About Ganesh Moorthy
Ganesh Moorthy, CEO of Microchip Technology, has described the company as being in a "major inventory correction" that has persisted for several quarters. In late 2024, Moorthy stated that the weakness is most pronounced in the industrial and automotive sectors, particularly in Europe and North America. He noted that while aerospace, defense, and the AI segment of data centers remain strong, he could not point to a particular end market that is improving. Moorthy characterized the situation as a "classic inventory correction amplified by macro concerns," adding that the company is shipping "substantially below consumption." He stated that the company expects the inventory correction to continue through the current quarter, but expressed optimism about the second half of the year based on some leading indicators.
Moorthy has outlined the company's response to the downturn, which includes running factories at lower utilization and implementing a company-wide salary sacrifice, with the highest reductions at the senior levels. He stated that the company is focused on preserving gross operating margins and cash flow, and that despite the trough of the correction, Microchip was still forecasting operating margins above 30%. Moorthy also discussed the company's plans for U.S. expansion, noting that Microchip is working with the CHIPS Program Office as an early recipient of a preliminary memorandum of terms and intends to create additional capacity and jobs in the United States over a multi-year period. He described the CHIPS Act as good for the industry and for America, enabling critical investments for economic and national security.
Source: AI-verified profile updated from Ganesh Moorthy's recent appearances.
Browse all interviews →
Transcript (3 segments)
C
Cory Johnson0:05
We've got fourth quarter earnings results, fiscal fourth quarter earnings results from Microchip, that giant $51 billion business making chips for all kinds of industries. It tells us a lot about all of those industries. This is the business story behind one stock on a move. I'm Cory Johnson, Chief Market Strategist for the Futurum Group, and yeah, we believe semiconductors are going to eat the world, but maybe it's just kind of a snack right now. Not great results from Microchip. Wall Street just likes a beat or a miss in these fiscal fourth quarter earnings. We kind of met expectations on both the top line and bottom line, but the guidance was a disappointment, which is to say Wall Street got it wrong and was too optimistic about the turnaround in the semiconductor industry. Here's what we actually learned, and we're learning really right now in real time from this business. Business actually did $1.325 billion in revenues, gross margins of 60%, pretty strong for this business, right in line with what their midpoint is, and earnings per share 57 cents. But when you look at what their guidance is for the long term, they beat their guidance, yeah, but over the long term they think this business can do a lot better in terms of profitability and bringing operating cost down. Now they hit all fields here in all the industries that they are in, so you know, we might expect the market to react to this because they would have known what's going on. Oh no, this stock sold off 5%, even though it was up for the last year about 23%, right in line with the S&P 500. But because they're in consumer and aerospace and defense and AI and automotive and aviation and communications, look, they really see everything here. Now last quarter they told us there were green shoots in the semiconductor industry, so where are the results? Well, now they're saying they see stabilization, but things are not better. Do we believe them? Here's the CEO of Microchip, Ganesh Moorthy, on the stabilization.
G
Ganesh Moorthy1:59
I can't really point to a particular end market doing better or not. As I said, in the aggregate, aerospace and defense and the AI segment of data center are both doing well, and so that part is pulling it up. On the others, you know, there can be some industrial customers who are still seeing weakness, others who are beginning to see the bottom and trying to come back in with the rush orders that goes into the other end markets as well. So no particular end market trend that is distinguishable on, you know, the bottoming out of where their inventories are yet.
C
Cory Johnson2:35
Another company telling us that inventories have not bottomed out yet, but with high hopes that that's going to happen in the second quarter, by the end of the second quarter. That seems to be what these guys are saying. We're going to have one number that tells us a whole lot about this story and gives us some real context as to what is going on with Microchip and really the rest of the semiconductor industry. We'll have that right after this. The Drill Down is brought to you by Futurum Group, where analysts, researchers, advisers, content creators, and marketing experts help business leaders anticipate and understand shifts in their industries and build strategies to leverage disruptive innovation. With deep analysis, Futurum Group's extensive industry experience delivers reliable research and data, thought leadership, and actionable advice to help you with your strategy and go-to-market efforts. Futurum Group. So fourth quarter fiscal fourth quarter results from Microchip tell us a lot about what's going on in the world of semiconductors from this giant maker of all kinds of semis. $1.325 billion, $1.326 billion, was above their guidance, and gross margin is also above their guidance. But this company says they can do better in the future, and they think that inventory turnarounds are going to happen maybe even at the end of the second quarter, which we're already living in right now, second quarter calendar year at least for us. Now, the Drill Down on Earnings: one number that tells a whole lot. The company is to point out that this is a typical semiconductor cycle, and indeed that last year semiconductor sales were down 99.4%. We have seen that before in semis, we'll probably see it again, but they say the bottom is near. All right, thanks for listening to Drill Down on Earnings. Check me out on X at Cory TV, on TikTok and Instagram at Drill Down OD, and the Futurum Group's YouTube page has all kinds of great stuff. Check us out, leave some comments, like, dislike, subscribe. Drill Down on Earnings, part of 65 Media.
