Analyst Conference Summary

conference date: April 28, 2008 @ 2:00 PM Pacific Time
for quarter ending: March 31, 2008 (Q4 fiscal 2008)

Forward-looking statements

Overview: Hit guidance, returned to revenue growth, and no downside surprises.

Basic data (GAAP):

Revenue was $260.4 million, up 3% sequentially from $252.6 million and up 1% from $258.2 million year-earlier

Net income was $76.7 million, down 4% sequentially from $80.1 million, and down down 40% from $127.7 million year-earlier.

EPS (earnings per share) were $0.40, down 4% sequentially from $0.38, and down 40% from $0.57 year-earlier.

Guidance:

Revenues for Q1 fiscal 2009 expected up sequentially 2% to 6%. GAAP EPS $0.39 to $0.41 with non-GAAP EPS $0.43 to $0.45. 18.5% tax rate. $28 million planned capital expenditures. Expects about $120 million operating cash generation.

Conference Highlights:

Non-GAAP numbers were: $79.2 million net income, down 2.6% from $81.3 million year-earlier. EPS was a record $0.42, up 13.5% from $0.37 year earlier. Non-GAAP numbers exclude a tax benefit, share-based compensation expense, and favorable adjustments from sale of Fab 3.

The dividend was increase to $0.33 per share per quarter.

Pleased to return to growing revenues. Flash microcontrollers, 16-bit microcontrollers and analog hit record quarterly income. Gross margin hit an all-time high of 60.9% (61.5% non-GAAP). This despite challenging industry conditions. Believed December 2007 quarter was the bottom of the cycle for MicroChip. Terminated Arrow as distributor, with substitutions seen as an improvement.

Revenue in Asia was down sequentially due to Lunar New Year holiday, but up in Europe and Americas.

Analog product revenues grew 8% sequentially. 16-bit microcontroller revenue grew 12%. Development tool shipments were strong. Overall microcontroller revenue increased 4%. Inventory levels declined.

Cash generated by operations was $99.3 million. $60.4 million was paid in dividends and $173.3 million was used for stock-buy backs of 5.5 million shares. 6.5 million more shares are authorized for repurchase. Cash and short term investments ended at $1.38 billion. Convertible debenture debt is $1.15 billion.

Book to bill was 1.06 and the backlog increased 8% during the quarter.

"In December 2007, the Company issued and sold $1.15 billion of its junior convertible debentures. As a result, the Company had an increase in interest expense, reducing after-tax income by $3.9 million in the quarter ended March 31, 2008. Utilizing existing cash balances and the proceeds of the debt transaction, the Company repurchased 32.5 million shares of its common stock during the third and fourth quarters of fiscal year 2008. Consequently, the debt transaction has been accretive to EPS as the impact of the reduction in diluted common shares outstanding was greater than the increased interest expense."

New products continue to be developed and rolled out, particularly new versions of 16-bit microcontrollers.

Cost of sales was $101.8 million. Gross margin $158.6 million. R&D expense $31.5 million. Selling, General and Administrative $45.4 million. Leaving operating income of $81.7 million. Other income was $7 million. Income tax provision $12.2 million.

8-bit microcontroller market share leader in 2007.

Q&A:

Strongest backlogs? We have so many customers that we can't comment on end market mixes.

Europe? The quarter is always a strong one for Europe off the December quarter.

Stock price impact on convertible debentures and share dilution impact of that discussed.

Linearity in March? Bookings at the end were very strong, but that is partly from end of Lunar New Year holiday, April bookings have been even stronger. June quarter usually is a normal quarter.

Competitive environment? In narrow product lines you can really grow, like 16-bit micro for us this last year. We had high growth in certain narrow parts of 8-bit too. But overall you can't get those high rates. Competition has always been hard, it is no different for 16-bit than 8-bit.

Last year we had a couple of bad quarters because of weakness in our consumer and housing market chips, but we are past that now.

Some of the new 150 sales team members are analog specialists, which helped get us design wins and is one reason we are back in growth mode. We sell analog both with and separate from our microcontrollers.

Automotive? 18% of our business. Nothing unusual in quarter.

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