Microchip Technologies Incorporated (MCHP) reported net sales of $250.1 million in the third quarter of fiscal 2010, up approximately 10.3% sequentially and up 30.1% year-over-year.

Revenues from all three product lines — Microcontrollers, Analog and Serial EEPROMs — grew in the quarter. The Microcontroller business grew 10% sequentially and up 30% year over year. Analog business was up 14.1% sequentially and up 40% year over year. Growth was especially strong in the linear, interface and safety and security product lines. Serial EEPROM memory products grew 9.8% sequentially.

On a geographic basis, Asia accounted for 52.3% of total sales in the December quarter. Americas were 23.7% of sales, and Europe was 24% of sales. Revenue in the Americas was up 6.1% sequentially. Europe was up 10.2% and Asia was up 12.4%.

Gross margin came in at 59% compared to 55.5% in the September quarter. The increase in gross profit margin was driven by efficiency in production activities and continued cost reduction efforts by the management. Operating expenses came in at 26.2% of the sales, down from 27.7% in the prior quarter.

Net income came in at $70.1 million or 38 cents per share compared to a net income of $53.2 million or 29 cents per share in the prior quarter. This easily beats the Zacks Consensus Estimate of 29 cents.

The results beat management’s revised guidance provided in December. During the quarter, Microchip generated $89.4 million of cash from operating activities and used $18.7 million in capital expenditures. Microchip paid $62.5 million in dividends.

Going forward, management expects revenues between $257.5 million and $267.5 million in the fourth quarter of 2010. Gross margin is projected between 59.75% and 60.25%, up from the third quarter as the company continues to see the benefits from increased production levels in factories in response to improving business conditions. Microchip expects to target a gross margin of 61.6% by the end of fiscal 2011.

Operating expenses are estimated to be 26.2% of total sales. Earnings per share are projected at 39 cents – 41 cents assuming a diluted share count of 187.2 million – 187.6 million.

Microchip to Buy Silicon Storage

Additionally, Microchip announced today that it will acquire Silicon Storage Technology, Inc. (SSTI) for $2.85 per share in cash or about $275 million in cash. The acquisition is expected to close by the second quarter of calendar 2010. Silicon Storage is a global leader in embedded flash technology and the licensing of these technologies. Silicon Storage has several other businesses which include serial, parallel and specialty flash memories.

Management expects that Silicon’s proprietary SuperFlash technology is a critical building block technology for advanced microcontrollers. This acquisition secures critical embedded flash technology for Microchip’s core microcontroller business, and will enable the company to get early access to advanced technologies as compared to waiting until they are in production at the foundries.

The acquisition also adds a strong patent portfolio to Microchip’s intellectual portfolio as it has over 360 granted patterns and over 180 patents that are pending.

The transaction is expected to be accretive to the company’s business in the first full quarter after acquisition.

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