Fitch Ratings revised the ratings outlook on Microchip Technology Inc. to negative from stable, while affirming its long-term issuer default rating at BB+ and senior secured ratings at BBB-/RR1.
The negative outlook reflects the rating agency's downward revision of revenue and profitability at the company in light of expectations of lower shipments into the channel over the course of two to three quarters on the back of significant excess inventory at Microsemi Corp., which Microchip Technology acquired May 29. Fitch said Microchip Technology's disclosure of aggressive shipments by Microsemi reflects heightened near-term integration risk.
Fitch expects management bandwidth to limit significant incremental acquisitions over the next two to three years as a result of the Microsemi deal. After Microsemi is integrated, the rating agency expects robust top-line and cash-flow growth to allow Microchip Technology to organically finance incremental acquisitions.