萊迪思半導體 (LSCC) 2002 Q4 法說會逐字稿

Good day everyone and welcome to today's conference call.

Copies of Lattice Semiconductor's fourth quarter ending December 31, 2002 earnings release may be obtained from the company's website, which is www.latticesemi.com.

This call is being recorded and is being broadcast live over the internet by On24.com.

A live broadcast and replay of the call will be available on the Lattice investor relations website www.latticesemi.com until January 30, 2003.

At this time, I would like to turn the call over to the Senior Vice President and Chief Financial Officer, Mr. Stephen Skaggs.

Please go ahead, sir.

Thank you.

Good afternoon, everyone.

Joining me on our call today are Cyrus Tsui our CEO, Steve Laub our President, and Rodney Sloss (ph), our Vice President of Finance.

Before we begin, I would like to read a Safe Harbor Statement.

Then I will provide a financial review on our outlook.

Steve Laub will then provide a business review, after which we will hold a question and answer session.

This conference call may contain forward looking statements within the meaning of the Federal securities Laws, including statements about our future quarterly financial results, revenues customers, product offerings and our ability to compete.

Investors are cautioned that actual events and results may differ materially from these statements as a result of a number of factors including overall -- conditions, market acceptance and demand for our new products, our dependencies on our silicone wafer suppliers, the impact of competitive products from pricing, technological and product development risks.

Please refer to our current filings with the SEC for further descriptions of these risk factors.

I would now like to review our statement of operations for the fourth calendar of the full year 2002.

Revenue for the quarter was $57.7 million, up 3 percent sequentially from last quarter and higher than our original outlook.

During the four quarter FPGA products contributed $9.2 million or 16 percent of revenue and grew 29 percent sequentially.

BPLD product revenue accounted for $39.2 million, or 68 percent of revenue, and grew 2 percent sequentially.

Simple CPOD products accounted for $9.3 million or 16 percent of revenue and declined 10 percent sequentially.

Revenues for the full year 2002 was $229.1 million, a decrease of 22 percent from the $295.3 million reported in 2001.

Revenue mix by product type for the full year 2000 was as follows: FPGA 12 percent, BPLD 69 percent and simple PLD 19 percent.

For the December 2002 quarter, the Americas made up 42 percent of our revenue, Europe 23 percent, and Asia 35 percent.

Revenue by end market for the quarter was as follows: Communications, 45 percent of revenue, computing 26 percent, and industrial and other 29 percent.

Revenue mix by channel for the quarter was 55 percent direct, and 45 percent distribution.

Looking at same revenue mix percentages for the full year 2000, first by geography, the Americas made up 45 percent of revenue, Europe 26 percent, and Asia 29 percent.

Revenue by end market for the full year 2002 was: Communications 47 percent, computing 26 percent, and industrial, other 27 percent.

Revenue mix by channel for 2002 was 52 percent direct and 48 percent distribution.

Proceeding with the rest of the statement of operations, gross margins for the quarter was 60.1 percent, consistent with 60.0 percent reported the quarter before.

Quarterly R&D expense was $21.8 million, up slightly from the $21.5 million reported last quarter.

Quarterly SG&A expense was $12.3 million, up slightly from $11.7 million reported last quarter due to the increased revenue level and new product introduction activities.

Other income for the December quarter was $2.3 million, down from $2.8 million reported last quarter.

During the December quarter, we again repurchased our convertible notes.

We've repurchased $18.4 million in notes at face value.

December quarterly gap net loss was $127.1 million or $1.14 per share.

Quarterly and tangible asset amortization was $18.8 million, up slightly from the $18.1 million of last quarter due to the inclusion of a full quarter of amortization expenses from the Serling acquisition, which was completed in August 2002.

Additionally, the tax provision for the December quarter was $111.1 million dollars.

This reflects a non-cash write down of our net deferred tax assets conforming with the accounting rules under tax (ph) 109.

Currently we are not paying income tax; we are generating GAAP tax losses.

Additionally, at the end of 2000, we exhausted our ability to carry back tax losses and receive cash tax refunds.

Given the circumstances, the accounting rules require us to eliminate our deferred tax assets.

Additionally in the foreseeable future, we will not report a quarterly tax provision or credit.

Excluding the write off of tax assets, our GAAP net loss were $16.0 million or 14 cents per share.

On a non-GAAP basis, earnings were $6.4 million, or 6 cents per share, flat with last quarter.

Non-GAAP earnings exclude the impact for intangible assets and amortization and include a tax shield of $4.25 million per quarter.

Going forward, we will continue to report both GAAP and non-GAAP earnings.

Non-GAAP earnings will continue to exclude the impacts of intangible asset amortization.

We believe earnings reported in this manner most accurately reflect the cash earnings potential of the company.

However, beginning in March 2003, we will no longer report a tax shield.

Tax shield reflected the cash text benefit that were available to Lattice due to the tax advantage structure of our Advantis and Agear (ph) acquisition.

In this regard the two months the cumulative tax shields we have reported since June of 1999, the date of our Advantis acquisition of $46 million, is comparable to the cash tax refund we have or will receive through June of 2003.

However, as we can no longer carry back tax losses to receive cash refunds in the future, we do not feel it is consistent to continue to report a tax shield in future periods beginning in March 2003.

Turning now to the balance sheet, cash and short term investments at the end of December decreased 13.3 million to 277 million.

Depreciation for the quarter was 4.9 million, and we spent 3.8 million on capital expenditure.

During the quarter we used 14.6 million in cash to repurchase outstanding convertible notes at a discount, and made a $5.5 million semi annual interest payment.

Netting together all these aforementioned items, cash flow from operating activities was a positive $10.9 million.

Inventory declined to $56 million from the $61 million reported in the previous quarter.

On an aggregate basis, total inventory using deferred income as a proxy for distributory was 68 million, down 9 percent from the 75 million reported in September quarter, and down 18 percent from the 18 million reported a year ago in the December 2001 period.

I'd like to conclude now with a discussion of our financial outlook.

We entered the first quarter of 2003 with essentially a flat backlog and continued limited visibility.

We anticipate a modern increase in turns (ph) business due to seasonal factors and consequently expect March 2003 revenues to be flat, just slightly up on a sequential basis.

Given our lack of visibility, we will only be giving formal guidance for the first calendar quarter 2003.

For the rest of the P&L, we currently have the following expectations for the March quarter.

We expect gross margins as a percentage of revenue to be flat.

We also expect operating expenses to be essentially flat.

We expect other income to be approximately $2 million.

As I eluded to in my comments, we will not report any tax provision in their the GAAP financial or the non-GAAP financials.

And finally, our shares outstanding should be relatively flat.

With that I would like now to turn the call over to out president, Steve Laub, for his comments.

Steve.

Thank you, Steve.

Good everyone.

As we just completed the year 2002, I'll focus my discussion primary on the changes for Lattice over this past year.

During 2002 we successfully repositioned the company from a CPLD and SPLD only supplier to a full range PLD company that offers a complete portfolio of FDGA and PLD solutions.

We successfully acquired and integrated two companies during the year -- Agear's FPGA business, as well as Serlings, a high speed series company.

Our new CPLD products have allowed us to regain the market momentum in this marketplace as we gained CPLD marketshare in each of the last two quarters, versus the industry's largest supplier of CPLD's.

We have grown our ORKA FPGA business each quarter since the acquisition closed in January of 2002 with very substantial growth experienced in the fourth quarter just ended.

2002 saw the reemergence of Asia as the highest growth geography in the world.

Lattice revenues from Asia have increased from approximately 21 percent of total sales in the fourth quarter of 2001 to approximately 35 percent in the fourth quarter of 2002.

Continued rapid growth in Asia relative to other geographies would disproportionately benefit Lattice as we have our strongest market position there.

This past year has also been a period of extraordinary innovation and execution.

During 2002 and including our most recent announcements, Lattice has delivered eight new product families to the marketplace and over 20 new products.

We are scheduled to deliver eleven new products in the first half of this year to complete the roll out of the already announced product families.

These new product families have strengthened the company in four major areas.

We've taken a leadership position in devices that combine programa logic and high speed IO, especially series technology in a single chip.

These are lead by our flagship ORKA FPSU products, which post the highest performance of any FPGA series product in the industry, a 3.7 gigahertz per second per channel.

During 2002, we introduced the ORSO 855 FC device, a sister device to the ORT device which provides similar performance but is optimized for sonic-based systems.

We substantially broadened our offerings of series space programa devices with the introduction of our ISPXGA product family, which averages configurations of 4 to 20 channels per device.

And a ISPGDX2, a high performance cross bow switch device that contains from 4 to 16 series channels per device.

The series in both the ISPXGA and ISPGDX2 run on speeds up to 850 mega per second per channel.

Today Lattice offers the industry's broadest selection of series placed programa solutions, providing the highest performance, the lowest power, the greatest number of channels, and the lowest cost.

The second major area is in CPLD products where Lattice extended its position as the leader in CPD solutions.

During the year, we delivered to the market place the IP market 4000 B product family, a 3.3 volt version of our industry standard 4000 architecture.

We also introduced the IP Mark 5000 B product family, a third generation VFW-3 product representing our super wide product thrust.

The most significant new product release is our ISP XPLD family, which is the first CPLD-like product to combine logic to memory.

This -- application and traditional CPLD and substantially boost of the market opportunity available for Lattice.

The third major area of product introduction is our newly released ISPX products.

These products are first to combine non-volatility with infinite reconfigure ability and instant on capability.

Capability is critical to a significant percentage of program logic users.

The ISPXGA and XPLD products have been promoted to our customers for approximately six months, and have generated a tremendous amount of design activities as measured by design opportunities.

The fourth major product area is comprised of three new product families that will expand the programa solution market place, diversify our customer base, and extend our reach to new end customers.

During the year, we delivered a new version of our ISP mac 4000 product line, which is optimized for the automotive customer base.

More recently we've just announced and released the IP mac 4000-Z product family.

This product family combined a high performance with (ph) mac 4000 with the industry's lowest power consumption.

This is an outstanding combination for portable and handheld products.

In addition to strengthening our position of CPLD's, this product line also supports our objectives of diversifying our end market, expanding our sales to the consumer market place.

Furthermore we also introduced the world's first mixed single PLD.

The ISP pac POWR, or power, which provides program logic and program technologies to provide an optimized solution for power supply management and supervisory functions.

These products sold (inaudible) based by our customers who have multi-supply voltages on their board.

In today's marketplace, the vast majority of visual systems use civil supply voltages and these customers are found in a broad cross section of end markets, including industrial, consumer, communications and confrontational.

This new mixing of PLD fulfills our objective to extending program solutions into new markets, thereby expanding the market where we uniquely serve.

While the business environment for our industry and our sales continues to be subdued, the technology that Lattice is offering our customers has never been as valuable and as compelling.

2002 marks a year of substantial repositioning and restrengthening of Lattice's position in the market.

As we enter 2003, Lattice has greater market opportunity available to us than ever before in its history as a more competitive supplier and a substantiate foundation for our future revenue growth.

That concludes my prepared remarks.

I'll now open up the call to questions.

Also, it's important to note that our Chairman, Cyrus Tsui, is prepared to answer any questions that require his attention.

Go ahead and open the call to questions.

Today's question and answer session will be conducted electronically.

If you have a question, please press the star key followed by the digit one on your telephone.

We will call on you in the order that you signal.

When called upon, please repeat your name and company name before posing your question.

Please ask one question at a time.

Time permitting we will come back to you for additional questions.

Now, we'll take our first question from Chris Danely from JP Morgan.

Nice quarter.

You're one of the few companies that actually grew the calm revenues.

Can you comment on what you think is happening, maybe it's a result of share gains or something else.

I'm not sure it's so much a result or focused highly on share gain.

We did grow our calm revenues.

I think that perhaps that our products are obviously designing to those programs which are potentially more attractive, and their programs are declining in the communications area.

We ourselves would say that one quarter does not set a trend in the overall market place.

We're pleased to see that happen but obviously continue to see that happen in the future.

Yeah.

Can you tell us why you guys are growing and nobody else is.

You know, as I said before, that growth calm share -- that is FPGA related.

We do expect that that business, as we said before, tends to be non-linear.

It tends to be mix of prototype and production.

We'd like to believe that we're going to see that this is a trend that will continue to grow, but at this point and in this marketplace, we're pleased to see that happen but we're not going to set any predictions as to going forward.

We do expect it will be -- we do expect that business will continue to grow, but it may not grow in a linear fashion.

Which means underline it will be up on a annual basis, but not necessarily on a sequential baize.

Can you tell us where you see the potential strength in the first quarter then by end market, please.

We expect the first quarter end market pretty similar to what we just experienced in Q4.

Basically the backlog the way it is shaped in, where it's coming from and what customer it's coming from, no major changes with respect to the end markets.

With respect to geographies, we expect Asia to continue to be an area of relative strength.

Okay.

Thanks a lot guys.

We'll take our next question from Tim Mahon with Credit Suisse.

Thanks.

Steve, Steve and Sirius.

I guess my first question here is on your sequential increase of net PGA revenues from the third to fourth quarter, can you talk about how much of revenue increase was from new programs or maybe you've won in the last 12 to 18 months.

Our sense is that the revenue increase is a combination of both new and old programs.

So I'd say that's what we're experiencing from that.

Any more granularity in that, Steve, or is that kind of tough to nail down?

The kind a programs that we're seeing here are basically for wireless equipment.

So if you have a base station type of equipment, that's primarily is where is it.

It's not -- we don't believe at this point -- there's not too much to 3-G we see that as also being weak at this time.

So it is new programs that are more than two and-a-half area.

And also some legacy programs as well --

Great.

That's good news.

And then just a follow up question.

It seems like the hot button for the last quarter has been storage and consumer.

I'm just curious if you have comment on what we're doing in that space and can you talk about any significant design winds that's you'd like to let all our investors know about.

Thank you.

We don't particularly share design winds, so I can't share that with you.

With respect to that space, we are foreseeing that consumer is an area that for us -- we expect that grow in 2003.

And we do -- did believe that the Q4 -- we did see growth there as well.

However, consumers also tend to be more seasonal, so it wouldn't surprise us if this particular quarter was softer.

The area that we're seeing growth there is in more the stuff that our (inaudible) into, which would be Seta (ph) box related, some telematic-type of applications.

What we're hoping is that with the release of our 4000Z product family we'll be able to enjoy some of the handheld and battery-powered consumer applications.

So we do expect they will help propel the growth in that particular end market in 2003.

So Steve, most of your success in consumer then would you say is more CPLD versus FPGA basis then?

At this particular point, I would say that's true.

Okay.

We expect also -

But Tim a storage went up quarter over quarter as well.

We do see some strengthening storage.

Thanks Cyrus.

We'll take our next question from David Duley with Wells Fargo Securities.

Good afternoon.

Congratulation on a nice quarter.

We saw a nice sequential strength in your FPGA product line.

Last quarter you talked about the growth in the FPSC product line.

I think it was up 500 percent sequentially, 1.5 million.

I was wondering if you saw continued growth in that product line.

With respect to the FPC product, actual growth was 1.7.

You're right, it was up 500 percent.

As was mentioned last quarter, we expected that business to create what we call a non-linear, chunky, lumpy -- whatever expression is used.

We did expected that to happen with because it because it is small, and a lot of it's based on lot of new designs that have been driven since Cyrus acquired the business.

Q4 we actually saw the growth really coming from the generic FBGA business.

This actually had a decline.

We expect that to grow during 2003.

But not surprising to us, as I said -- I think I actually intimated in our last conversation -- we thought perhaps it would be a bit of a slow after such a fast ramp in Q3.

But force of the business last quarter was basically from the generic FPGA business.

Another question along the FPSC product line.

It was my impression that traditionally under Agear it was sold to a very small customer base.

Are you happy with your progress and growing your business -- other major customers like Cisco or Sortell or something like that.

I agree with you that under Agear it was it was a very narrow customer base.

They had very few designs that we were able to inherit from the business when we acquired it.

We are quite pleased with the success we're having on design activity and extending this to a lot of new customers and large customers.

And also as a surface company, new applications as well.

To sort of give you a sense of the activity there, our design ends on the FPFC between Q4 as compared to Q3 were up over 60 percent.

So we are pleased with the activity we're seeing there.

Those are the designs you've won, not the ones you're tracking.

Those are ones you're actually designed in on.

These are programs that are sales force, that we are designed on.

That is true.

Congratulations.

Could you give us -- you may have said something earlier -- could you give us design end opportunities on your CPLD and your ORCA FPGA lines as well.

We didn't talk about those.

What we'll share with you -- we do track this for proprietary products.

Tracking design end is actually very important to us to give us appreciation for future revenues.

Total companies design end last -- actually we should compare 2002 versus 2001, which I think is more important than a quarterly number.

The total company design ends for the year were actually up and it actually set a company record for the year.

The low voltage BWF, which is a cut of numbers that I've been sharing with you in the past, and design basis were up over 20 percent actually year over year.

And they were also up double digit Q4 over Q3.

I just share with you those numbers on PFSC's.

Thank you.

I will remind everyone, if you do have a question, press the star key followed by the digit one on your touch-tone phone.

We will go now with Charles Bouchet with Bear Stearns.

Mr. Bouchet, your line is open, sir.

We'll move on to Bill Bazella (ph) from Davis Investments.

Thank you.

I wanted to talk a little more and get your perspective on the power management segment of the market place.

Earlier this week Zilinks and International Rectifier came out with an announcement.

You folks -- you introduced product relative to the power management arena.

Would you walk us through what's happening in power management relative to the programa logic world, please.

Sure.

What's happening out there in the programming management area (ph), which is becoming a hotter area, more exciting area.

It's become a real challenge for board designers, system designers.

Because if you go back 5, 6 years -- or go back to the early 90's actually -- almost everything back then was 5 volt.

So you didn't have much of a power management challenge.

You had a supply of 5 volts on your board.

Once you required different voltages, you didn't have much of a power management challenge.

What's happening today is you could have on a single board you could have a mix of many different voltages, whether it be 5 volt, 3.3, 2.5, 1.8, 1.5, 1.3.

Because different products are coming out with different technologies, and so memory can be one thing FPGA a different thing and so forth.

When that happens the power supplies have to be able to serve the different voltages of the components on the board.

You may have a challenge now of what power -- what device ramps up at what time and making sure that the proper power supply voltage get up to that device, and making sure it is turning on and off the appropriate times.

That is an extraordinary challenge for designers today.

What's happening and one of the things that's occurred is that this has become -- I was told by one of the editors we're the number one challenge facing the (inaudible) guys.

What this product does is it allows the customer to control multiple power supply voltages.

Coming out of power supply, going to device.

It controls the voltage ramps, it supervises the voltage levels, and so forth for the devise, it controls the turn on, turn off and so forth in the system.

That is going to make the customer -- it's going to take a lot of challenge out of it for him in doing so.

So one thing, it's a high growth there, we believe.

We're excited by this.

The other thing is that we're the first ones to provide a real integrated solution and programa solution.

We're the only one who has program logic and programa technologies.

We found that -- we believe -- time will tell if we're right -- but we believe that this is an ideal application for these technologies and it's the first one we've combined it to.

We're looking forward to really being able to be an important part of this segment in the market place.

Does that help you, Bill?

It does.

As a follow up to that, your last point about integrating the mixed signal and the logic.

Is that why you see someone like Zilinks gearing up with International Rectifier, where Rectifier is providing analogue side and Zilinks providing the logic side.

Where as you folks can do it in one piece, or am I mixing apples and oranges here?

I think you need to ask Zilinks why they hooked up together.

But we, again -- we are the only company that has the technology to be able to do this.

And so we're -- again, it is our hope and belief -- only the future will tell us -- that by using these technologies, we're providing a solution no one else can provide into a market place where there's a real need.

So it's also marketplace that can be -- as I mentioned in my prepared remarks, it's one which is a challenge by the vast majority of digital designers and board level designers, and it's also marketplace, which causes end markets.

This is not communication specific, it's not application specific.

It's a cross -- market.

And it's really a very new market, so just starting out.

It's a new market -- it's a market that has been growing over the last few years because this challenge has been growing the last few years.

This challenge has been coming up exponentially in just the last couple of years.

Again, people moving down to these 1.8, 1.5, 1.3 voltage levels.

But it's a completely new market.

We expect focusing to grow and emerge.

For us, it's completely new.

It's a new market -- for our solution.

Currently, the current solution is basically discreet, and then the engineer just have to tune it, and tune it, and tune it until it works before they can ship out the board.

With our solution you can integrate all the discreet components and give people the programmability and the easy to use software to make their job enormously simple.

So it's a very common solution.

As Steve and I went out and talked to the customers, it seems to be universally welcome at the timing solution to that problem today.

Sirs, I apologize for dominating, but a follow up on that.

In terms of solution up to this point, when you say "discreet", are you really talking discreet provided by the traditional power management companies -- Silicon Fairchild, International Rectifier, et cetera.

All of them.

Okay.

That's helpful.

Thank you very much.

We will take next question from Robert Toomey with Dain Rauscher.

Hi.

Good afternoon.

Stephen Skaggs, could you comment on what you expect cap spending and depreciation to be in 2003?

The depreciation should be relatively flat at the current level.

I would expect similar capital spending -- as last year.

Okay.

Also can you comment on what you're top four end market applications were in 2002; top three or four by sales volume.

We actually don't break it out for you guys at that level because people are always trying to figure out which customers are doing what and so forth.

So we don't usually say which one is the top four.

We share with you the kind of end market application the parts are going into and focus in that regard.

That would be great.

For this past year I would say the top end markets for our products -- communication, as much as its declined, continues to be our largest single end market.

Again, the wireless area within that, the base station still remains to be a very large one.

Enterprise networking has a application area -- is an area that seems to be large for us.

Storage -- and I'd say by storage we're talking large storage kin to type of stuff that is sold by the three letter company.

That's an area also regard to top application area.

Does that help you?

It does.

So when you look out going forward, given your product and technology positioning right now, if you look at -- can you comment where you feel the most promising areas of growth here as we look out over the next year or two?

I think we had a comment on that with respect to what we're looking forward to.

I mean the growth areas, what we think is going to be areas of relative strength, are still going to be, you know, the wireless areas within communications.

The wire area going to be weak and there's no reason to think that's actually going it change.

So the wireless areas -- and by wireless areas we're thinking 3G will have some room and some lift off -- base station is that generally I should have some recovery.

Enterprise Networking, we still expect to be reasonably good.

The metro area obviously within the networking area is going to be good.

We expect to see some growth in the areas that we haven't been playing in.

The consumer areas -- I think other people are seeing growth there.

We expect that -- especially with the release of our very low power of 4000-B product line, combined with our sort of sales focus into that area -- that those types of application portable handheld more and more fielding.

And then the automotive area, which is the reason we came out with the automotive line with CPLD, that and the telematic area within automotive is really a high growth opportunity for us.

Okay.

Thanks and what would you see as the most influential factor that could influence your gross margin?

And do you see the potential for improvement there?

Is it purely volume related or does any of that have to do with mix?

We don't expect any changes with respect to gross margin.

I think the gross margin has been relatively stable over the prior two to three years.

There's no sort of external events that we expect will have a major influence on that.

There's no doubt -- there's nothing like an update in business, stabilization of AFP's and lower costs in terms from gross margins.

But right now we'd expect from a standpoint looking out, expect relatively stable.

Okay.

One last question, if I might.

If any of you there could shed some light on your expectation or general thoughts on some kind of an advancement, what would trigger acceleration in IP spending generally in the industry.

Any thoughts on that?

We're not going to prophesize on what we think is going to cause acceleration in IP spending.

I think there are other people who are focused on that particular event than we are.

So I think we will pass on that particular question.

Thank you.

We will go next to Dan Burkery with UBS O'Connor.

Hi.

Two questions.

First one looking at the other assets.

Did you guys sell any of your UMC stock charts in the quarter or are you still about 88 million shares?

And then what are your sort of thoughts going forward in terms of monetizing some of the unrestricted UMC stock?

And then a second question to follow.

We didn't sell any shares last quarter and will continue to look at monetizing that on a opportunistic basis based upon the market value of the MC shares.

Has the restriction dropped or is it still 23.2 million from the queue (ph) that was restricted of the 88 million?

The restriction goes -- it's two fold.

One is security market related in Taiwan, and that dissipates over time.

The second is contractual with UMC in that effect.

We disclose that every quarter.

Frankly I don't have the exact number on the tip of my tongue now, but it will be included in our next financial filing.

Okay.

Second question.

You've have been buying back convertible bonds last couple quarters.

What sort of is strategy there?

Is it opportunistic buy back based on the price of the bond?

Are you looking at, sort of, if you have extra cash that you generated in the quarter that you become a more active buyer, or do you have a certain cash level you don't want to go below.

If you have any sort of strategy in those buy backs that you can share with us.

We don't want to share specific details on repurchase strategy in a public forum.

But can we assume that if it continues to make sense from a dilution standpoint that you will continue to do it?

No.

Okay.

You can assume whatever you want.

I buy whenever I feel like buying.

Okay.

Thank you very much guys.

Good luck next quarter.

I'd like to remind everyone if you do have a question, please press star 1 on your touch-tone telephone.

We'll go to a follow up question to David Duley with Wells Fargo Securities.

Just a quick question.

Your inventory level came down pretty good in the last couple quarters.

Are we at a level now that you feel comfortable -- is this the right level inventory for the level of business that you see?

We've totally got it all along over the past two years that our target for inventory is four to five months.

That's the inventory we continue to work down to that level over time.

I think our actions are consistent with those statements.

Thank you.

Did you have any 10 percent customers in 2002 or the fourth quarter?

No.

One final thing for housecleaning.

You may have mentioned this, but there was -- I recollect -- I don't think there was -- the last couple of quarters there was a big shift between direct and distribution and this quarter it was a 5 percent shift from one to the other.

Any particular reason that happened?

There's no particular strategies.

No particular reason that happens.

Depends on the customer selection.

A lot of it has to do with contract manufacturer direct.

Okay.

Thank you.

Gentleman, that was the last question we have in our queue at this time.

I'll turn the call back to you for any closing remarks you may have.

People know where to get a hold of us if they have further questions.

We're always happy to take them.

Thank you very much for your attendance.

Bye.