(Reuters) – Chipmaker Microchip Technology forecast fourth-quarter net sales and profit below Wall Street estimates on Thursday, anticipating tepid demand as customers in the automotive market still work on clearing excess inventory.
Shares of the Chandler, Arizona-based company fell nearly 5% in extended trading.
Automakers had stocked up chips during the pandemic to avoid a supply crunch, but now are grappling with an inventory glut due to lower demand.
Analysts expect the weakness in the automotive end market to continue through the first half of the year due to high inventory and softer end demand.
“While we have seen substantial inventory destocking at our customers and channel partners, we believe the correction cycle is still not completed,” said CEO Steve Sanghi.
The company is taking a “methodical yet urgent approach to evaluating all aspects of our business and implementing necessary changes to strengthen our competitive position,” Sanghi added.
Microchip expects net sales in the range of $920 million to $1 billion for the fourth quarter, compared with analysts’ average estimate of $1.06 billion, according to data compiled by LSEG.
It expects adjusted profit per share between 5 cents and 15 cents, compared with estimates of 27 cents.
For the third quarter ended December 31, the company posted net sales of $1.03 billion, down 42% from las year, missing analysts’ estimate of $1.06 billion.
Excluding items, third-quarter profit per share came in at 20 cents, compared with estimates of 27 cents.
Peer NXP Semiconductors forecast its first-quarter revenue below analysts’ estimates on Monday, in a sign of sluggish demand for its chips from industrial and automotive customers.
(Reporting by Juby Babu in Mexico City; Editing by Alan Barona)
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