Microchip Technology Inc. (MCHP) reported in-line September results and guided revenue significantly lower for the December quarter. Revenue and GAAP EPS were $269.7 million and $0.41, respectively.

MCHP remains one of the more resilient stocks in semis following its announcement that it will maintain strong dividends in spite of a weak economy and pursue an aggressive initiative to preserve cash. Microchip guided December quarter revenues to decline 8-16% sequentially. Due to broad based weakness in demand, orders decelerated in October and resulted in a significant decline in Q3 backlog.

We highlight that on an average, MCHP's guidance is in line with peers that reported results recently. Although visibility remains limited, management commented that March revenues may increase compared to the December quarter. As a result of the expected sharp revenue decline in December quarter, the company plans to shut down fabs for two weeks in Q4. We think that reduced fab loading is the main reason behind a weaker margin guide in December. MCHP expects Q4 GAAP gross margin to decline -210bps sequentially to 58.8%.

We now expect the company to earn $1.60 per share (pro-forma, excluding stock compensation) for FY 2009. GAAP EPS (E), including stock-based compensation stands at $1.46. Our target price has been revised down to $25, which has been derived by applying a P/E multiple of 15.6x to our fiscal 2009 EPS estimate.