Benchmark Electronics Inc (BHE) 2007 Q2 法說會逐字稿

Welcome to the Benchmark Electronics second-quarter earnings call. For the conference, all the participant lines are in a listen-only mode. However, there will be an opportunity for your questions. Instructions will be given at that time. (OPERATOR INSTRUCTIONS) And as a reminder, today's call is being recorded.

At this point, I would like to turn the conference now to the President, Ms. Gayla Delly. Please go ahead.

Good morning. Welcome to the Benchmark Electronics conference call to discuss our financial results for the second quarter of 2007. Thank you for joining us.

I'm Gayla Delly, President of Benchmark Electronics. I would first like to introduce our team members present day. I will begin our call with an overview of our second quarter, and will provide a few comments on our strategy and overview of the current marketplace. Then Don Adam, our CFO, will review our expectations for the third quarter and discuss our financial metrics for Q2 in greater detail. After our prepared remarks, Don; Cary Fu, our CEO; and I will take time for your questions in our Q&A session. We will hold this call to one hour. You might note that we're missing Barbara Sorenson today, who is taking vacation, and is away from the heat and rain here in Texas.

During our call, we may make projections or other forward-looking statements regarding future events or the future financial performance of the Company. We would like to caution you that those statements reflect our current expectations, and actual events or results may differ materially. We would also like to refer you to Benchmark's periodic reports that are filed from time to time with the Securities and Exchange Commission, including the Company's 8-K and S4 filings, quarterly filings on Form 10-Q, and our annual report on Form 10-K. These documents contain cautionary language and identify important risk factors which could cause actual results to differ materially from our projections or forward-looking statements. We undertake no obligation to update those projections or forward-looking statements in the future.

First, I would like to begin by thanking our corporate and operating teams globally who delivered solid results for the second quarter 2007. We were very pleased with our performance during the quarter.

When you look at our first half results, they were solid, and even so in comparison to last year's strong first-half results. You might remember that we delivered 31% revenue growth and 38% operating income growth, adjusted, for the first half of 2006 on a year-over-year basis. And now, for 2007, we see 7% revenue growth and flattish operating income, adjusted, for the first half of 2007, while we have also driven strong diversification of our customer base and improved our balance sheet metrics.

Now I would like to share some highlights for our second-quarter results. Bookings remain strong. For the quarter, we booked seven new programs with 100 to $130 million in potential annual revenues. Again, on a year-over-year basis, our new program bookings had more than doubled for the first half of this year. You can see we have strong momentum going into Q4.

During Q2 2007, we had one customer with revenue over 10%. This customer's revenues represented 25% of our total revenues during Q2. We expect that this percentage will remain constant for the balance of 2007, excluding any new program ramps, which will favorably impact revenues during the latter portion of 2007 or 2008.

During the quarter, we also generated cash from operating activities of approximately $66 million. For the first half of the year, we generated cash from operations of $161 million.

We have noted over the past year that we were reviewing our capital structure on an ongoing basis. And this morning, we announced a stock repurchase program to purchase up to 125 million of our outstanding common shares -- $125 million. We planned to initiate purchases under this plan immediately.

We also plan to keep our balance sheet solid and flexible to support growth and opportunities. We reduced inventory $79 million during the quarter. Our team has done an outstanding job of effectively managing inventory during this market.

With the revenue growth expected for Q4, we do expect to see some growth in our inventories for Q3, but anticipate our inventory turns will remain in 6.5 to 7.0 range.

In Q2, we continued with our integration plans to improve efficiencies and reduce costs across the Company following our acquisition earlier this year. We are on target to achieve our planned savings.

Our earnings were on the higher end of our earnings guidance, and we were in the mid-range of our revenue guidance.

As I mentioned, we continued to drive a strong bookings during the first half of the year, and we are optimistic with the positive pipeline of opportunities we see in front of us, and expect our bookings to remain strong for the last half of the year. The revenue and earnings benefits of these new bookings are expected to be realized beginning in the fourth quarter of 2007. Keep in mind that these are estimates, and actual results may differ.

I want to specifically note that we expect to achieve our operating margin target of 4.5% by the fourth quarter. Our continued focus will be on improving our operational effectiveness; integrating our acquired facilities; aligning our footprint and resources for the market and customer demands; continue the diversification of our customer base; and expanding and leveraging our service scope.

Now I would like to turn it over to Don to provide additional comments on our second-quarter results and our third-quarter guidance.

Thank you, Gayla. Based on the current indications from our customers, including new program ramps, we expect third-quarter revenues to be in the range of 730 to $770 million. The corresponding earnings per share is in the range of $0.38 to $0.42 per share, excluding stock-based compensation expenses of $800,000, the amortization of intangibles of $447,000, and restructuring charges and integration costs of approximately $1.5 million due to the incremental opportunities we see in leveraging our resources.

Sales for the full year are expected be in the range of $3.0 billion to $3.1 billion. The corresponding earnings per share is in the range of $1.58 and $1.66 per share, again excluding stock-based compensation expense of $3 million, the amortization of intangible assets of $1.8 million, and restructuring and integration costs of approximately $8.2 million.

Please note that the earnings per share guidance just mentioned excludes the impact of our recently announced stock repurchase program.

This revenue range for Q3 and the full year is below our original expectation, and reflects a more moderate demand environment than we earlier anticipated. And it is also a transition quarter for several of the new programs we are ramping. We expect to incur restructuring charges, integration costs, and amortization of intangibles of approximately $10 million during 2007.

Now, let me share some actual highlights from our second quarter of 2007. As Gayla previously mentioned, one of the highlights of Q2 was our continued improvement in cash flow from operating activities. During Q2, our cash flows from operations were approximately $66 million. We expect cash flows of 25 to $50 million for the remainder of the year, most of which will be generated in the third quarter.

Please note that the Q2 financial results contain three special items. They are as follows -- Restructuring charges and integration costs of $2.2 million, $1.6 million net of tax; stock-based compensation expenses of $1.2 million or $803,000 net of tax; amortization of intangibles of $447,000 or $292,000 net of tax.

Also please note that Q2 '06 also includes special items. Please see our press release for the description of these items.

To help in a more meaningful comparative analysis, we present certain financial information excluding these special items during this conference call. We will call your attention to the fact that these items are excluded when we do so. In today's press release, we have included a reconciliation of our GAAP results to our results in excluding these items.

During the second quarter of 2007, we had revenues of $756 million. These revenues were within our guidance of $740 million to $775 million provided in our last conference call and are up slightly year-over-year compared to revenues of $749 million in 2006. Our operating margin for the first quarter was 4.2%, excluding the special items noted earlier.

GAAP net income for the second quarter of 2007 was $25.9 million compared to $27.5 million for the second quarter of 2006. Excluding the special items, net income was $28.6 million compared to $29.4 million in the second quarter of 2006.

Diluted earnings per share for the second quarter were $0.35 per share. Diluted earnings per share excluding the special items were $0.39 compared to our guidance for the quarter of $0.36 to $0.41 per share. Diluted earnings per share for the second quarter of 2006 were $0.45 excluding special items. Please note that in 2007, the interest expense and convertible debt of $32,000 was used in the computation of earnings per share.

Our ROIC was 10.1% for the second quarter of 2007.

Interest and other income were approximately $3 million for the quarter. Interest expense was $564,000 due to the debt acquired, and other income was approximately $564,000.

Excluding the special items, our effective tax rate was 17.2% for this second quarter. On a GAAP basis, the effective rate was 15.4%. For the full year of 2007, our estimated tax rate -- effective tax rate is 14.6%. Our tax rate has continued to benefit from favorable tax incentives on our expanded business levels in Asia.

Weighted average shares outstanding for the quarter were 73.3 million. Note that during the quarter, the outstanding convertible debt was converted into 351,000 shares of common stock.

Our cash and short-term investments balance was $318 million at June 30. Our cash balance increased $94 million when compared to December 31. This increase is after reducing acquired debt by $71 million for the first half of the year.

For the second quarter, our cash flow from operations were approximately $66 million. Capital expenditures for the second quarter were approximately $2.5 million. Depreciation and amortization expense was approximately $10.1 million. Receivables were $501 million at June 30, a slight decrease of $12 million from the last quarter.

Inventory was $385 million at June 30, a reduction of $79 million from March 31. Our inventories improved to 7.3 times for the most recent quarter compared to six times in the first quarter. Current assets were approximately $1.3 billion, and the current ratio was 3.0-to-1 in Q2 compared to 2.5-to-1 in Q1.

As of June 30, we had $13 million in debt outstanding, all as a result of the acquisition. This was reduced from March 31 due to the conversion of outstanding convertible debt and the payoff of the remaining line of credit. The remaining debt facility is primarily a long-term capital lease on one facility.

With the softer market, we saw comparable revenues for the quarter when comparing 2007 to 2006. For the second quarter of 2007 as compared to the second quarter 2006, we did continue to see double-digit growth in several of the industry sectors that we serve. Industrial control sectors increased 10%. Test and instrumentation sector increased 32%. And the Telecom sector increased 28%. Revenues from the medical sector were down 13% and the computer sector was on 6%.

On a year-over-year basis, our medical revenues have increased. The current quarter, of course, has been impacted by program delays we noted in our last conference call. We expect two of the four programs to be resolved during the latter part of 2007.

Comparing the second quarter of 2007 to the same period in 2006, the revenue breakdown by industry continues to show consistency. The breakdown is as follows. Medical in 2007 was 13% compared to 14% in 2006. Telecom was 14% in 2007 as compared to 11% in 2006. Computers was 54% in 2007 as compared to 58% in 2006. Industrial controls was 12% in 2007 compared to 11% in 2006. And test and instrumentation was 7% in 2007 as compared to 6% in 2006.

At this time, I would like to open for the Q&A discussion. During the session, we request that you limit yourself to one question and one follow-up question in order to allow enough time for everyone's questions.

(Operator Instructions). Kevin Kessel, Bear Stearns.

My question is -- I just wanted to understand a little bit better on the FDA programs or the medical programs. I heard Don mentioned two of the four you expect resolution on by the end of the calendar year. Does that mean that they should resume normal production in the beginning of 2008?

We anticipate -- Kevin, this is Cary. We anticipate the [project] will be started the later part of 2007. We should have a full revenue potential for 2008. That's correct.

For two of the four. Where do you stand on the other two?

We still monitor them. We still anticipate it will be resolved [somewhat]. We just don't have a very specific timetable at this point in time.

Are these programs -- are they all for the most part relatively equal in terms of size or are some larger than others?

The two projects we'll talk about in the release will be the two major projects.

Okay, the bigger ones?

Yes.

Okay. And then in terms of a follow-up question, when you guys say in your statement that you expect a more moderate demand environment, and that there's going to be a transitional quarter, can you just help us understand what you mean by transitional quarter for some of the programs? And maybe you can quantify, because you say several -- I'm just trying to get a better sense of how broad-based this is.

We have a number of new programs, new product ramps that are coming up, Kevin. And as you will recall from half-quarters, you go through a transition period, and [the wool], if you will, in between, the product transition. So I think that that's what we would expect to see in Q3 as we kind of anticipate fourth-quarter ramp on some of the new programs' and new products.

Amit Daryanani, RBC Capital Markets.

I'm glad to see a share buyback there. My question though really is around the inputs and guidance you have for the December quarter. It looks like you're looking for December to be up about 6% or so sequentially after the first three quarters of the year being essentially flat for you.

Initially, what's driving the big sequential uptick in the December from your expectations? And is that new ramps? Is it end-market strength that you're seeing in December?

It's probably a combination. As you note from my earlier comments in the prepared remarks, our bookings are double on a year-over-year basis. So we expect to see the benefits of some of the programs bookings. And no doubt, Q4 is a stronger quarter typically during the year. And we have new product ramps even some of the ones that we've been working on for long periods. So it's really a combination of those three effects that I think are bringing about a stronger Q4.

All right. And Gayla, just as a follow-up, I thought you mentioned that you expect your largest customer to be flat around 25% of the sales for the next for the remainder of the year. But typically for your largest customer, Q3 tends to be a soft quarter, and we have seen the percent drop for you guys. You don't expect to see that happened this time around? And why is that?

Again, as we said, with several of our top customers, as we go through a product transition, in front or during the period of product transition, you are shipping both older-generation and new-generation products. And while the new generation products may get strong growth opportunities, as you bleed off the older generation, you will have a lesser revenue base there.

So instead of a decline or a softness as we might see in some cases, since it would be Q4 as we ramp some of the new programs, I would expect it to be flattish.

All right. Just finally, the EPS shortfall in Q3 -- does the Quantum acquisition you guys did on the Penang site, is that weighing down the Q3 EPS at all? And does that lower your CapEx expectation in the back half of the year?

No. The acquisition which we did, as you recall from the filing, was our nominal use of cash. It was a good opportunity for us to expand our footprint in Asia and have a low-cost entree there. So that's of no significant impact whatsoever.

As to your second question, I forgot what (multiple speakers)

I guess, does it lower your CapEx -- I think the CapEx expectations were about $50 million for the full year. Given that you just got I think about 100,000 square foot from this acquisition, does that lower your desire to spend more money in expanding capacity and low cost over here?

It may allow us to delay our expansion, specifically in China. We probably have prolonged that by a quarter or two as compared to what we would have done earlier. So yes, it will affect probably 2007 overall, but not by a significant amount. It just probably slides it out a quarter or two.

Tom Dinges, JPMorgan.

I wanted to run through where you guys are expecting numbers to be now for the full year, kind of where you were expecting it a couple of quarters back and trying to better understand this. Obviously, you're talking a lot about moderate demand and programs that are getting pushed and pulled around all over. But if you look at it, it's about [200 and maybe 50 million bucks] of revenue that's now not going to be shipped in 2007.

And how much of that is truly just what you guys are seeing in terms of just softer demand relative to what you were expecting, and how much of that has been relative to the programs that have been pushed around a little bit? Just trying to get a sense of how much of this maybe just disappears completely, and how much might actually sometime ship in 2008? And then I have a quick follow-up.

I guess the -- from the initial projection, the 2007 versus what we update projection, most of all reflects -- we do see a softer market from telecom and from the computing site, but not the business [disappears] more on new project coming through probably later than we anticipate it, as well as on the medical product which is being pushed out into 2008.

So there's a lot of variables. But I feel pretty good about what we've done. And you look at -- compare [us getting] (inaudible) earlier discussion, we covered a very strong 2006 significant growth. And our focus is for [the two years] will be diversified customer base and deliver a continuing amounts of growth. And that's our focus. And I think we did a very good job on that.

And then lastly, just point of clarification on the buyback. Did I hear you correctly that you will engage in that buyback immediately? And when does that window actually open up for you guys?

We will start immediately and put that program in place. So we will begin very soon.

Jeff Walkenhorst, Banc of America.

Thanks for taking my question. First of all, actually on the buyback, you mentioned you'd like to stay -- keep the balance sheet flexible. Does that imply that you don't assume to lever up any way to fund the buyback, and you will merely use the cash and the balance sheet or --?

At this point in time, I do not see that we would lever up to undertake this buyback that we have announced today. Again, we would continue as we have said over the past year to monitor and review our capital structure and identify any actions that we would need to take on an ongoing basis.

Okay -- if you could surmise if in fact the pipeline is quite robust and you expect a strong fourth quarter and then maybe better trends into '08, that there could be some leverage advantage from using some debt on the balance sheet. But I guess that's just something that we'll have to keep an eye on.

Second question is just trying to get a better handle on some of what's already been covered. But this pipeline rebound in the fourth quarter, which of the different industry segments to you expect to see better growth?

Well, as we mentioned, I believe in our program, new program wins and bookings that we've seen over the past few quarters -- those are broad-based. So that's just kind of one point of reference.

Second, we mentioned that we expect some of the medical programs to begin shipping again. So we would see a bit of an improvement in that.

And then third, as it relates to normal improvements in Q4, those seem to be broad-based, with good strength typically in computing.

Jim Suva, Citigroup.

I have a quick question. When we look about -- Gayla, you talked about growth and things like that. And when we look at the numbers versus this year, total sales should be up about 5%. Is it that the PEMSTAR acquisition isn't all progressing what you thought it would be? Or is it the core Benchmark business is slowing? Because up 5% for the full year considering a big, sizable acquisition is a little bit disappointing. Can you just help us kind of connect those dots?

I think, Jim, as we've mentioned in our previous calls, we have several dynamics that had gone on over the past year. And I believe the acquisition, the second sourcing -- some of those activities, as well as the new entity that was spun off from Agilent -- all of those combined, and including the 30% growth -- 31% growth on a year-over-year basis -- when you factor all of those in, I feel very good about the traction, the diversification and the growth that we've seen on a year-to-date basis, and specifically, on our full-year 2007 expectations.

Okay, so I guess it doesn't sound like something's off-track then --

No, in fact, I think it is very much on track. I'm very pleased with both bookings that we've had year to date, and in fact the opportunities we see in front of us. Our teams have really stepped up, both on the bookings front and on the operational execution.

And now as my follow-up question -- the timing of the stock buyback can be interpreted a couple of different ways. And maybe you can just help us clear up some investor questions about that. Your cash per share has actually been higher at previous times. And also, there's been a lot of M&A activity in the industry right now. And someone could interpret the timing of your stock buyback to either be just a normal decision that you had made as you had been looking to do something with your cash; or B, it could be because you see cash deployment for expansion or other opportunities slowing; or C, is it a method to get rid of some cash because you want to make sure or there's someone looking at you guys for like a takeover, and you want to get rid of some of that cash on your books.

Could you maybe just help us clarify that? Or even a last reason is because of the EPS shortfall or taking down in the next quarter or two -- is that just an opportunity to kind of stem that? Help us clarify that.

Let me [answer] the (inaudible). Stock buyback in the capital structure we view is not a very short-term process. And as you know, we have discuss about a some sort of adjustments on capital structure for the last four quarters.

And the reason we took this action is a long-term discussion between our board members and our management team. And if you look in the background, we have been continuously increasing our cash flow very obviously -- for the year, we [get] over $160 million of the cash flow from operations in the first half. And also, anticipate a continued growth of about another $15 million in the second half.

That will put our cash position close to $400 million. And that will be way too much than we anticipated. And that's what will trigger this buyback.

I think this is a good thing. It's not a short-term decision. It's not for [any] purpose. It's a longer-term adjustment of the capital structure of the Company. Even with the $125 million buyback, we still sit on a very strong cash balance, and with no debt and a very strong -- there's a line of credit in place, we still can engage in a significant acquisition if the opportunity presents itself.

I think this is a long-term decision for the Company, and we don't take these things very easily. There's a lot of discussion behind [these things] long-term discussion of all our team. So I think it's the right thing to do.

Of course, with that [much cash on hand] make the cost of capital is very expensive. And that's where the decision is made. And it's a question about whether someone is (inaudible) happened. We'll make a decision pure for the benefit of the shareholders and the benefit of the Company as a whole.

Okay. And is it an accelerated one, or do you see it over the next year taking place? Or how should we think about the timeline? Does it expire in a year?

This is open markets repurchase plans. And we want to keep the most flexibility. And the intention was to purchase the stock -- initially the [procurement] -- purchase planning immediately. And we're going to adjust the market conditions. And what we'll commit to is we'll do the best for the benefit of the shareholders, as well as the Company.

(Operator Instructions). Steven Fox, Merrill Lynch.

Just another question on the new program win. The reacceleration -- did you do anything internally in terms of reorganizing in order to get you guys back on track with the wins? Was there any other specifics around why the reacceleration took place as opposed to what was going on in the previous couple of quarters?

I think it's a very strong marketplace. I guess we have to give some credit to the sales teams for the efforts put forth. But as you might appreciate, the selling cycle is a long-term selling cycle in our business. So it's just kind of closing on some actions that we've been underway with for periods of time.

And (multiple speakers) indicating the selling cycle of our business is very, very long. And what you see today is the effort we've put in last years in the -- that's what you see the benefit of.

That's helpful. Gayla, just to clarify one comment -- when you talked about the Sun business being 25% of sales, you said this percentage should be constant, ex-new programs, we're you implying excluding any new Sun programs, or excluding other programs? I'm not sure how to take that comment.

Well, both. I think that based on the current state of affairs, any significant wins on either the numerator or the denominator would have an impact on expected concentration rate.

But were you implying that there's new wins with your largest customer coming?

With all our major customers, I believe we have opportunities that we are embarking on for new programs. So nothing unusual there.

Last quick question -- tax rate going forward?

Should be -- we're anticipating 15% on the non-GAAP basis.

Kevin Kessel.

I just wanted to understand -- Gayla, I think it was your comment about operating margin being 4.5% in the fourth quarter. And how would you guys see that coming about? Do you actually see further gross margin expansion, or is it just better leveraging of SG&A?

It's a combination of the increased revenue streams that we anticipated, and operational efficiency that we're getting through the restructuring efforts that we put forth.

Okay. In terms of just accretion coming from the acquisition, I think you guys outlined about $20 million in cost savings from PEMSTAR when you did the deal. How do you see that falling into the model? Is that more going to be 2008? Or is some of it going to show up actually in the December quarter when you have higher revenues?

I believe you'll start seeing some impact from its in the fourth quarter and then following on into 2008.

Just housekeepingwise, maybe Don, can you clarify why the other income went up as much as it did on a sequential basis? I didn't catch that.

A couple of reasons -- higher cash balance gave us a little more interest income. And then the foreign currencies -- (multiple speakers) yes, it was $0.5 million as opposed to a loss last quarter. So that sort of had a double effect on that.

Would you expect -- where would you expect that other income line to be? Or what is implied, I should ask, maybe in the guidance that you presented for the back half of the year?

I would say other income is probably $2.5 million.

2.5, okay.

Right.

And then CapEx-wise, you guys -- at this point, it looks like you will definitely undershoot the $50 million target for CapEx for the year --?

Definitely -- that's -- we think the acquisition that we have -- we have a significant capital equipment we can redeploy to the different units. We don't need to acquire additional capital equipment. So yes, it will be undershoot the $50 million.

And where would you see CapEx in general then on a normalized basis? Would it go back to kind of a 30, $40 million range or --?

Well, 2008, we'll probably going back to this 40, $50 million range. And this year will be the year we're trying to digest all the newly acquired equipment we have, and be sure we use it efficiently. And that's one thing -- the Benchmark team did a very good job, and we took our assets available to us, and do a very good planning to utilize assets effectively.

Okay. And then lastly, Gayla, you were saying that you expected that the largest customer to remain flat for the remainder of the year, barring any new program ramps from them. If they were to remain flat, let's just say as a percentage of revenue based on the expectations you've outlined, that would essentially put them down 25% year over year, which I think is in line with what the expectation was at the beginning of year when you filed your 10-K.

Could that imply then that the dual sourcing is something that is essentially behind Benchmark? Or is dual sourcing something that will always be a part of engaging with this customer as we go forward?

Again, I am probably going to defer. I don't feel it is appropriate for me to discuss any further or surmise what is happening in the relationship other than to give you guidance as to what we expect to include in our numbers. So I will leave it at that.

Carter Shoop, Deutsche Bank.

Just a few follow-ups, maybe on this last one here with Sun. You talk about how you are expecting new program ramps in the fourth quarter overall the entire business. And then you also mentioned in the Q and also today that you are not -- you think that the business is going to stay at roughly 25% excluding any ramps that could happen either in the fourth quarter or first quarter.

I just wanted to clarify that your guidance suggests that your largest customer is not going to ramp a new program in the fourth quarter. Is that accurate?

I guess (inaudible) -- you've got my guidance for revenue. You have got my guidance for the concentration. Speaking to how and when new programs for any specific customer are going to ramp is not appropriate for me to disclose on this call.

So I think you have got the guidance for the concentration and the revenue. And any specific questions with regards to programs for specific customers, I will have to invite you to speak to their Investor Relations.

Just so I heard you correctly, you did say that largest program is going to ramp in the fourth quarter or first quarter of '08. Is that what you said earlier in the call today?

Let me go back and reread exactly what I said so that we make sure we are not misstating or having a misunderstanding. Hold on, and let me find that point in the notes.

Okay, during Q2 2007, we had one customer with revenue over 10% of total revenue. This customer's revenues represented 25% of total revenue during Q2. We expect this percentage will remain for the balance of 2007, excluding new program ramps which could impact our revenues during the latter portion of 2007 or early 2008.

Okay. And what I'm asking is when you say latter part of 2007, is that baked into guidance or is that going to be incremental?

So what we are referring to it is the percentage calculation would be impacted by any new programs, not the -- I'm not readjusting guidance. I'm just saying that the percentage could be impacted by either new programs that have a different impact than what we anticipate in our calculation of the 25% number.

Okay. And then in regards to the buyback, I guess first off, am I correct in understanding that it's going to be -- it's baked into guidance? And assuming that's the case, the second half guidance -- does that assume that the buyback is completed by the end of the year? Or what exactly does guidance assume?

No, as Don noted in his comments, the earnings per share guidance excludes the impact of the stock repurchase program that was announced this morning.

Good -- clarify that. And then the last question, it seems like there's a little bit of a disconnect between a lot of insider selling over the past six months and the Board's decision to do a buyback, particularly given the investors clambering over a buyback for the past several years. And then all of a sudden, we're seeing kind of spike in insider selling. Can you maybe discuss that disconnect, and how the Board discussed how that may be perceived by the Street?

There is absolutely no real connection between the insider selling and the decision we make. Keep in mind, most of the executives of the Company have options in place for long time. And the reason we all will sell our options almost [near] the expiration date. And you can see the pattern there -- the reason you see some of the insider trading was mainly to the dispose the option before the expiration. And because the acquisition we had to delay to some of those selling programs because we had some insider information -- there's absolutely no connection between the two numbers, and we always do a [sell] options once a year in that kind of pattern. And there's no anything unusual about that. And as a matter of fact, I still hold a significant number of the stock in hand. I have not done anything there.

And just one separate note is Don Nigbor has had an ongoing 10b5-1 plan that is out there. So he is an exception to the once-a-year or whatever of the options. His has been an ongoing plan.

Brian White, Jefferies.

If we look at -- the program win rate in the last couple of quarters has really been phenomenal relative to last year. What do you see going into the September quarter? Can we keep this up, or what does the pipeline look like?

We have a very strong pipeline. And I would expect it to be very comparable to what we've seen.

Brian, what we discussed earlier is -- this is not an action we have taken yesterday and triggered this kind of result. This is something we've done 18 months ago -- knowing all the activity and anticipated some of the potential issue -- potential end-customer issue, we have a very focused business development process, and that's what you see the benefit today.

So, is there any reason why we wouldn't see a meaningful acceleration in sales growth in 2008 versus 2007?

Well, probably, I'm not giving the guidance in 2008. Based on the number, the bookings will (technical difficulty) and the ramp, and we should see a pretty decent growth and into the 2008.

And you know, growth of our business is not -- it doesn't happen very suddenly. [We're ready to] start Q4, and that will be -- the momentum should be carried to 2008.

Okay. And just Cary, in the September quarter specifically, what markets do you think would actually go up sequentially?

Well, I think industrial control will probably do okay. Medical may be up slightly from sequentially. But we definitely see a week from the computing and the telecom side.

Amit Daryanani.

Just a couple of quick follow-ups -- regarding the buyback, what kind of time-frame would you ideally like to complete the buyback in? And when does authorization actually expire for you guys?

Again, we don't have an expiration date on it there, do we have? No -- the intention of the buy is the most efficient way and to the benefit of the shareholders, and based on the best benefit of the Company. And I'm not here giving a specific guideline. But I will say we will be initiating the buyback immediately.

All right. And I may have missed this, but of the seven wins that we announced this quarter, how many of them are with new customers versus existing ones?

Most of them are from new customers.

All right. And can I just listen to you talk about expected cash duration going forward? It sounds like there's more room for the inventory reduction to keep happening despite the 18% drop we have this quarter. Could you just talk about what's enabling you to do a much better job in inventory this time around than the way it was last year, at least?

Time out, Amit -- I specifically said in my comments that I don't expect inventories to continue to decline next quarter. I think we did get some efficiencies as we go into Q4, and expect strong revenue increases in Q4. We will of course position inventory for that.

What I do want to do is to maintain an improved and increased velocity on our inventory turns. But I don't expect [$12] to be generating more cash from inventory. That would be great, but I don't think that's realistic.

We will take one last question I believe.

[Jay Hindirani], Standard & Poor's.

Real quick -- just wanted to circle back on the guidance by concentration in the guidance? I think I may have missed that real quick. Did you say you booked that out by segment?

I'm not following the question.

Were you speaking of the revenue guidance?

Yes.

No, we broke out the most recent quarter's sales by segment. But we did not break out this guidance by segment.

Okay, I thought I heard in Gayla say that we talked about guidance and concentration.

Okay. And then, the other question I had real quick was on the buyback. Do you have a certain price range that you think -- the stock will be attractive to you?

No, we have not set forth any specific guidelines.

Okay, fair enough.

Thank you all for joining us today. And we look forward to speaking to you again. Thank you.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect.