Semiconductor company Microchip Technology Inc said it would buy flash chip maker Silicon Storage Technology for about $273 million in cash and reported third quarter results which beat market expectations.

The deal gives Microchip access to Silicion Storage's Superflash technology and patent portfolio, both key building blocks for advanced microcontrollers, Steve Sanghi, Microchip's chief executive said in a statement.

Hit hard by a supply glut, dwindling orders and growing competition over the past two years, small and mid-sized chipmakers have seen valuations plummet, making them attractive targets for larger companies.

Microchip, which reported better-than-forecast quarterly results, said it had over $1 billion in cash and short-term investments as of December 31, 2009.

The company forecast fourth-quarter earnings of 33 cents to 36 cents a share, on revenue of $257.5 million to $267.5 million.

Excluding items, the company expects earnings of 39 cents to 41 cents a share.

Analysts were looking for earnings of 30 cents a share, excluding items, on revenue of $247.9 million, according to Thomson Reuters I/B/E/S.

For the latest quarter, net income fell to $69.4 million, or 37 cents per share, from $72.4 million, or 39 cents per share, a year earlier. Revenue rose 30 percent to $250.1 million.

Analysts on an average were expecting earnings of 29 cents a share, excluding exceptional items, on revenue of $243 million, according to Thomson Reuters I/B/E/S.

Shares of the company were up 2.4 percent to $27.21 in pre-market trade. They closed at $26.56 Tuesday on Nasdaq. (Reporting by Shrutika Verma in Bangalore; Editing by Vikram S Subhedar)