Mr. Sanghi added, “As a result of the 'go live' of our business system integration for Atmel on January 1, 2017, several of our customers requested early shipment of their product that was originally requested to be delivered in the early part of January.  We believe the impact from these customer requests added approximately one percent to our December quarter revenue.  Ordinarily we attempt to schedule these business system integrations in the middle of a quarter to minimize the impact on our quarterly revenue results.  As a result, investors should view the true end market demand for our products in the fiscal third quarter to be about one percent lower than our reported GAAP and non-GAAP net sales and our fiscal fourth quarter 2017 true end market demand to be about two percent higher than the midpoint of our GAAP and non-GAAP net sales guidance.”

Mr. Sanghi further added, "Non-GAAP earnings per share was an all-time record and was 14.5 cents per share better than the mid-point of our guidance given on November 29, and up 64.9% from the December quarter of a year ago due to improving sales, gross margin percentage, operating expense leverage and the successful execution of our core business as well as accretion from our acquisitions.  GAAP earnings per share was up 62.4% from the December quarter of a year ago."

"Microcontroller revenue was outstanding in the December quarter and represented 63.1% of Microchip’s overall revenue," said Ganesh Moorthy, President and Chief Operating Officer.  "We remain pleased with the performance and competitiveness of our 8-bit, 16-bit and 32-bit microcontroller portfolio.  We continue to gain market share, and we believe we have the new product momentum and customer engagement to continue to gain even more share, as we further build the best performing microcontroller franchise in the industry."

Mr. Moorthy added, "Our analog business performance was also outstanding and represented 25.9% of Microchip’s overall revenue in the December quarter.  We continue to develop and introduce a wide range of innovative and proprietary new linear, mixed-signal, power, interface, timing and security products to fuel the future growth of our analog business."

Eric Bjornholt, Microchip's Chief Financial Officer, said, "The cash flow from operations in the December quarter was a record $290.8 million.  As of December 31, 2016, the consolidated cash and total investment position on our balance sheet was $699.7 million."

Mr. Sanghi added, "I want to thank all of the employees of Microchip, including acquired employees from Micrel, Atmel and other acquisitions worldwide for delivering such a strong quarter."

Mr. Sanghi concluded, "We expect total net sales to be between $872 million and $908 million in the March 2017 quarter.  Having achieved non-GAAP operating profit of 32.8% in the December quarter which is very close to our long term target of 33% non-GAAP operating profit, we are revising our long-term operating model.  Our long-term non-GAAP operating model used to be 59% gross margin, 26% operating expenses and 33% operating profit.  Today we are revising it upwards to 60% non-GAAP gross margin, 24% non-GAAP operating expenses and 36% non-GAAP operating profit.  Microchip does not utilize a GAAP long-term operating model.”

Microchip's Highlights for the Quarter Ended December 31, 2016:

• Microchip released a new generation of 8-bit tinyAVR^® microcontrollers with Core Independent Peripherals. The family consists of four new devices that range from 14 to 24 pins and 4 KB to 8 KB of Flash.  This represents the first integration of Microchip’s Core Independent Peripheral Technology onto the Atmel’s AVR microcontrollers.
   
• A peripheral touch controller with superior water tolerance is now available on several of Microchip’s microcontrollers including the latest line of 8-bit tinyAVRs.
   
• The industry’s first seven-port USB 3.1 Gen1 SmartHub IC for USB Type-C™ was announced from Microchip. The USB58xx and USB59xx offer customers simpler designs and cost savings over previous solutions.
   
• Microchip announced the industry’s lowest-power vehicle access solution for smart keys and wearables. Microchip’s ATA5700 and ATA5702 have ultra-low-power consumption, outstanding key localization accuracy and unique built-in counter relay attack protection measures.
   
• Core Independent Peripherals are available for the first time on the PIC18 family of MCUs. The PIC18F “K40” features intelligent ADC with filtering and signal analysis capabilities that are ideal for touch and signal conditioning.
   
• Microchip launched its first Sigfox FCC-certified long-range RF transceiver and connectivity development kits for IoT applications.
   
• A new memory offering is now available from Microchip. The new I²C EERAM memory is an easy-to-implement, nonvolatile SRAM memory that is ideal for applications that need to constantly or instantaneously record, update or monitor data.
   
• Microchip continued to prove that MOST^® technology is still a leading standard for automotive infotainment, announcing new design wins for the technology with Audi and Daimler.
   
• The industry’s first automotive-grade LIN system-in-package solution, including a microcontroller and touch hardware, support was announced from Microchip. The SAMHA1GxxA microcontroller family is ideal for touch button, touchpad, slider, wheel or proximity-sensing applications, including optical and haptic feedback.
   
• Microchip announced the new low-power PIC24 “GA7” microcontroller family. The family is the lowest-cost 256 KB Flash memory, 16-bit microcontroller available today.
   
• Silicon Storage Technology (SST), Microchip’s licensing subsidiary, announced that it has enabled the shipment of more than 75 billion semiconductor devices with embedded SuperFlash^® technology.
   
• Microchip released two new low-cost, feature-rich PIC32 Curiosity Development Boards. The PIC32MX and the PIC32MZ Curiosity Boards include an integrated programmer/debugger and are fully incorporated into Microchip’s MPLAB^® X Integrated Development Environment.
   
• Microchip’s 32-bit PIC32MZ EF portfolio includes the first Microchip PIC32 MCUs to meet the Automotive Electronics Council’s AEC-Q100 Grade 1 Specification.
   
• Microchip’s CEO Steve Sanghi was named Executive of the Year at the 2016 ACE Awards.
   
• Microchip’s AWS-ECC508 won several awards, including Product of the Year award from Electronic Products, being selected as an honoree in the 2017 CES Innovation Awards and was named a finalist in the Design News Golden Mousetrap Awards.
   
• Microchip as a company was honored by several awards programs, including being named a finalist in the GSA Most Respected Public Semiconductor Company Awards, selected by the Austin American-Statesman as one of Austin’s Top Places to Work and being named by The Deal as one of The Most Admired Corporate Dealmakers.

Fourth Quarter Fiscal Year 2017 Outlook:

The following statements are based on current expectations.  These statements are forward-looking, and actual results may differ materially.  The table below provides our guidance on both a GAAP and non-GAAP basis for the March 31, 2017 quarter:

• Microchip's inventory days at March 31, 2017 are expected to be 98 to 106 days.  Our actual inventory level will depend on the inventory that our distributors decide to hold to support their customers, overall demand for our products and our production levels.
  
• Capital expenditures for the quarter ending March 31, 2017 are expected to be approximately $38 million.  Capital expenditures for all of fiscal year 2017 are expected to be approximately $90 million.  We are continuing to invest in the equipment needed to support the growth of our production capabilities for fast growing new products and technologies.