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conference date: April 25, 2007 @ 2 PM Pacific Time
for quarter ending: March 24, 2006 (3rd fiscal quarter 2007)
forward looking statements
Overview: Weak revenues for quarter. Still unable to give detailed results due to accounting issues. Guiding revenue mostly up for June quarter.
Basic data:
Revenues were $475.8 million, down 4.4% sequentially and down 0.5% from year-earlier.
No Net Income information due to ongoing stock-option accounting restatement process.
Cash and equivalents ended at $1.32 billion, up $8.5 million sequentially.
Guidance:
Expects June quarter sequential revenue increase of 9 to 13%, noting it is a 14 week quarter.
Conference Highlights:
Demand hit bottom and stabilized during the quarter. Turns orders are strong. Expects sequential growth for the June quarter.
Non-GAAP gross margins improved during the quarter.
Accounts receivable dropped $26 million to $250.7 million. Depreciation expense was $26.2 million.
4th fiscal quarter 2007 will have 14 rather than the usual 13 weeks.
Restatement process is making good progress and they hope to complete it this summer.
Gross margins improved 0.8% sequentially due to mix shift (lower notebook shipments) and changes in inventory reserves.
Operating expense excluding non-recurring items increased 2.4% sequentially. Added to R&D headcount. One time items in quarter were $19 million for tech rights settlement; $6.8 million for legal settlement.
Cash used included $50 million for dividends, $64 million in payments for property and equipment, and $54 million for income tax.
Accounts receivables decreased $26.3 million to $250.7 million. DSO declined from 52 to 50 days.
Gross bookings $486 million, down 3% sequentially. 90 day backlog increased to $350 million from $343 million.
Bookings in first 4 weeks of a quarter are often misleading, but this quarter we see bookings signaling revenue growth.
Reserved $3 million in inventory due to cancellations by two wireless customers. Bookings from consumer end markets were up, but those from industrial, communications, and computing were down slightly. This would imply an unfavorable shift in gross margins. But we expect to take a smaller inventory reserve in fiscal Q4, so on balance will retain margins.
Operating expenses excluding nonrecurring items are expected to increase 9.5% sequentially due to 14 weak quarter.
Reiterated design wins announced during quarter. New areas include ultrasound imaging, power-over-Ethernet, audio and LCD power systems for computers.
Q&A:
Gross margin during growth periods? Don't expect a major expansion in gross margin with amount of foreseeable short term revenue growth.
Cap ex going forward? Around $90 million this quarter, which is up from fiscal Q3 due to equipment purchases and new software. But believes cap ex will go down next year; most of the spending is in place to do next year's shipments.
Revenues by end market? Well balanced, does not give details.
September quarter revenues? Business units seem optimistic about that quarter, will probably be up on a 13 week to 13 week comparison.
Inventory reserves? Actions result from looking at specific inventory that does not appear to be saleable within 12 months. Should modulate as demand picks up.
What market did you drop out of? Stand alone high speed analog to digital converters. Too much competition, not worth the R&D resources. Expects no revenue impact in short term because will continue to sell products that are already developed.
Motherboard power management market? Maxim has been dominant supplier. It has become a more crowded field, so product differentiation is important. Diversified into related motherboard products.
Lead times? Were reduced by about 1/2 week by customers during quarter. We matched that. Hope to shorten lead times further, maybe another half week.
Inventory? Non-GAAP $ increased slightly. Likely to go down slightly in next quarter. But helped reduce lead times; at a good level.
Accounts receivable drop? Did not see a linearity change in the quarter. Receivables in usual range.
Hazardous substances inventory reserves in Q2? Took most leaded inventory out. Did not go down to zero, but believe customers still want those.
Visibility is poor for long term. Does not have a long-term revenue model for revenues. Does expect analog mixed signal market to grow.
Q3 notebook demand? Q2 had strong demand, expected to drop in Q3, but not as much as it did.
Cell phone markets? Much of the strong bookings came from Korea. Cell phone market unit growth is in low end. Much of our gross margin problems have been due to low margins in low end cell phones. But high end cell phones we see as still having good growth potential.
Automotive? Competive pressures on them to shorten cycles for entertainment electronics in autos.
Integrated PMIC for wireless? Handset products in several functional areas. Integrated power management solutions have potential for growth; audio too; integrated audio with backlighting. We make the best tuner ICs for mobile television and have a lot of design wins in Asia for them. Focusing on high-end handset market; we help to provide new features. We have a great portfolio of building block functions that can be integrated for specific customers.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but its possible. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2007 William P. Meyers