a while since you've added to the analog business. And obviously, there's some activity in the M&A market. I was wondering, I don't anticipate you to comment directly on your strategy, but I wanted you to comment on the proportioning of the business, and to what degree would having a little bit of a larger analog business perhaps help with cross-selling Microcontroller or Memory? Thank you.

Question: Terence Whalen - Citigroup - Analyst : Activity in terms of potential sales of activity, [Genem] recently was purchased. There are other activities, proposed sale of companies.

Question: Terence Whalen - Citigroup - Analyst : Correct, yes.

Question: Terence Whalen - Citigroup - Analyst : Okay. Very helpful. And then the second question I have is in regards to the timing of why Microchip sees either improvement or softness, perhaps one quarter earlier than other companies. I know that you talk a lot about your operational excellence and lead times being so low, That being a contributing factor. The question that I had is to what degree does the programmability of your products enable distributors to more rapidly stock and destock your product? To what degree does that have a timing element versus other companies with fixed hard wire solutions that have much longer skew tails. Thank you.

Question: Terence Whalen - Citigroup - Analyst : Great. Thank you for the insight.

Question: Harsh Kumar - Morgan Keegan & Co., Inc. - Analyst : Hey, guys. First of all, congratulations on great numbers. Steve, you talked about a fiscal gross margin target of 60% and then longer term 61%. I'm curious if you could elaborate on what the biggest factors are that would play into that thinking.

Question: Harsh Kumar - Morgan Keegan & Co., Inc. - Analyst : Got it, Steve. Thank you for that help. And then there's a lot of -- there's some fair bit of thinking that because communication and industrial businesses in general, not yours, but the industry as such got hammered last year towards the end, that they would spike back up a little bit better than most. I'm curious if you could maybe not give numbers, but if you could just give us your sense of exposure to those areas, that's comm and industrial.

Question: Harsh Kumar - Morgan Keegan & Co., Inc. - Analyst : Got it. Thanks, guys. Great execution. Thank you.