科磊 (KLAC) 2006 Q1 法說會逐字稿

Welcome to the ICOS Vision Systems Q1 2006 earnings conference call. At this time, all participants are in a listen only mode. Following management's prepared remarks, we'll hold a Q&A session.

[OPERATOR INSTRUCTIONS].

As a reminder this conference is being recorded, April 27th, 2006. I would now like to turn the conference over to Jody Burfening. Please go ahead, ma'am.

Thank you, Marvin. Good morning, this is Jody Burfening of Lippert/Heilshorn & Associates. Welcome to ICOS Vision Systems' first quarter 2006 earnings conference call. With me today is Anton De Proft, President and Chief Executive Officer. You should have all received a copy of the press release which was issued earlier today and if you have not yet received a copy -- the release -- a copy has been posted to the investor relations section of the company's website at www.icos.be. Before starting the call, I'd like to mention that certain statements made by management during the course of this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of ICOS to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include among others those detailed in the company's reports filed with the Securities and Exchange Commission.

With that, I would now like to turn the call over to Anton. Good morning, Anton.

Good morning, Jody, and thank you for the introduction and good morning to -- and good afternoon to everybody and welcome to our first quarter 2006 conference call. I will start by discussing our performance during the quarter. Then I will comment on the outlook of our business and after that I would be glad to take your questions. Revenues for the three months ended March 31, 2006 were 33.4 million, 16.6% higher than the 28.6 million reported for the fourth quarter of 2005 and more than double the 16.2 million reported for the prior year first quarter. Income from operations were 10.8 million, representing an increase of 35.8% compared to 7.9 million one quarter earlier and a four-fold increase over the 2.3 million we reported for the first quarter of 2005. Net income was EUR8.8 million, or 83 Eurocents per share, compared to 6.4 million, or 61 Eurocents per share, for the fourth quarter and 1.7 million, or 16 Eurocents per share, for the first quarter of 2005.

In line with our guidance, the first quarter of 2006 produced the best results in our history, with new records set at both the top and bottom lines. Revenues and earnings exceeded our previous record set during the third quarter of 2000 when the semiconductor industry was operating at an unprecedented high, by approximately 7% for the top-line and 12% for the bottom line. We achieved these superior results even with almost 50% higher R&D spending, which demonstrates the leverage inherent in our flexible operating model and the benefits of our strategy to strengthen our market leadership and expand our addressable markets through continuous R&D investments. We achieved an operating margin of 32.3% and generated 4.6 million cash from operating activities during the first quarter of 2006. We ended the quarter with EUR54.8 million in cash and cash equivalent. Finally, our stockholders equity increased 9% during the quarter to reach 97.1 million.

First-time buyers accounted for 2% of revenues during the quarter and these customers were located in Asia outside Japan. We're also proud to say that we were awarded with Intel's Preferred Quality Supplier Award for the second year in a row. ICOS received this award for its outstanding performance in providing products and services deemed essential to Intel's success. The PQS Award are part of Intel's supplier continuous improvement process that encourages suppliers to strive for excellence and continuous improvements. To qualify for PQS status, suppliers must score 80% on a report card that assesses performance and ability to meet cost, quality, availability, delivery, technology and responsiveness goals. Suppliers must also manage and deliver on a challenging improvement plan and a quality systems assessment. In addition, during the quarter we also won a regional supplier recognition award from Texas Instruments.

New product sales accounted for approximately 43% in the first quarter of 2006. The majority of these new product sales were again generated by our CIC-120 system which was introduced last year. On several occasions I have talked about the tremendous evolution of our markets and how we are expanding our R&D efforts to improve our product offering. Also during the first quarter we increased our R&D spending which is again almost 30% higher than a year ago. The R&D work was intense over all our product lines and the largest amount of our efforts continues to be spent on our component inspectors. However the largest increase in R&D efforts was spent on our wafer inspector products. We continue to increase our R&D team for our wafer inspector products, as we expect this market [inaudible] for inspector products to grow quickly. On April 4, we announced the introduction of our new WI-2000 wafer inspector which incorporates our image processing boards and runs at double speed. The new WI-2000 is designed for advanced surface inspection and defect detection on whole wafers, wafers on hoop rings and wafers on filmframe carriers. We expect to introduce additional wafer inspector products during the remainder of the year, including a 3-dimensional inspection system. Finally, important R&D efforts continue to be spent on [flex tape] inspectors and solar cell inspectors as well as on technology development for future generation products.

Also during the quarter we finalized a small acquisition from an Israel-based company of a technology for a 3-dimensional measurements at the nanometer level. We don't have any immediate product plans for this technology but we do believe that 3-D measurements at this level will become more important over time and we believe that this technology is well-suited for these types of measurements and it's our goal to further optimize this technology for future applications and to incorporate it in our products.

The competitive situation then, we continue to have a strong market share for our component inspector products and with the introduction of our CI-T120 last year we believe that we have further consolidated that position. In combination with our strong sales and support network and our flexible operation model, we believe that we continue to be very competitive in this market. In the wafer inspector market, we are a runner-up. We believe that we have strong technology in this field and we are very busy adding several major features to our wavelength sector and to expand the market coverage of this product line. We continue to build up our sales pipeline and to strengthen our sales and support organization to improve our market coverage.

Let me also take this opportunity to give you a short update on the patent infringement litigation between our company and Scanner Technologies -- in the first case which started in 2000, you will probably remember that we had a court trial in March 2005 -- in fact in that case nothing has changed since then and we're still waiting for the ruling. As we communicated previously, we initiated a second case and we initiated a suit against Scanner in July 2005 before the same court, seeking declaratory relief that certain new patents issued and assigned to Scanner and relating to the same technology are not infringed by our products. Furthermore, our suit seeks to enjoin Scanner from activities which we believe constitute unfair competition. In the second case we can give you a little bit of update. Scanner moved to dismiss the complaint or alternatively move the new case from New York to Minnesota. This motioin was denied by the court, following which Scanner counterclaimed asserting infringement of certain of these patents as we anticipated.

Then the organization -- the total number of employees stood at 334 full time equivalent at the end of the first quarter of 2006, up from a level of 316 at year end 2005. Our staff increased during the quarter, to strengthen our organization and to support our multiple product portfolio. Most of the hiring in the first quarter went on in Belgium and Hong Kong as we increased our operations staff to ramp up the production. And as we increased our R&D staff to increase our development activities. We also expanded our marketing and sales to support our growing product and customer base and will continue to do so in the near future. Inspection systems accounted for 87% and inspection modules for 13% of first quarter revenues, very similar to the 86% inspection systems and 14% inspection modules in the first quarter of -- no, in the -- yes, in the first quarter of 2005. While we don't break down our revenues per product line, the situation remains similar to the previous quarter -- the component inspector continues to be by far the largest product line and therefore remains responsible for the majority of the revenues and the revenue variations. Other products generate substantially less revenue still and the individual orders and the timing are responsible for revenue variations from quarter to quarter for these product lines.

Then the revenue breakdowns for geographic area -- during the first quarter we realized 75% of our turnover in Asia, of which 9% in Japan and 66% in other areas of Asia. Further, 17% of our turnover was realized in Europe and 8% in the U.S. In the first quarter and in line with our guidance, the growth was geographically widespread, as we saw almost all regions contributing to record sales of the first quarter. For the second quarter we expect to see a much more mixed picture with some regions advancing and others declining.

Then the financial information -- on the revenues of 33.4 million, we achieved a gross margin of 61.8% in the first quarter of 2006, up from 61.4% gross margin in the previous quarter. For the current quarter we expect that our gross margin will remain in the 60 to 62% range. Our net R&D expenses increased slightly from 3.3 million in the fourth quarter to 3.4 million in the first quarter of 2006. Our R&D expenses didn't benefit in these quarters from any [grants]. For the second quarter of 2006, we expect R&D costs to increase to within the range of 3.6 to 3.8 million as we continue to increase our R&D efforts. SG&A expenses increased modestly to 6.5 million compared to 6.4 million in the previous quarter. Based on the assumed revenue decrease of approximately 10% in the current quarter, we expect SG&A expenses for Q2 to decrease to within the range of 6.1 to 6.3 million. We expect that mainly commission expenses and to a lesser degree other expenses which are sales activity related will decrease during the current quarter. The income from operations for the first quarter was 10.8 million, up from 7.9 million reported in the previous quarter. We generated an operating margin of approximately 32%, up from 28% a quarter earlier. Based on our guidance for the given quarter, we expect our operating margin to fall back accordingly. During the first quarter of 2006, we incurred almost no foreign currency exchange losses compared to a [inaudible] loss of 98,000 in the fourth quarter of 2005. We expect the impact of currency exchange effects to remain limited during the next quarters.

Interest and other income increased to 263,000, up from 240,000 in the fourth quarter of 2005. We incurred a tax of 2.2 million or approximately 20% of income before taxes compared to a tax of 1.6 million or approximately also 20% of income before taxes in the fourth quarter of 2005. As indicated before our tax rate can vary. We are geographical mix of sales and manufacturing. The tax rate in the first quarter -- for the first time includes the effect of the [notional] interest deduction which is a consequence of a new Belgian tax law to encourage equity financing. And maybe I should give a little bit of example -- or explanation here. In essence, the notional interest allows company to deduct a percentage of their adjusted equity capital including retained earnings -- similar to an interest deduction in the case of debt financing. In doing so, the notional interest encourages companies to strengthen their equity capital. The notional interest deduction is applicable on accounting years ending on December 31st, 2006 or later and therefore applies for the first time to ICOS in its tax provision for the first quarter of 2006. As a consequence of this notional interest deduction, we lower our tax guide -- tax rate guidance which used to be in the mid-20s and we now reduce it to a range of 20 to 25%. Consequently, we realized a net gain for the first quarter of 2006 of 8.8 million or basic earnings per share of 83 Eurocents and diluted earnings of 82 cents -- Eurocents of course.

Cash flow from operations in the quarter was positive at 9.3 million, due to the 16.6% sequential revenue increase and the corresponding working capital increase, the net cash flow from operations including changes in working capital amounted to 4.6 million. During the first quarter of 2006, we used 137,000 in investing activities and we spent 184,000 for financing activities. So let's now turn to the balance sheet.

Cash balances stood at 54.8 million at the end of the first quarter, up from 50.7 million at the end of last year. Accounts receivable increased to 28.5 million from 26.5 million at the end of the previous quarter. [Inaudible] outstanding decreased to 77 days, down from 83 days at the end of last year. Inventories increased to 27.5 million at the end of the first quarter compared to an inventory level of 25.4 million at the end of last year. The inventory split was 8.8 million raw materials, 13.5 million work in progress and 5.3 million finished goods. Stockholders' equity finished at an all-time high of 97.1 million at the end of the quarter, an increase of approximately 9% versus one quarter earlier and almost 30% versus one year earlier. Before going into the specific guidance and the outlook, let me remind you that we see a strong evolution in the demand drivers for the semiconductor industry, as semiconductors are employed in an ever-increasing range of consumer-oriented applications such as digital audio and video, phones, TVs, cars and even illumination. Many of these applications require special [inaudible] that can deal with the specific applications and the harsher environment in which they have to operate. We believe that our increased R&D efforts in this field have placed us in the strong position to take advantage of this evolution. The new WI-2000 that we introduced during the first quarter is an example of our commitment and our ability to keep up with the advancements in packaging technology.

Looking ahead our visibility remains limited as ever. But we do continue to see a strong market demand during the second quarter although we expect sales to be approximately 10% below the records of the first quarter which in hindsight benefitted from an exceptionally strong January month.

That concludes my comments and I would now like to open the call to -- for questions. Operator?

[OPERATOR INSTRUCTIONS].

One moment please, for the first question. Our first question comes from Olivier Parein with ING.

Good afternoon. I would have three questions. One is on the outlook for the year. What do you observe in terms of clients' buying intentions, inventory levels, utilization rate and also replacement of 99-2000 volumes? Second question is could we get the name of the Israeli company that you bought the 3-D measurement activities from? And the third and last question is on 2006 you said you see a mixed picture in terms of regions for second quarter -- with some regions declining -- could you say which ones, please?

Okay. Well, good afternoon, Olivier, this is lots of questions. I'll try to go through them. The outlook for the year, well, you know we only give a specific guidance for the next quarter. When we look a little bit beyond that then we of course look at the more general condition of the market and so on. And then well, I have to say that we continue to see a fairly healthy environment -- there were -- the general economy worldwide keeps doing well -- GDP grows, keeps healthy, that's the first step. We continue to see strong packaging drivers -- system in a package, flip chip [inaudible] wafer level packaging, 3-D packaging, and so on. So also there we see -- we continue to see strong and healthy drivers. When it comes to capacity utilization of the latest information which is -- which we received -- well, about a week or 10 days ago. Still calls for about 90% utilization rate on back-end equipment. So that continues to be also healthy. And advanced packaging capacity utilization -- flip chip and system in a package and so on -- is -- remains above 90%.

Inventory outlook -- I would say a little bit less clear -- the signals that we get but in general we keep -- well we don't hear any -- how would I say -- warning light there. It looks like the inventory is also under control and remains to be under control. In fact if you look then at things like the book to bill ratio, this remains or continues to be healthy at 1.06 for the back-end. With in fact book bookings and billings increasing healthy.

In [VLSI] Research as well as Garner have just increased their expectations for 2006 somewhat. So if you look at all these things then we -- definitely don't see a trend reversal. I think you have to look back at our last three quarters and then well, we had of course very very strong sequential growth of 22%, 46% and 17%. If you add all these up then that's more than a doubling in 9 months. So obviously not every quarter can be better than the previous quarter and so now we expect the next -- or the second quarter to be a little bit lighter -- but we don't see that as a trend reversal based on all the things that I just said. In fact, I hinted to it already that we had an exceptionally -- January and in hindsight if you take one -- maybe two -- orders out if you make extraction of them, then we see that we have a fairly flat evolution over the -- well, the last three months and also into second quarter. So the first six months of this year are essentially going to be quite flat. If -- again, if you make extraction of that real one-month peak that we have in this one or two orders in January.

So to extrapolate from there and to have or to -- and to summarize all the things I just said, of course, the answer is we don't have any visibility but there is no clear trend for the second half of the year that would indicate either a clear up or down. So we expect to continue this healthy environment for -- well, for the foreseeable future which concretely of course is Q2 in the first place.

Can you comment on replacement of 99-2000 volumes? Is that continuing?

Yes, of course. Sooner or later they're only to be replaced where indeed 5, 6 years later than those -- than the moment in which they were installed so -- but it's very, very hard for us to have a specific number or to get good feel for how much that would contribute. Because in essence -- okay, they're typically -- okay, their average lifetime let's say is about 5 years. But obviously they're bought when there is new capacity coming on line or capacity needs. And when the units are growing. So the answer I realize is quite fuzzy there, but it's -- again, it's difficult to really say how big that effect is.

Okay.

The second one you asked specifically for the name of the company. I'd rather not answer that question. Like I said in my comments, it's a technology so where we just take over technology and we take over just a couple people and then work on the longer run to integrate that into our road map for future products. And so the application or the technology is to measure height at the nanometer level, as we believe that with wafer level packaging and so on, the 3-D measurements in general will become more important as we also for instance will introduce the 3-D wafer inspector around the middle of this year. And after that we believe that also finer measurements may sooner or later -- or will sooner or later come in. So -- but that's -- again, that's a little bit longer term road map. And then finally you asked about the second quarter expectations on regional [life] which will go up, which will go down? I'll -- the two strongest one will be I guess Japan and Korea. And weakest ones will be Taiwan and China because they've grown very rapidly over the first -- over the last few quarters, so that's the two strongest and weakest ones. And I hope that answers your question.

Yeah, it does. Thank you. But isn't Taiwan usually a leading indicator for [inaudible]?

Yes, Taiwan is a country that -- well, this is typically very early in the cycle so to speak, that is correct. So they're the first ones to go up, also the first ones to go down. I think you have to -- and obviously after going up as strongly as they did, it's obvious that they cannot keep doubling or more every quarter. I would like to repeat here what I said about cycles a number of times -- is that for a number of reasons both supply and demand [cite] for a number of reasons we do expect semiconductor cycles to become less pronounced, both in amplitude but also the length of the cycle. We expect much more nervousness, short term ups and downs so dancing around the line, I often call it. And if you look at quarter over quarter growth they cannot or they will not be nicely -- well, a nice increase quarter after quarter. You'll see some very strong ones, you'll see some down ones. We expect that to be natural.

Okay. Thank you.

Welcome.

Our next question comes from the line of [Wen Louis with Fortis].

Right. Hi. Anton, just to bother you again on the acquisition, can you give an indication of the size -- I mean, the cost, is it a couple of million or is it more?

No, it's small. I think we've done a number of small acquisitions in the past and it always comes out to about the same numbers. It's again around order of magnitude, 200,000, so it's quite small.

Okay, thanks. Can you just repeat the conclusion on the Scanner case? Is it now totally dismissed or was there still something hanging on?

So there is two cases. And in the first case which started in 2000, well, we're still waiting for the judge to rule. After the trial in March of last year. And then in the second case which we started, there was a motion to dismiss which means that Scanner tried to stop this case, which was denied by the court. And they tried to either stop it or transfer it to Minnesota. This was denied, which means that this trial will continue. And that's basically where we are. Oh, and then also in their answer which is -- well, to be expected, in their answer, they counterclaimed, which in essence means that we expected them to or we started this trial because we expected them to put in some claims and they now have said, yes, we do claim -- we do claim this. So that case, well, continues to go on, that is just one update in -- well, we don't know how long this case will continue.

Okay, thanks. And last question on the R&D, you mentioned extra investments needed in flex tape and solar cell. Is that going to continue over the year when most of the new 3-D wafer inspector comes on and is it going to increase R&D even more?

Well, you can expect R&D to continue to increase a little bit probably quarter after quarter during the remainder of this year. We -- but now you've also seen over the last few quarters, we continue to -- or we increase quarter after quarter, not really dramatic from one quarter to the next but over time we're definitely increasing our efforts as we do believe that all these products have good potential. So expect the rest of the year probably to continue to see this quarter over quarter growth.

Okay. Thanks very much.

Welcome.

Our next question comes from the line of [Neil Zeflard with Ravo Securities].

Good afternoon. I still got a couple of questions left. First of all could you maybe fill us in more about how you see the market for solar inspectors and for flex tape inspectors evolving? What did you see in Q1 and what's your outlook going forward? And secondly, I'd like to inform about the production capacity you have for your wafer inspection too. As far as I know it was around 4 per quarter. Is this still enough to meet demand or do you have to make extra investments there? Those were my questions, thank you.

All right. Well, on the market for solar cell and flex tape you know that we don't really give specific information on those markets or on the sales in these specific markets. And that's clearly for competitive reasons that we like to keep the cards a little bit closer to the vest there. What I can say is that these are two markets which are -- well, first of all, substantially smaller than the component inspector market and then the potential for the wafer inspection market, but both markets that are well -- nice and growing and have some potential although smaller than the component inspector or the wafer inspector. The solar cell of course is especially long term, it grows quite nicely and should do so for the next -- well, many, many years is the expectation there. Flex tape is driven by the flex panels and so is driven by markets like television market going digital and going flat panel. So also that market is doing -- we expect that market to be doing quite well over the next few years.

And then you asked the question about the production capacity. Well, in effect we are but for a number of reasons we are expanding our clean room again. But it's more than just for production capacity. It's also for R&D capacity and not only for the wafer inspector products but also for flex tape products and also for -- well, I mentioned about this acquisition and this new technology, all these things need to go into clean room so we're actually expanding our clean room and we took the opportunity to also increase the production capacity of our wafer inspector. Of course you don't want to change or well, start doing refurbishing every three months. So we took advantage of that to again more or less double the capacity there. But I do want to make it clear that that doesn't -- or was not immediately inspired by immediate needs there. So I don't want to create any false impressions there.

I understand. Could you give us maybe some idea what your capacity now is? Potentially, of course, if you use all the space you've got dedicated for it now.

Well, at this moment, it's still 4. And it will go up to -- I believe it's 8 or 10 after the refurbishments.

Okay, again, one final question. Of course you say you will be introducing these 3-D inspector over the course of a year. Will that require you to do extra as an SG&A investment so that we can see that deadline going up in Q3 or Q4 maybe?

On the sales side, you mean?

Yes, [inaudible] your sales or your marketing network, things like that.

Right. Well, actually we are working on that also -- also this quarter we did some more investment. We do expect indeed to increase our sales and support network and to add some people, but it's already included also in our -- in the guidance that we gave. But the answer is, yes, we expect to continue to add some sales and some support people.

Okay, thank you very much.

You're welcome.

Our next question comes from Jerome Ramel with [Ixis] Securities.

Thanks, good morning, Anton. Two questions concerning -- the first one is concerning -- we know that [inaudible] largest client -- is it a possibility that the weakness of this client is actually seeing right now could treat your [inaudible] on the short term?

Well, good morning or good afternoon, Jerome. This is a difficult question to answer because we are completely bound by very strong [NDAs] with the certain of our large clients. And so I really cannot comment at all on that, I'm afraid.

Okay.

Yeah, obviously large customers can have a larger effect than smaller customers, but really I cannot comment anything specific.

Okay, no problem. Just wanted to check with you where are your lead times today?

Lead times for component inspectors remain under 4 weeks as they've always been.

Okay. And maybe an update on what you are going to do with your cash?

Yes, so we have -- or we -- at the annual meeting, annual shareholder's meeting, we will ask the permission to buy back shares -- up to 10% of the shares with a very wide mandate -- anywhere from 1 Eurocent to EUR100. And so we have to wait for the annual meeting to approve that. But what I can say is that the board of directors is indeed intended to start a program and to act on it.

Okay, and --

When it's approved, of course.

Okay, and just final question concerning the wafer inspection 3-D, when should it be released -- Q2 or Q3 this year?

Well, around the middle of the year, so probably that will be early Q3, but that can vary still a little bit. But that's the expectation today.

Okay. Thank you.

You're welcome.

Our next question comes from the line of Nico Melsens with KBC Securities.

Yes, hi. Good afternoon, Nico Melsens with KBC Securities in [inaudible]. Just first of all one quick question on your operating expenses -- I noticed that your Q1 SG&A expense came in just slightly below the lower end of your guidance range that you gave in February. Is there any specific reason for this?

The most important part of that is commissions which turned out to be lower than expected or than foreseen and that had mostly to do well with the product and the geographic mix.

Okay, fair enough. Then could you just give us a quick update on the trends that you're seeing in your different business segments [inaudible] for now?

Well, that's a very broad question, Nico.

Generally you give [per segment] -- just give us a quick update of what you're seeing -- what were the trends are without being very specific of course -- we know you don't do that. But in general you can provide just a -- just your review on the trends that you're seeing.

Yes. Well, like I said in my answer to the first question, we continue to see a healthy environment and we continue to see a number of positive trends. In general I think our products are driven by two things, that's first of all -- well, unit sales of course -- semiconductor units. And they're driven by two important trends. One is new countries like China, India, Brazil and [inaudible] that are really making the worldwide economy grow -- the worldwide GDP grow, and that's definitely one big driver. The second one is the fact that these chips are being used in increasingly more so in all kinds of mostly consumer applications. Virtually anything that you can buy these days have chips and always more and more chips. That is also by the way why we believe that our sales will be more and more related to general GDP growth worldwide because in general when GDP growth is healthy it means people have money. It means people buy stuff and stuff has chips. It's -- that's the main driver that we see. On top of that there is specific packaging drivers, as most of these applications are consumer oriented as opposed to PC oriented, it means that you need specific packaging. You have -- and that drives things like system in a package, flip chip, [mems] for sensors, for instance. Wafer level packaging, 3-D packaging.

All these trends have to do -- or most of them have to do with consumer applications becoming more and more important. And one specific trend there is that you use -- or there is a trend to use more silicon chips in one package and that is a trend which is by itself very powerful because it means that before you're going to put two or three or four silicon chips in one package you have to make sure that these function well. So that's what is related to as a [known good die] problem. I think you have to make sure that the die -- at the die level, the chips are [fine] before you put them in the package. So whereas before, it was enough to do just the package inspection in the end, at this moment more and more you see two levels where you need the wafer inspector, so at the package -- at the die level and then secondly at the package level when the package is finished. So that by itself -- and that's actually the main driver for wafer inspector and that's why we believe that market is growing so quickly.

So, that as far as drivers is concerned and then the other big trend I would say is that all this adds to or leads to cycles which we believe have to diminish on the demand side, when you add all these demands, there is no way you can think of [cars] being extremely cyclical like PCs can be, for instance. So when you add cars and TVs and phones and everything to the demand for chips, it has to make the cycles smoother and also on the supply side, the industry has become more flexible, shorter lead times and so on which means that -- well, they can react quicker and you don't have the need for -- well, long term orders and then even some double ordering to make sure you will get the stuff and so on. So if you look at them you have both of the supply and the demand side, you have quite strong drivers, we believe for smoother cycles, so therefore we believe that cycles will become less pronounced and more short-term -- you'll see much more short-term nervousness as opposed to a long and pronounced cycle like we used to have in the PC [inaudible] I would say. And I guess that's a little bit -- the general big trends in a nutshell. Of course, I could talk all day about that.

Okay, thank you.

You're welcome.

[OPERATOR INSTRUCTIONS].

There are no further questions at this time, please proceed with your presentation or any closing remarks.

Okay, I really don't have any further specific closing remarks other than thanking everybody for joining us and we're going to go back to work and we hope to -- and we're looking forward to seeing you all next quarter again. Thank you.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your line.