Microchip Technology's CEO Hosts 2013 Annual Shareholder Meeting (Transcript)

Aug.16.13 | About: Microchip Technology (MCHP)

Microchip Technology Incorporated (NASDAQ:MCHP)

2013 Annual Shareholder Meeting

August 16, 2013 12:00 pm ET


Steve Sanghi - Chairman, Chief Executive Officer and President

Mark Reiten - Vice President of Licensing

Ganesh Moorthy - Chief Operating Officer and Executive Vice President

Patrick Johnson - Vice President of Computing Products Group

David S. Lambert - Vice President of Fab Operations

Dan L. Termer - Vice President of Vertical Markets Group

Kimberly Van Herk - Vice President, General Counsel and Corporate Secretary

J. Robert Suffoletta - Partner

Stephen V. Drehobl - Vice President of Mcu8 and Technology Development Division

Mitchell R. Little - Vice President of Worldwide Sales & Applications

Steve Sanghi

Okay. May I have your attention, please? Good morning. It's 9 a.m., and the 2013 annual meeting of the stockholders of Microchip Technology Incorporated will please come to order. I'm Steve Sanghi, President, CEO and Chairman of the Board of Microchip Technology. I would also like to introduce some additional members of the audience. First, I will introduce the other members of the Board of Directors. Albert Hugo-Martinez, CEO of Hugo-Martinez Associates; Matt Chapman, President and CEO of Northwest Evaluation Association; L.B. Day, President of L.B. Day & Company, Inc.; and Wade Meyercord, President of Meyercord & Associates.

Next, I will introduce the company's corporate and appointed officers that are in attendance today. From our headquarters in Chandler, Arizona, we have Ganesh Moorthy, Chief Operating Officer; Eric Bjornholt, Vice President and Chief Financial Officer; Steve Drehobl, Vice President MCU8 Division and Technology Development Division; Dave Lambert, Vice President of Fab Operations; Mitch Little, Vice President of Worldwide Sales and Applications; and Rich Simoncic, Vice President of Analog and Interface Products Division. Rich is traveling today. Derek Carlson, Vice President, Development Tools Group; Lauren Carr, Vice President, Human Resources; Mike Finley, Vice President Fab 2 Operations; Patrick Johnson, Vice President, Computing Products Group; Bryan Liddiard, Vice President, Analog and Interface Marketing; Sumit Mitra, Vice President of MCU32 Division, not here. Mark Reiten, Vice President, Business Development and Technology Licensing. He's based in San Jose. Dan Termer, Vice President of Vertical Marketing Group; and Kim Van Herk, Vice President, General Counsel and Corporate Secretary.

Several other appointed officers who are not present are either located at other domestic or international sites or are traveling today.

Several members of the firm of Ernst & Young, the company's independent registered public accounting firm are also here today. They are Ron Butler, Partner; Eric Lewis, Partner; and John Gaylord [ph], Manager. I would also like to introduce Rob Suffoletta, a Partner with the law firm of Wilson Sonsini Goodrich & Rosati. Rob is back there, who serves as the company's outside general legal counsel.

Pursuant to company's bylaws, I have been appointed by the Board of Directors to serve as Chairman of the meeting. Rob Suffoletta will serve as the Secretary of the meeting. Notice of this meeting stating the time, place and purposes was mailed on or about July 11, 2013, postage prepaid, to each stockholder of record at the close of business on June 20, 2013. Affidavits of mailing have been received by the company and are available for inspection at this meeting. 197,300,354 shares of common stock were outstanding at the close of business on June 20, 2013 and are entitled to vote at this meeting.

Now just some matters with respect to the voting of your shares. If you have already mailed in your proxy, and you do not want to change your vote, then you do not need to do anything at this time. If you did not turn in your proxy yet, or if you wish to change a proxy that you previously submitted, or if you hold a proxy to vote the shares of another shareholder, please submit those proxies to us at this time. Judy and Debbie, please collect these proxies now. So anyone who either wants to change their vote or have not submitted their proxy or are holding a proxy for another shareholder, please raise your hand. No one.

Lastly, if there is anyone here who did not submit a proxy and who wishes to vote their shares in person, please raise your hand and again, Judy and Debbie will distribute a ballot to you. Anybody here who's a shareholder that requires a ballot? No one.

We will -- okay, in accordance with the provisions of Delaware law, the Board of Directors has appointed Rob Suffoletta to serve as the Election Inspector at this meeting, and he subscribed the oath of his office prior to the meeting. Rob has informed me that a quorum is present, and I declare the meeting open for business.

If there are any questions that relate directly to one of the proposals, I would like to receive that question at the time that we consider each of the proposal. Otherwise, we have reserved time after we complete the business matters of the meeting for a presentation on the company, followed by a question-and-answer period. But, please hold all questions that are not related to the proposal until the question-and-answer period.

The first proposal is to elect 5 directors to serve for the ensuing year and until their successors are elected and qualified. Each stockholder is entitled to one vote per share for each director to be elected. The 5 persons receiving the most votes will be elected as directors. Nomination for directors will now be received. I recognize Mark Reiten.

Mark Reiten

My name is Mark Reiten. I nominate Steve Sanghi, Matthew W. Chapman, L.B. Day, Albert J. Hugo-Martinez and Wade F. Meyercord for election as directors of the company.

Steve Sanghi

Ganesh Moorthy?

Ganesh Moorthy

I second the nominations.

Steve Sanghi

Are there any further nominations? If not, then the nominations are now closed.

The second proposal is to consider and vote to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2014. Stockholders are entitled to one vote per share on this matter, and the affirmative vote of the holders of a majority of the shares of the common stock represented at the meeting is required to adopt the proposal. Is there any discussion on this matter?

A motion calling for a vote on this proposal will now be received. I recognize Patrick Johnson.

Patrick Johnson

My name is Patrick Johnson. I move for the adoption of the following resolution. Resolved that the proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2014, as more fully described in the company's proxy statement dated July 11, 2013, be approved.

Steve Sanghi

Dave Lambert?

David S. Lambert

I second the motion.

Steve Sanghi

The third proposal is to hold an advisory nonbinding vote regarding the compensation of our named executives. Stockholders are entitled to one vote per share on this matter, and the affirmative vote of the holders of a majority of the shares of common stock represented at the meeting is required to approve this proposal. Is there any discussion on this proposal?

A motion calling for a vote on this proposal will now be received. I recognize Dan Termer.

Dan L. Termer

My name is Dan Termer. I move for the adoption of the following resolution. Resolved that the compensation of our named executives, as more fully described in the company's proxy statement dated July 11, 2013, be approved on an advisory nonbinding basis.

Steve Sanghi

Kim Van Herk?

Kimberly Van Herk

I second that motion.

Steve Sanghi

The polls are now open for voting on the proposals before the meeting. The time and date of the opening of the poll is 9:09 a.m. today, August 16, 2013. Debbie and Judy, please collect the ballots of those stock stockholders who wish to vote in person. If you have a ballot, please raise your hand so that we can collect them.


Steve Sanghi

While the polls are being tabulated, ballots are being collected and polls are being tabulated, right after the Election Inspector announces the results of the vote, we'll conclude the business portion of this meeting, but please stay seated because after that, I will make a presentation on the company.

The polls are now closed. The time and date of closing of the polls is 9:10 a.m. today, August 16, 2013. Will the Election Inspector please announce the vote.

J. Robert Suffoletta

I hereby declare that all the nominees have been duly elected as directors of the company to serve for the ensuing year and until their successors are elected and qualified.

With respect to Proposal #2, I hereby declare that the proposal to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm of Microchip for the fiscal year ending March 31, 2014, has been adopted.

With respect to Proposal #3, I hereby declare that the compensation of the company's named executives has been approved on an advisory nonbinding basis.

Steve Sanghi

This concludes the formal portion of our meeting. Before I adjourn the meeting, is there any further business?

If not, I will entertain a motion to adjourn. Steve Drehobl?

Stephen V. Drehobl

I move that the meeting be adjourned.

Steve Sanghi

Mitch Little?

Mitchell R. Little

I second the motion.

Steve Sanghi

All in favor say, aye.


Steve Sanghi

Any opposed say, no.


Steve Sanghi

Ayes have it, the meeting is adjourned, please stay seated.

Okay. So now I'll make a presentation of the company. Before I begin today, I wish to remind you that during this presentation, I'll be making some projections and other forward-looking statements regarding the future financial performance of Microchip. These statements involve predictions and the actual results may vary materially. So I refer you to Microchip's filings with the SEC regarding all the important risk factors about the company.

In today's presentation, while it is 2013, fiscal year 2013 Annual Stockholders Meeting, I will show many of the results going all the way up to our June quarter, which was announced just a couple of weeks ago.

So the agenda of my presentation would be Microchip's business characteristics are one of consistent growth, perennial market share gains, a very high margin business model. We have a tremendous track record of accretive acquisitions, and the company is very shareholder-friendly, with consistently increasing dividends and generating a very large free cash flow. I'll talk about our current business condition and then end with an opportunity for significant accretion as the margins expand towards our business model. So we'll begin with showing you consistent growth.

So this slide shows the annual revenue of Microchip all the way going back to the year we went public, fiscal year '93. The very last graph on this is plotted as a run rate. So that's the last quarter, June quarter times 4, 3 quarters are still ahead. So the actual number for the year may be significantly higher than that. That is just plotted as a run rate. One tremendous trait Microchip's financials has, is as of June quarter, we completed 91 consecutive quarters of profitability, which to my knowledge, no other semiconductor company has been able to achieve.

Looking at our 16-bit microcontroller revenue, it has shown phenomenal growth year-over-year as shown by the green bars, and the blue bar comparison just compares the June quarter of this year to the June quarter of last year. You can see, again, it shows significant growth. When the 4 quarters are added up this quarter, the number would be off the chart.

Similarly, looking at the 32-bit has shown very substantial year-over-year growth, and the blue bars show just a tremendous growth first quarter this year over first quarter last year.

This is the annual growth chart for analog. There, again, you can see the analog business has seen very substantial growth. And June quarter over June quarter also shows very, very substantial growth. Analog has been a very quiet and silent story, almost a stealth. When many of the investors and even our customers see this graph, very often I get the comment that, very quietly over the last 12, 13 years, Microchip has become a very large analog franchise. We are now significantly larger in analog than many of the well-known analog names in the industry. I wouldn't name these companies. But 2 years ago, I should say, well, this company versus Microchip, go ahead, they were known for analog and we were nowhere. Today, we're larger than many, many well-known players in analog. So a tremendous accomplishment there.

We're also a company that is a perennial market share gainer. And here is the market share chart for total microcontrollers combining all bit widths of microcontrollers together. Graph goes all the way back to calendar year '94. You can just see that we've gained a tremendous amount of share. Coming from nowhere, we're almost close to a 10% market share. So $1 out of every $10 of microcontroller shipped worldwide is now shipped from Microchip. Many of our investors in the audience, if you look inside your homes, your washers, your dryers, your thermostats, your security systems, your garage door opener, your TVs, remote controls, pool pumps, kitchen appliances, remote controls, anything and everything today has a microcontroller and in very large number of cases that microcontroller is shipped from Microchip.

Looking at the market share by bit width a little bit. This is the 8-bit microcontroller market share. So we entered this market back in early 1990 when we were at the bottom as shown by the very first column behind everybody else in U.S., Europe, Asia and Japan. And then our market share went up year after year after year, competing against some of the best-known names in the microcontroller market in the world. Some of the blue lines represent some of the mergers in 2001 to 2005 timeframe. Motorola and Mitsubishi -- I'm sorry, Hitachi and Mitsubishi merged to become Renesas. And then Renesas again merged with NEC to become Renesas Electronics. So the merger of 3 larger Japanese giants: Hitachi, Mitsubishi and NEC brought them to the #1 place, and we lost the #1 place from 2009. Although if you look at last year's data, 2012, we closed the gap to Renesas by 50%. And we doubled our gap from the next company Atmel. So while it shows no change in the market share from 2010 to 2012, behind the numbers there's a tremendous story of significant market share gain. And I think as we have publicly said, we're not going to rest until we regain the #1 market share on this graph.

And this data is some evidence to why it would happen. This is a survey that, again, comes out year after year. It is conducted by UBM Electronics, which is the parent company of Electronic Engineering Times, EE Times. And in their yearly survey, they ask their readers, their customers, "Which of the following 8-bit chip families would you consider for your next embedded project?" And it's an unaided survey, so the customer can answer any company. And Microchip's PIC microcontrollers were in the #1 spot with 52%. This is a tremendous gain over the prior years, dramatically increasing the distance to #2 Atmel, and this is really what shows that year after year we keep gaining market share.

Looking at the 16-bit microcontroller, the chart looks very similar to the 8-bit chart. It has less years to develop, but year after year, we keep gaining market share. And just in a few short years, I can envision being in the top 5 and then the competition gets harder, working our way over the years to the top of that list also. And again, this chart will tell you why we believe that will happen. Same survey by the UBM Electronics asking, "Which of the following 16-bit chip families would you consider for your next embedded project?" Microchip is in the #1 place. On the prior year, we were tied with TI. This year, we broke apart.

Looking at the 32-bit microcontroller, developing story from the bottom just like the 8 and 16, but gaining many steps of market share every year. Here also, we again expect to again pick up share this year with large growth and pick up a couple of spots. So this story is also developing. And when the survey is done by UBM Electronics asking their readers, "Which of the following 32-bit chip families would you consider for your next embedded project?" Here, again, first time ever, Microchip PIC32 was in the #1 place, creating some distance to the #2. There is no ARM competitor, ARM-based microcontroller competitor, that exceeded Microchip in this survey despite a lot of hype out there about the ARM. Many people try to combine all the ARM controllers together, which really wouldn't be a fair comparison.

One of the Microchip characteristic also is a very high margin business model. And this slide shows Microchip's non-GAAP gross margin over the years. So from the earlier years of 50% gross margin, you can see we achieved substantial accretion in gross margin, reaching to a peak of in the 61%, 61.5% area. The worldwide financial crisis in 2009 brought a steep decline in the middle of the graph. We clawed our way back all the way to again, a new record. And from there, effect of the business downturn, a couple of acquisitions that had a lower characteristic of gross margin. We are clawing our way back for the last several quarters. Last quarter was 58%. So we are a little bit away from a new record, but really working toward our long-term goal of 60% again. These will be considered -- any of these numbers will be considered very high gross margin in the industry. There are only a handful of companies that can make this kind of gross margin.

When you look at the non-GAAP operating margin shown by the blue line here. For majority of the last decade, operating margin was in the 35% range for years and years. It went down substantially during the financial crisis. Clawed all the way back to a new record. And after that, with the recession and some acquisitions, which had a lower operating margin characteristics, we came down. And the last 3 point show that we are clawing our way back here also, crossing 30% again last quarter. And our long-term target here is 32.5%. One more point on the graph shown by the red line, we did make a record operating margin last quarter. Record operating margin in dollars, but not in percentage.

Microchip has garnered a tremendous record of accretive acquisitions. We've done about 12, 13 acquisitions in the last 4 or 5 years. There are 2 pages of this. This is the first page. Hampshire brought us the touch screen controllers in October of '08. R&E International brought us security, life-safety ASICs. HI-TECH International brought the development tools and the compilers. ZeroG brought the low-power embedded Wi-Fi. Silicon Storage Technology brought us the high density Flash-IP, from where we have built a tremendous business in the IP licensing area. Advanced Silicon brought us motor drive products. MMT brought us additional assembly and test capacity. LSS brought us capability in high-speed ADC. The Ident acquisition brought us gesture recognition and proximity. Roving Networks brought capability in Bluetooth and Wi-Fi solutions. And the largest acquisition ever, SMSC, completed in August '12 last year, brought us the MOST entertainment business in automotive, our USB and Ethernet hubs and LAN connectivity, wireless audio solutions for Bluetooth, as well as Wi-Fi market and PC controllers for a lot of the embedded laptops and desktops and industrial PCs and others. All these acquisitions have worked out very, very well for us. The record of technology acquisitions of the industry is pathetic. I think many of you know that. And Microchip's record is just the opposite. All of these acquisitions are successful. So we're really proud of our record. Proud of the due diligence we do. The care we take in spending our shareholders' money. All these acquisitions have been accretive. I would say not all, but all the large acquisitions have been accretive. Some of the technology-type acquisitions like Ident are not accretive yet, but they're bringing tremendous capability to Microchip from where we can expand our solutions to the end market. So we have really taken good care of our shareholders' money.

Here is the accretion from SMSC non-GAAP. In third quarter of last year, which was a December quarter, the accretion was $0.065 per share. The quarter in which we completed that deal, September quarter was only, I believe, $0.03, $0.035. I don't have it on this slide. The fourth quarter, which was the March quarter of this year, accretion was $0.085 per share. June quarter was $0.10 per share, and we have guided to the investors that the fiscal year '14 accretion would be $0.40 to $0.45 per share. So it's been a tremendous use of shareholders' money.

In acquiring SMSC, we acquired about a $400 million business. Net of the cash we got back from SMSC, I believe we spent about $746 million. That number is approximate, I think, for that $400 million business. And that $746 million now this year will create about $0.40, $0.45 accretion per year. We don't take it lightly when we write a check for $746 million, the money that belongs to the shareholders. And I think this slide shows that we spent that money very well.

Served available market expansion areas, focus areas and applications where Microchip is gaining significant share. A large list here, I wouldn't read all of them. The 3 highlighted in green are the 3 which came from the SMSC acquisition. One was the infotainment in cars through the MOST bus, another is the wireless audio and third is a computing embedded controllers. Many of the others came from internal microchip development or from some other smaller acquisitions before.

I'll give you a feel for what we are doing in cars. I just picked one segment today, what are we doing in cars. How much penetration we're getting? What kind of applications we're getting? My first example is my favorite car, Tesla Model S. It is the best-known electric car in the world today. And you could see that the car is loaded with Microchip content in it around the car. There are 5 microcontrollers in it, 9 analog products in it, 1 memory product and 2 USB products providing the USB hub for charging in the car. And if you look at the Tesla Roadster model, which is a little older model. It came in a few years ago. There are 9 microcontrollers in it, 17 analog products and 2 memory products in that Roadster.

This is a new phenomena, electric car and gaining very quick popularity, but very small volume. They're building 20,000 cars just for this year, might exceed that number. We're also not only limited to these high-end electric cars. We also have tremendous business in high volume cars and other brand luxury cars. And this will probably be the best example here. If you buy S-Class Mercedes today, you're buying 26 microcontrollers, 6 analog products and 6 memory products from Microchip, all around the car, doing various functions. And as we bought SMSC, there are 11 more chips in the same S-Class car from SMSC. 6 parts are on the MOST bus, which is the entertainment bus in the car and 5 for the clear audio.

So large amount of content in the car, and these are just examples. You can pick up any other car. There's a very, very large microchip content in the cars.

Microchip is also very shareholder-friendly, with consistently increasing dividends and providing free cash flow. This slide shows our cash and investment balance. We just finished the quarter with $1.9 billion of cash. Some of the shareholders I was talking to at the meeting -- as we were gathering for the meeting, said they bought the stock soon after just Microchip had gone public. And when we had just gone public, we had no cash. Going public, we just had raised a little bit of cash to stay surviving. And from there, we have $1.9 billion cash in the bank, and we have also returned, is it correct, about $2 billion of dividend back to the shareholders. So we have returned $2 billion to the shareholders, and we still have $1.9 billion in the bank, so that's nearly $4 billion of cash generated in the last 23 years of being public. Tremendous feat. So shareholders should be proud.

And this is the $2 billion dividend paid I just talked about. The blue line shows the dividend per share on a quarterly basis. As you can see, we continuously slightly increase the dividend every quarter. And the red line shows the total number of dollars given each quarter. The reduction that you see in the earlier part of the graph here, in the Q3 '08 timeframe, was from a large stock buyback. So we have never decreased our dividend ever in the last many, many years. We never decreased it. These have a total decrease in total dollars in one quarter because we bought a lot of the stock back. When you buy the stock back, then you no longer have to pay dividend on the stock you bought back.

So what are the current business conditions as we speak? June quarter results beat the high end of our upwardly revised guidance for sales, gross margin, operating profit and earnings per share. Our inventory is within our target range of 119 days. We often said 115 to 120 days, so it's in the range. Our distribution inventory is at the low end of the historical normal level. Microchip recognizes distributor revenue only on a sell-through basis worldwide, when the distributors sell it to their end customer. We are continuing to experience strong bookings activity in the current quarter. In the month of August, today is 16, so about half the month gone, so far has been seasonally better than normal. August, which are all the holidays in Europe and holidays in China and Japan and lots of U.S. holidays. A lot of people take a vacation in summer, August and December usually are really difficult months usually of the year. But so far, August has been stronger than -- seasonally stronger than normal.

Total inventory, as I mentioned, the red line is the 119 days of Microchip inventory and blue line is the distribution inventory. You can see that if you go across, it's kind of on the lower end of really what has been normal inventory. So I'm not concerned about inventory at this point in time. We're, in fact, ramping our factories pretty hard. Both our fabs, our assembly and test plants, we're ramping them to provide more product to meet the growth needs of our customers.

And finally, opportunity for significant accretion as the margins expand towards our business model. So if you look at the Microchip's financial information, the first column were the actual numbers from the June quarter. The second column is the official guidance we provided in our earnings conference call. So we're looking for sales to grow about 2% to 6% this quarter with a midpoint of 4%. Gross margin from 58.1% to 58.7%. Operating expenses from 27% to 27.5%, and operating profit of 30.6% to 31.7%. Non-GAAP earnings per share, the midpoint is $0.60.

I'm reminding investors that our all-time record non-GAAP earnings per share was $0.63. So even though we're making record revenue, and we're making record operating profit dollars, the earnings per share is not yet a record because of a number of factors: One, when we made the last record, the interest rates were substantially higher. Talking about a very large amount, a couple of billion dollar cash, which were slightly lower at that time. We were earning much, much higher interest income than we are earning today. Interest income is kind of negligible today. The second factor is, we have some more loans outstanding today because of the large acquisitions we have done. We're paying interest on those loans. Third factor is, our share count has gone up. As the stock has gone up from the $30s it used to be to the $40s it is now, some of the share count creeps back in from the large amount of convert transactions we had done back in 2007. So because of many of these factors, the earnings per share midpoint this quarter is $0.60, still about $0.03 lower than the all-time record. But we're rapidly approaching towards it. And the most right column shows the long-term model of a 60% gross margin, 27.5% operating expenses and 32.5% operating profit at the midpoint of all of those numbers. So as we go from where we are today, with continuously growing top line and improving gross margin, as well as operating margin, you have a double effect from growth on the model and should drive substantial accretion for our shareholders.

So with that, I will summarize the presentation today. Microchip is a consistent revenue grower. Microchip is a perennial market share gainer. Microchip has consistently maintained a very high margin business model. We have shown a consistent track record of accretive acquisitions. We are very shareholder-friendly, have increased dividends for a very long time and do it on a quarterly basis, and we're generating very large free cash flow. Our current business conditions are very strong and investors have an opportunity for a significant accretion opportunity, EPS accretion, as the margins expand towards the long term business model.

With that, I will entertain some questions from the shareholders. If you have a question, first, please raise your hand. When you are recognized, please state your name, your relationship with the company and the relationship with the company could be, I'm a shareholder, I'm an employee, I'm a consultant and whatever. State your relationship with the company and then, please ask your question. So any questions? Yes, sir, mic.

Question-and-Answer Session

Unknown Shareholder

[Question Inaudible]

Steve Sanghi

That's a very good question, and thank you for asking. The whole phenomena about stock split has really quite changed with the advent of Internet trading. There are no more odd lot fees and things like that. So companies used to do a lot of stock splits for 2 or 3 reasons. Number one, if the stock runs up to, let's say, $100 and if you wanted to buy 100 shares, somebody has to invest $10,000. What do you do with a small shareholder who wants to buy 2,000 shares of company? And if you only wanted to buy 20 shares, there was an odd lot fee, both on the buying side and the selling side. It was very expensive for the shareholder to invest in very small share quantity. Some brokers used to have a minimum fee to buy -- to transact. And if you take that minimum fee divided by 5 shares or 10 shares, used to be expensive proposition. Today, a lot of the trading is done on the Internet. You can sell 5 shares, 10 shares. There are no minimum fees. Sometimes, fees are a few cents per share. There are no odd lot fees. So with that, the reason for being able to buy 100 share of lot has disappeared. The second reason a lot of companies will split shares is when there are very few shares in the float. So if there are very small number of shares in the float and a shareholder wanted to take a substantial position either on the buying side or then reducing the position on the selling side, there were not enough shares trading, and so they couldn't really take a position. And it has to take a long time sometime to buy a little bit of shares everyday for a long period of time. So companies would split their shares to create a larger number of shares, just like splitting $100 bill in 2 $50s, or $10 bill in 2 $5s. It doesn't create any value. It simply gives you 2 $5 for $10. But by creating those large number of sales, you improve the float and therefore, the shareholders were able to rapidly transact, buying and the selling side. With 200 million shares in float at Microchip today, that need isn't there. And that need is in there for many large companies today. The third reason often, Street talk, when you split the share, the Street's interpretation was that -- Street thinks the management is very positive on the outlook of the company. And by splitting the shares, the company management will give that message to the Street, we're splitting our shares because we think it will go up again, and that message is positive. That link has long been broken. We're giving plenty of positive messages through these presentations that we make to investors every quarter. So that link is broken because large companies like Google and Apple and who's stocks are in many hundreds of dollars. Apple is sitting around, near $450 and Google is what, $700 or $800. They're not splitting their shares, and that's not the way anymore. So all those 3 reasons for splitting the stock have disappeared. Now having said that, you will find complete consensus on it and you could probably find people in our management. I haven't polled, but even our board that they have a differing opinion that we should be splitting the stock. But it's not on the table right now. Thank you. Any other questions?

Unknown Shareholder

Steve, Mike Molina [ph], employee and shareholder. With the growth that we're experiencing this year, can you make some additional comments on our manufacturing capacity to support the growth?

Steve Sanghi

Definitely. So if you look at the manufacturing capacity, we have said that in our 2 fabs combined, our Tempe fab and our Oregon fab, we have clean room space in these 2 fabs that can do about $2.2 billion of revenue. And probably more so today with strength of technologies and others. In addition to that, we should use a large number of foundries, TSMC, GLOBALFOUNDRIES, X-FAB and others. We use a large number of foundries to supplement our capacity on various different technologies that we do not build inside. So by combining all those, we don't really see a capacity limitation today to be able to grow our business. Does it mean short term industry isn't facing capacity constraints at the foundries and lead time's a little longer than we like to have? Yes, that is true. But there's not a fundamental limitation of a longer term capacity constraint because the foundries are building substantial capacity and adding new fabs and all that. And Microchip is constantly adding additional equipment in our Oregon fab, would still have substantial room for expansion. So there's no fundamental capacity limitation we have. Now when you look at the assembly and test side of the capacity back end, there, majority of work Microchip does is in-house. Other than the large SMSC acquisition we did, all their work was outside, and we are starting to bring some inside. We have an entire floor in Thailand that can do several additional million units a day that is empty. It was a 4-story building, and it's a little more than half full, so we have a lot of space left. In addition, we have our second plant, MMT, it's only about 10 kilometers away in Thailand from our other plant, which has substantial space available for expansion. So there again, we will require -- dollars should be spent to add equipment, but the floor space is not a constraint. Thank you. Any other question? Yes, sir.

Unknown Shareholder

[Question Inaudible]

Steve Sanghi

Okay. So let me repeat the question. I don't know if the mic was working well. The question is, do I know or what do I think would happen when the Federal Reserve Board starts to taper off, starts to take the stimulus away, where they're buying $85 billion a month or so from the market in mortgages and other stuff, in bonds. I wish we knew. The market works on it everyday. What has happened is, the market is reacting very, very strange. In fact, I heard at the article, whatever was told yesterday, there was a Wall Street Journal article yesterday that said, the market is behaving actually just the opposite. On every good news, the stock market seems to go down because the good news is interpreted as Federal Reserve Board will taper and every bad news, the market seems to go up because market reads with the bad news Fed will continue to put the stimulus and not taper. So that's sort of what the article said. That's sort of what I'm seeing. My personal belief is, this huge stimulus artificially just spending that kind of phenomenal amount of money and balance sheet expansion is long term horrible. It's just going to have a very bad ending. And probably shouldn't have done it in the first place. But the answers will then really start to touch the political lines, which I wouldn't. But eventually, this has to go away. No country can spend $85 billion a month forever. The country has to build this economy on sound principles, not by taking a drug shot every month, which really is what they're taking today, taking $85 billion a drug shot. So what's the fundamental health of the economy when you draw that stimulus away? I'm not an economist. You pay me to run your money for the shareholders of Microchip. We have run our business in good times as well as in bad times very responsibly. Have been profitable for 91 quarters. Kept paying dividend through the financial crisis of 2009, and we'll be prepared to deal with whatever is put in our way. The Fed doesn't ask me what they should do, I'll tell them if they do. Thank you for that question. Anybody else?

All right. If there are no other questions, thank you for joining the shareholder meeting today. And we'll see you again next year. Thank you.

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