Cirrus Logic Inc (CRUS) 2010 Q4 法說會逐字稿

Welcome to the Cirrus Logic fourth quarter fiscal year 2010 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will open up the call for your questions. Instructions for Q&A will be provided at that time. As a remind this call is being recorded for replay purposes.

I would like to now turn the conference over to Mr. Thurman Case, Chief Financial Officer. Mr. Case, you may now begin.

Thank you. And good morning. Joining me on today's call is Jason Rhode, Cirrus Logic's President and Chief Executive Officer.

Before we begin, I would like to remind you that during the course of this conference call, we will make projections and other forward-looking statements regarding, among other things, estimates for the first quarter revenues, gross margin levels, combined R&D and SG&A expenses, amortization of acquired intangibles and share-based compensation expense, as well as other estimates and assumptions regarding long-term gross margin and operating profit goals, future demand for products, and expected revenue and market share growth. These statements are predictions that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the company undertakes no obligation to update or revise any projections or forward-looking statements, whether as a result of new developments, or otherwise.

Please refer to the press release issued today, which is available on the Cirrus Web site, the latest form 10-K, and 10-Q, as well as other corporate filings made with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations. All financial numbers are prepared, unless noted, in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial information provided in today's call to the most directly comparable GAAP information is included in today's press release, and on the company's web site in the investor section. Non-GAAP financial information is not meant as a substitute for GAAP results, but it is included because management believes such information is useful to investors for informational and comparative purposes. In addition, management uses certain non-GAAP financial information internally to evaluate and manage operations. As a note, the non-GAAP financial information the company uses may differ from that used by other companies. These non-GAAP measures should be considered in addition to, and not as a substitute for, the results prepared in accordance with GAAP.

And now, I'd like to discuss our results. As we announced on April 7, net revenue in the March quarter was $62.6 million, an 87% from $33.5 million in the March quarter last year, and a 4% decrease sequentially from $65.2 million in the December quarter. For the full fiscal year, we recorded net revenue of $221 million, compared to $174.6 million in the previous year, a net annual increase of approximately $46.4 million, or 27%. Audio products contributed $40.5 million in revenue for the March quarter and $153.7 million for the fiscal year. This product group includes components used in a variety of devices such as home theater systems, portable media players, smart phones, media-centric computers and car audio amplifiers. As you see in the tables we included in our press release today, quarterly sales of audio products grew 116% year-over-year, driven by an increase in general home audio products and continued growth in portable audio. Quarterly revenue is down 14% from the December quarter due to seasonality.

On an annual basis, sales of audio products grew by $56.4 million, or 58%. Sales of energy products were $22.1 million for the March quarter and $67.3 million for the fiscal year. This product group includes components designed for a variety of engineering, energy measurement and energy control applications, revenue for our energy products was up 50% on a year-over-year basis, and increased 22% compared to the previous quarter, due mainly to growing demand for our power meter products, as well as renewed strength in some of our baseline energy business, such as energy exploration, high power, and general industrial products. Annually, sales were down 13% from $77.3 million in the previous fiscal year. Historical revenue breakdowns by product category are available on our Web site.

Gross for the March quarter was 56%. Up from 54% in the previous quarter, and up from 55% in the quarter a year ago, due primarily to a favorable shift in revenue mix to our energy products. Total GAAP operating expenses for the March quarter were $27 million, compared to $24 million in the previous quarter. Non-GAAP operating expenses were approximately $24.9 million for the March quarter, compared to $22.9 million for the December quarter. The increase in non-GAAP operating expenses is primarily due to additional employee-related expenses and higher sales commissions. We ended the current quarter with 505 employees, up from 487 at the end of December.

Income from operations was $8.3 million, or 13% on a GAAP basis and $10.5 million, or 17%, on a non-GAAP basis. We recorded a credit of $11.8 million during the quarter related to a realization of deferred tax benefit. GAAP net income for the quarter came in at $20.4 million, or $0.31 per share, based on 66.6 million diluted shares. In the same quarter a year ago, we reported a GAAP net loss of $7.8 million, or a loss of $0.12 per share based on 65.2 million diluted shares. For the full fiscal year 2010, GAAP net income was $38.4 million, or $0.59 per share, based on 65.6 million average diluted shares, compared to a full fiscal year 2009 GAAP net income of $3.5 million, or $0.05 per share, based on 65.7 million average diluted shares. On a non-GAAP basis, net income for the quarter was approximately $10.7 million, or $0.16 per diluted share. In the March quarter a year ago, we reported a non-GAAP net loss of $900,000, or a loss of $0.01 per diluted share. For the full fiscal year 2010, non-GAAP net income was recorded at $29.1 million, or $0.44 per share, compared to full fiscal year 2009 non-GAAP net income of $16.9 million, or $0.26 per share.

Moving to our balance sheet, we ended the March quarter with $24 million in net receivables, down slightly from $25 million at the end of the December quarter. Our average day sales outstanding remain consistent with previous quarters. Ending net inventory increased to $35.4 million from $30.4 million at the end of the December quarter, with net inventory turns of 3.1, as we positioned ourselves to support our current backlog and projections for production ramps of new design wins. We ended the quarter with $141.6 million in total cash and marketable securities, an increase of $8.1 million, from $133.5 million, at the end of December. During fiscal year 2010, total cash and marketable securities grew by approximately $21.4 million. Cash flow from operations was $7.9 million for the quarter, and $25.1 million for fiscal year 2010. Capital expenditures for the March quarter were $1.3 million compared to $1.4 million in the December quarter, while depreciation and amortization expense for the quarter was $1.9 million. I'd like to now turn the call over to Jason to discuss our business operations and guidance for the upcoming June quarter.

Thank you, Thurman. FY '10 was an outstanding year for Cirrus Logic in many ways. When the global economic downturn put the brakes on the economy late in 2008, we remained focused on our strategy, continued to hire the best engineers, and invested in key growth programs for the world's best customers. As highlighted by our recent financial performance, our strategy seems to be working. As excited as we are to have grown revenue by 27% in FY '10, we're even more optimistic about the future. I'm pleased with our Q4 performance, as revenue of $63 million exceeded our original estimates. Generally speaking, typical fourth quarter seasonality was largely offset by new product ramps and improving economic conditions. Revenue from portable audio products was a continued highlight, but perhaps the bigger story in Q4 was the improved revenue contribution from a broad variety of our consumer audio products, as well as continued improved performance from energy exploration and energy measurement product lines. Overall gross margins were at the high end of guidance due to outstanding work from our supply chain team, coupled with the increased contributions from some of our higher margin energy product lines.

Our vision is to be the first choice supplier of signal processing components for the audio and energy markets. We are very passionate about both audio and energy, and we believe that our outstanding people and our technology portfolio position us to capitalize on these exciting markets. Our strategy is to work with the best customers for each product line and to use our expertise to solve real problems for them. Our business with our largest customers is a great example of how this strategy is working. Four years ago, we showed them some new technology we had developed in our portable audio product line. They gave us a list of additional problems they wanted to see solved in a new product, and our team delivered it. Today, we developed a portfolio of custom parts for them that is compelling and growing, and we're shipping in every one of their major product lines. This is a success story unlike anything I've experienced, and we're extremely proud to be a small part of it. Every employee at Cirrus knows that keeping our existing customers happy is job number one, and we're extremely focused on doing so. That said, we're using this strategy elsewhere in the company, everywhere else in the company, and our business with our top three customers in FY '11 is projected to be driven by custom products.

In non-custom product moves, we plan to publicly launch two new portable audio products in June, an amplifier and smart CODEC, targeting general market smart phone applications. We believe these new products will allow us to build upon the market leadership position that we have achieved in portable audio. The smart CODEC product adds value to OEMs by helping them reduce system power, extend battery life, improve the audio quality, and better manage multiple audio-related features. This product is already being featured on the XM6260-3G reference design available from Infineon, which is a good indication it will be well received by target customers. Our home audio business also staged a comeback in Q4, rebounding to the solid demand patterns in place prior to the recession and was a key contributor to exceeding our guidance. Overall, in audio, we have achieved great new design wins over the past year in applications such as BLU-ray players and sound bars with tier one customers--tier one suppliers, and we're looking forward to helping our customers ramp their new products into production this quarter and throughout the coming year.

Looking now at our energy business, we saw improvements in a variety of our product lines throughout the quarter. Our current investment in the energy product lines are focused on the power meter markets, as well as the energy control areas, such as power factor correction, lighting and motor control. We have been a global supplier in the energy measurement business for many years, and the recent push for smart grid enhancements has created many new opportunities worldwide for our power meter ICs, for digital utility meters, and energy monitoring applications. Revenue from power meters is now a substantial and growing contributor to overall company revenue. Our traditional industrial business also benefited from improving economic conditions. And, in particular, revenue from our energy exploration products continue to grow sequentially.

Forecasting the seismic business has always been a challenge but our current backlog indicates that this business will be a meaningful contributor to revenue and margins over the next few quarters. For our energy control products, we plan to publicly launch our first digital power factor correction ICs in June. These new chips which target both power supplies and lighting ballast systems feature our highly innovative and cost-effective digital approach to solving energy efficiency and design challenges. We are currently sampling chips to leading customers in these markets and we're in the process of defining a great lineup of derivative products to help create another growing energy business. There are very relevant parallels between our approach to enter the PFC market with the successful approach we took in portable audio.

I'd like to briefly touch on a few general business issues before getting to our guidance. As Thurman mentioned, we increased inventory levels substantially during Q4 in anticipation of strong demand and upcoming new product ramps. The largest component of this inventory build is composed of a small number of our newer products and was required to support our customer's backlog and projections. Another benefit of the shift in our business to a smaller number of larger customers is that they typically give us better forecasts and their booking behavior is more reasonable compared to our general catalog business. As the economy has improved, we have seen longer lead times from our suppliers, and our supply chain and sales teams have had to work hard to ensure that we are still able to supply our customers with reasonable lead times. Distribution inventory turns remain at very reasonable levels.

Our long-term gross margin target remains 55%, which we expect to achieve through the continued efforts of our supply chain team, combined with the improved business conditions in some of our higher margin energy product lines. We're actively hiring great engineering talent and we will continue to carefully manage our expenses across the company in order to exceed our target of 20% operating profit. One of our largest--one of our larger quarterly expenses is our occupancy costs. We're pleased to announce that we expect to move our headquarters into a new building when our lease expires in 2012. We will own the new building outright and we believe this is a prudent use of cash reserves leading to a reduced -- leading to reduced P&L expenses long term when the move is complete.

Looking forward to the first quarter of FY '11, we expect revenue to range between $78 million and $84 million, representing year-over-year growth at well over 100%. Gross margins to remain between 54% and 56%. And combined R&D and SG&A expenses to range between $27 million and $29 million, which includes approximately $1.7 million in share-based compensation and amortization of acquisition-related intangibles expenses. So, while we're very excited about the growth we just had, we're even more excited about our projected revenue growth in fiscal year 2011, which we're currently modeling at over 30%. We believe this type of consecutive growth performance illustrates the strides that we have made in recent years towards becoming a great company. Our team has done an awesome job of delivering new products and design wins and we are excited about new production ramps at our top customers in areas such as home entertainment, power meters, portable audio, and other new form factors. Our sales and marketing teams are now busy attacking new opportunities to carry our growth into fiscal year 2012 and our engineers are working hard to develop great new products to ensure the future remains as bright as the present. Okay, operator, I think we're ready to take questions from the analysts. Operator?

Thank you, sir. (Operator Instructions) The first question comes from Vernon Essi from Needham & Company. Please go ahead with your question.

Thank you very much. And congratulations on the strength here in this guidance.

Thanks, Vernon.

Just wondering if you could elaborate on your power metering market and if you have any sort of anecdotal comments around Maxim's acquisition of Teridian, and how that might play out for you going forward.

Well, I mean, as we've been saying, power meter overall has been strong. We don't break it out, but it is a significant contributor to our revenue. I think -- I don't want to get too much into the detail of how much Maxim overpaid for that piece of business, but just fundamentally, we already had a pretty different approach to that market than Teridian did. We view it, in a power meter, typically, there is--you can think of it as two major components, there is the metrology portion which is largely a subset of the same measurements for every meter no matter who is making it, and then there is the telemetry portion of it, which is different in pretty much every meter manufacturer around the world. And so by our way of thinking, micro controllers are pretty cheap and everybody's got their favorite ones. We don't really add a tremendous amount of special value to make micro controllers, so what we choose to do is through a metrology only chip that we think is the best that you can get. And then we swap that into our customer system, bolt it up to whatever micro controller they're happy to use, and we think that's a pretty competitive solution. The Teridian product, there are certainly plenty of customers using it, not knocking their approach, but it's just pretty different than ours. So, how bundling that with the rest of the Maxim product lines affects us, I don't think it is an enormous change relative to what we're doing.

Okay. That's helpful. And then, moving over to the audio side, this--you told me a smart CODEC product, that you discussed in the past. It sounds like you're going to have that launched in June. You've got a reference design out there from Infineon it sounds like. When you're talking about building up your inventory, can we get an understanding of how much of this is in anticipation of this product? Or --

Zero.

Zero. Okay. So we're still -- still not even in production mode yet on that.

No, design wins for that product, I think we said in the last call, we would probably be a good -- at the earliest would be the January quarter kind of a thing. Phones take longer than you might expect. And cracking into a new one definitely takes a while. So, no, the bulk of the inventory build is on design wins that are pretty visible and existing business, that's either ramping or growing or various different new SKUs that are coming into play.

And can you give us an understanding just on the guidance, where you might see more growth trajectory between energy and audio, any color between the two?

Well, the biggest component, the biggest component of it is portable audio. But there is pretty significant growth, I'm thinking on a year-over-year basis right now, because the numbers are fresher in my head, but from a year-over-year basis, home audio has grown, power meter has grown in a pretty significant way. Thinking about from a December to a January quarter, of the various different product lines that we track internally, just to kind of measure stuff, almost all of them were up in dollar terms, portable more than any of the others. But it wasn't necessarily even the highest one from a percentage basis. So things are just broadly doing pretty well.

Okay. And then lastly, do you care to put a range around what percentage your largest customer was in the quarter?

It is right around the 35 to 40, somewhere in that range.

It was right around 35%.

35%. And I mean our -- we will see how the year shakes out but -- I'm sorry, actually, yes, it says right here, it was actually exactly 33%. For the year, we're modeling it. We'll see how the year shakes out. But we don't anticipate that for the overall year getting much above 40.

That's very helpful. Thanks a lot.

You bet.

Thank you, sir. The next question comes from Tory Sandberg with Thomas Weisel Partners. Please go ahead with your question.

Yes, thank you. And congratulations on the strong results. A few questions here. First of all, do you have any other 10% customers?

No.

Okay. And could you just talk qualitatively about your backlog? Obviously, very strong growth rate here in the June quarter. Can you just talk about your backlog coverage and how bookings have been so far in the month of April?

We don't break out the percentage. But qualitatively, it was, from a percentage coming into the quarter, it is almost -- it was almost exactly the same percentage as where it ended up. How do I phrase this concisely? As the percentage it was of our final results for the previous couple of quarters. So it's very consistent with a reasonable extrapolation of what we've gotten in the past couple of quarters. And at this point in the quarter, it's very supportive of the range that we've put out there.

Okay. And I don't want to pick on what you said about fiscal '11 but you're saying at least 30% growth. I mean if we keep the remaining quarters of the year flat, you will get to 30% at least. So, is that just a conservative assumption? Or are you seeing anything for the back half that is suggestive of a potential slowdown in your growth?

No, I guess you could call it that. We did say "at least". But you know, we don't give projections for the year, or we don't give guidance specifically for the year for a reason, and it's really -- we don't see anything specific to our business -- to our own business. I think that I'm quite confident that we're going to outperform our sector, in our view. The thing is, we don't know what the economy is going to do in the second half. I think if we had -- now, if we knew what it was going to do by sector for the year then we could probably give you a very accurate prediction of what that will mean for us, but we just -- we've got a fair amount of visibility into what Q1 and Q2 hold for us, and people don't book so far out that we get a lot of visibility into Q3, and as 2008 taught us, things can change.

That's very fair. And the question for Thurman. Thurman, how should we look at tax going forward? Obviously, you had a benefit this quarter. Are you going to start to get a tax expense in fiscal '11?

No, that tax benefit really is associated with the accounting treatment for the deferred tax asset that we -- if you look at last year, we actually took a tax hit in Q4 of last year, and we got a benefit this year. We will be paying no taxes going forward.

Okay. Again, great quarter. Thank you very much.

Thanks, tory.

Thank you, sir. Our next question comes from Adam Benjamin from Jefferies. Please go ahead with your question.

Hi, guys. Thanks a lot. First question, Jason, just to clarify, you kind of lost me there, in terms of your guidance, maybe can you rank on a sequential basis the biggest adders on a dollar basis from from the December -- sorry, from the March to the June quarter?

From March to June, portables are the biggest. Power meter is up. Those are kind the big swingers. And then most everything is up to a more or less extent, but those are the biggest contributors.

Okay.

But we really -- I mean, it's really a nice -- as ugly as it was this time last year, where all industry wide businesses were painfully quiet, this year they're definitely not.

Sure. Not nitpick you on this 30% year-over-year, but as it was indicated it would seem that that is a really, really low bar and it would actually imply you're going to decline off this quarter June guidance through the rest of the year. You typically see good seasonality into the September quarter. Historically December comes down a little bit. Given consumer builds. Your mix has changed a little bit with portable audio being more of a ramp into Q4, or December quarter. Obviously, I'm not looking for to you give guidance, but is there any reason why those normal seasonal patterns shouldn't hold this year, given the mix of products that you are in?

Generally, no. We have no data that says that is not going to take place. I mean I certainly would like to have -- we certainly enjoy being able to beat people's expectations, but no, I can't pretend like we've got magic knowledge that says the economy is going to decline or suddenly people are going to stop buying portable media players or phones or what not. You know, I think in the broad industry, there probably has been some -- a little bit of a cycle this spring of rebuilding inventory buffer at customers, or distributors or what not, that might get back to a more reasonable pace at the second half of the year, but again, that is to a large degree just speculation on my part. You know, I think you can see this elsewhere than Cirrus, too, that we're all still bearing some scars from the fall of 2008, and it's a little difficult to let ourselves get all overly ebullient about how great things are going to be and what not.

That's fair enough. Maybe one last question, Jason. On the new audio, portable audio products, you guys have been talking about this for quite some time. Ramping outside your lead customer. And it seems like it is maybe taking you a little bit longer than you would have thought. I know some of the design cycles for hand sites and gaming are on the longer side, but can you talk a little bit about the dynamics there as to what's maybe causing some of the delay there? Is it just the competitive dynamics? Is it the longer design cycles? Maybe some more color would be helpful.

Well, no -- I mean, just to be clear, the first time we had general market phone parts available back from Fab at all was last fall. You know, I think roughly in the October time frame is when we got both of these parts back from Fab. We've got a pretty disciplined process of -- you know, you get the part back and take your time evaluating it and make sure that we're not going to send parts out to customers that have got issues with them that we don't know about. We do go through a process of sampling key customers, obviously, who want a slot on our reference design, so we're out showing it to folks in advance of a public launch, and in both of these parts cases, a minor revision or so to clean things up, and really get them ready for prime time. But I don't know that it's necessarily taking longer on the audio side than I would have expected, given that we just got parts back in October. You really -- as you know a lot of our business is with one particular customer, with proprietary products, so those, we don't go running around showing all of the rest of the industry.

No, and fair enough. Maybe just one last question. I know that (inaudible) is a large percentage of your revenue as well. Can you talk a little bit about the dynamics there, Thurman, if you have any color in terms of what you've been shipping in versus what they have been selling through and kind of where that balance lies, whether increasing, decreasing, et cetera?

I mean we were just talking about that. I mean revenue, or sorry, the inventories increased a bit, but their turns are still very in line with what we expect. It's been nice that they have actually been willing to book orders in advance again. And it's certainly dropped as a percentage of our overall business, as large direct customers have grown. So, we don't feel like we've got any undue exposure. The sell-through has been great. We monitor that very, very carefully. As I said, we're all still very paranoid from '08. So we're keeping a real close eye on their sell-through and looking for any signs of doom and gloom on the horizon but thus far, not finding anything to get too upset about.

Okay. And that's all I have, guys. Nice job. Thanks a lot.

Thanks, Adam.

Thank you, sir. The next question comes from Christopher Longiaru from Sidoti & Company. Please go ahead with your question.

Hi, guys. Congratulations on the guidance.

Thanks, Chris.

My biggest question, how do you see the energy exploration part of your business progressing from here? And can you talk a little bit about that?

Well, in terms of revenue, we've got backlog that extends out through Q2, so we feel pretty good about that. It's more visibility than we get a lot of times in that business. There's at least projections for stuff throughout the year, but that is a tricky to forecast market, and there's, I think, some -- there's macroeconomic forces that work on that market that are certainly beyond my comprehension, so we try to take a pretty conservative view in our overall annual planning process relative to what seismic might do. And, like I said, we've got pretty good visibility over this quarter and next quarter that it should be a pretty meaningful contributor.

Now, is part of that -- the guidance range being 78 to 84, just a pretty big gap in the middle there, is that due to the fact that -- due to the lumpiness of energy exploration?

No.

Okay.

No, it's a -- we kind of historically, when we were in the 40s, we used to give plus or minus 5%, so we felt like as we -- as the overall base grew, we could probably give ourselves a little larger window to shoot at.

Got it. That's all I have for now. Thanks, guys.

You bet.

Thank you, sir. The next question comes from Jeff Schreiner from Capstone Investments. Please go ahead with your question.

Yes, good morning, gentlemen. Thank you for taking my questions. My first question is just on the traditional audio business. How boring can this business remain during fiscal year '11?

We feel pretty good about it. Over the past few years, we refreshed a number of our DSP products. We came out with a 65-nanometer really, really high performance audio DSP that we -- in fact we didn't touch on that in the script, but we had mentioned awhile back that we expected to start shipping that in production this quarter. In fact, we are. So, that is pretty cool. The sound bar business has been stronger for us.

We're shipping in a lot of cool products from Vizio and some of the other guys that have got pretty good visibility in the marketplace. Those products continue to ramp up. It's not the highest volume segment of the market we serve, obviously, but it is a neat segment for us, just because it represents an opportunity to sell a really wide variety of our audio products into the same box. So, it's always nice when you can get up in the double digits worth of content in some of them. So, we feel pretty good about it for the year. Overall, the trend tend to be heading in the right direction. Booking behavior has been good from our customers. So, I don't know if that gets to your question.

It does, Jason. Thank you. And to follow up on that, I think I'm trying to understand a little bit maybe how this may be impacting that business, but, how will the 3D audio impact Cirrus's ASP's going forward?

I'm sorry, 3D audio, you mean in the various different surrounds and all --

Well, will the 3D audio solution improve the ASP's for Cirrus or is it just going to be an additional function which maintains the same ASP for the company?

I suspect it will probably just create -- the whole pull from the 3D TV in the first place probably just creates that much more pull and interest and what not in that area. The various different surround decodes of all ilks are things that we're pretty keen on, we've been implementing for many, many years, so it's always good when there are new standards and new varieties of these kinds of decodes that are needed. We've got a great team at implementing this stuff. We think we implement it more efficiently than anybody, we maintain it better, and that's something that our customers count on. So, really anything in the home audio kind of AV decode space that causes churn and change and new algorithms and things like that, any of that is good for us.

Okay. Can we just look at the margins maybe. Margin levels obviously look to be possibly sustainable, as long as implied first quarter can last ,but given that in the first quarter we are kind of already at the target and we exceeded the target in the fourth quarter, shouldn't we maybe expect gross margins to maybe move higher in terms of the company's overall long-term target?

Well, I mean we actually think 55 is kind of right about long range where we see things lying. You're right. We can certainly bump up or down quarter by quarter, by a point or two. But it really is driven a lot by mix. So you could definitely see movement up or down but we feel pretty comfortable, we're in and around that mid-50s range.

Okay. And just last question for me, just trying to understand, just an overall, maybe how you guys are looking at the word substantial, and what does that equal in Cirrus terms, maybe for the power meter market? Is it a certain percentage that you have to get over on a threshold? Or how could you maybe put that in context for us?

Well, in terms of a customer base, or in terms of an individual customer, I mean anything that is in the 5% to 10% range feels pretty substantial to me. They're going to get a lot of focus from us.

Okay. Thank you very much, gentlemen. That's all I have.

You bet.

Thank you, sir. (Operator Instructions) Thank you. There are no further questions at this time. Please continue with whatever points you wish to raise.

Thank you, operator. We have a few additional questions that have been submitted to our Investor Relations department that we wanted to address. We had one investor who wrote in, asked for a little more color on our business in Japan, how are things going there, the size of the market and that sort of thing. Japan has been a significant focus for us over the past couple of years. It is a big audio market on the order of -- it is difficult to get good estimates for the exact size of the audio market in particular in Japan, but we believe it is on the order of $200 million a year. It's no secret the overall Japanese economy has been struggling a little bit and in particular consumer electronics I think has had an increasingly difficult time competing with -- in that industry elsewhere in the world. But, still, it's a significant market. So, we've done, I think, better there through the efforts that we've put in, one of our top three customers is in Japan, or at least one of the ones that we predict to be top customers for FY '11.

We did a custom product for a portable audio supplier there that incorporated some of their IP. That's one of our higher runners for the year. Like I said, we're talking about -- with one of the analysts a minute ago, that we're shipping our 65-nanometer DSP for the first time this quarter into some Japanese -- into a Japanese socket. So, it's slow and steady progress, I would say. Obviously, we would love to make improvement even more quickly, and we're always brainstorming about ways that we can do that. But that's not a market that moves anywhere near as quickly as some of the regions of the world that we do business with.

We had another question that was looking for a little more clarification and color on the DC motor business that we discussed. You may recall we launched some parts a while back that targeted the DC motor space, and motor control in general is part of our larger energy control initiative. So, DC motor control is obviously a fairly big area of the market. It's pretty fragmented, though, I guess is how I'd characterize it. As everything from board level discrete solutions all the way up through integrated parts at various different levels of price and performance and power.

The business that we approach traditionally has been on the end -- kind of more towards the discrete end, so we typically solve things that are in gate drives and power FETs, with really some pretty impressive specs for what you can get in a CMOS-IC. This has been driven out of our Tucson operation, the Apex acquisition, and we have business in that space. But relative to the overall company revenue, it historically has been -- has not been a huge contributor. That said, we've got some pretty cool plans that are underway at the moment, developing a more integrated product that kind of combines the best of both worlds in terms of the traditional Cirrus style signal processing, and really more of a complete solution with the gate drives and power devices all integrated. And targeting certain segments of the DC motor control opportunity. So we're excited about the opportunity that brings. It's not something that is coming in this quarter or next, but it's something we're again working on, on the horizon, and we believe that it is an area where the Apex product line could actually have a pretty meaningful impact on the overall company revenue.

The next question related to power factor correction and wanted some clarification as to -- we've said there are parallels with portable audio. Does that mean that these products are going to be more proprietary? And it it going to follow, kind of similar along to I-tron. We are nothing, if not flexible, I would say. But, in general, the parallel we're trying to draw with audio is, or with portable audio, rather, is that we -- when you come out with the first product in the product line, obviously, we have talked to many customers in the space, and shown the paper tiger presentation, but there is a certain level of reality that hits the fan when you show up with the real product. And, much like portable audio, you come out with the first product, we shipped our first portable audio CODEC in pretty decent volume. Where overall it was a successful product. And we certainly hope that will be the case with our first PFC.

We have definitely gotten a lot of interest from customers as that product has become more and more real and tangible to them, that, in fact, the ASP's have actually surprised us a little bit of late. But the real success of that business, rather than just from an individual product point of view, will come on the heels of a successful derivative road map that are based on that first part, and that's really the value of that first -- the first product in the product line, is to have -- that's what enables the marketing people to have a real meaningful discussions about the road maps going forward. So, for PFC, while we have some expectations for the first part as it comes out, we're out talking to everybody else in the market about what else we can do for them. We've got some great feedback from customers that are interested in very specific enhancements for derivatives, and so it is definitely possible that there could be that sort of parallel to the portable audio business as well, where, for example, we end up doing a custom for a particular customer or two. Ideally, we like to do those arrangements when it's -- we've designed a part to someone's spec but we're still able to sell it to other people. That's not always the case, obviously. Anyway, hopefully that gives a little additional color on that question.

Finally, there was a write-in on the sound bar business. I think I've already given a fairly fair coverage of that on one of the analyst questions. But just to summarize, yes, that business is continuing to grow. We feel quite good about the impact that that form factor will have in the marketplace going forward. There's a variety of different models that are available at pretty reasonable price points around the world that we're a meaningful part of, so we definitely feel like that is a good part of our nonportable growth for FY '11.

So, I guess that's it. Thank you for all of your questions. And appreciate the write-ins. We'll try to make a habit of doing that on future calls. As I stated earlier, we're very excited about the growth here we just had and we're even more excited about our projected revenue growth in fiscal year 2011. Thanks for joining us on the call today.

Thank you, sir. Ladies and gentlemen, this concludes today's conference call. Thanks for participating. You may now disconnect.