If there was one semiconductor company’s guidance ahead of the last earnings season that contributed heavily to an already negative tone at the time, it was Microchip Technology Inc. (NASDAQ: MCHP). It turns out that the big chip blow up was not as widespread as many analysts feared at the time. Now we have Microchip Tech limiting some of the sequential declines it was expecting for this quarter after it reported the formal guidance at the end of October.

It turns out that Microchip Tech has now all but erased its big slide that took place from the stock falling from above $45 down to under $40 in the first half of October. The recovery that started in mid-October lifted this ship too.

Microchip Technology announced after the close on Tuesday that it has revised its financial guidance for its fiscal third quarter of 2015, ending in December. Microchip now expects net sales to be down between 2% to 5% sequentially, and that earnings per share would be in the range of $0.60 to $0.64. The company previously gave guidance in late October when it expected net sales to be down 2% to 7% sequentially and earnings per share to be in the range of $0.59 to $0.64.

While this news may seem close enough to being in-line with expectations, this company’s recent history makes it just one more positive or less-bad bit of news to digest. Steve Sanghi, Microchip’s President and CEO said:

We have continued to see an improvement in our bookings and billings since our earnings call on October 30, 2014. We are now even more confident that the small correction that we experienced in the September quarter is behind us, and we currently expect to provide guidance of a low single digit sequential revenue increase for the March 2015 quarter when we announce our fiscal third quarter of 2015 results in late January.

In the post-market session on Tuesday, shares of Microchip were up about 2% at $45.52 in reaction to the revised guidance. The stock has a consensus analyst price target of $47.96 and a 52-week trading range of $36.92 to $50.04. It has a market cap of almost $9 billion.

Here is what blew up the chip sector back with the guidance given in early October. On top of the concerns about China and September being back-end weighted without sales materializing, here were the quotes in early October which added even that much more carnage on top of selling pressure that had been in place in late September and early in October:

Microchip often sees the turn of the industry ahead of others in the semiconductor industry. First, in contrast to many others in the industry, we report sales from distribution on a sell-through basis worldwide. We built a significant amount of inventory in the distribution channel in the September quarter. If, like many others in the industry, we recognized sales on a sell-in basis to our distributors, our sales would have been significantly higher for the September quarter. Second, Microchip does business with over 80,000 customers worldwide, most of whom are small and nimble and are able to adjust their demand in real time. We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future.

While we are reducing our production levels in our wafer fabs and assembly and test facilities, we are continuing to ramp production on our new technologies where we have been capacity constrained. We believe that we will be able to catch up on the capacity constraints during the December quarter and lead times should return to normal. The December quarter is seasonally our weakest quarter of the year. During typical industry corrections, we have returned to sequential revenue growth after two quarters and we currently expect the same this time.

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