萊迪思半導體 (LSCC) 2013 Q1 法說會逐字稿

Good afternoon.

My name is Jay, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Lattice Semiconductor first quarter 2013 conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

I would now like to introduce David Pasquale with Global IR Partners.

Please go ahead, sir.

Thank you, Operator.

Welcome, everyone, to Lattice Semiconductor's first-quarter 2013 results conference call.

Joining us today from the company are Mr. Darin Billerbeck, the Company's President and CEO; and Mr. Joe Bedewi, Lattice's Chief Financial Officer.

Both executives will be available for Q&A after the prepared comments.

If you have not yet received a copy of today's results release, please email Global IR Partners using lscc@globalirpartners.com, or you can get a copy of the release off of the Investor Relations section of Lattice Semiconductor's website.

Before we begin the formal remarks, I will review the Safe Harbor Statement.

It is our intention that this call will comply with the requirements of SEC Regulation FD.

This call includes and constitutes the Company's official guidance for the second quarter of fiscal 2013.

If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum, such as a press release or publicly announced conference call.

The matters that we discuss today, other than historical information, include forward-looking statements relating to our future financial performance and other performance expectations.

Investors are cautioned that forward-looking statements are neither promises nor guarantees.

They involve risks and uncertainties that may cause actual results to differ materially from those projected in the forward-looking statements.

Some of those risks and uncertainties are detailed in our filings with the Securities and Exchange Commission, including our fiscal year 2012 Form 10-K and our quarterly reports on Form 10-Q.

The Company disclaims any obligation to publicly update or revise any such forward-looking statements to reflect events or circumstances that occur after this call.

Our prepared remarks also will be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles, or GAAP.

At this time, I would like to now turn the call over to Mr. Darin Billerbeck.

Please go ahead, sir.

Thank you, David; and thanks to everyone for joining us on our call today.

In terms of Q1, revenue was $71.2 million, up 8% compared to Q4.

This was at the high end of our revised guidance and 11% above the midpoint of original guidance.

Importantly, we returned to profitability in Q1, which is the ultimate validation of our market strategy and operational execution.

The strong Q1 revenue growth primarily reflects our successful penetration into the consumer market.

We also saw some macro market improvements, including pockets of strengthening in the communications segment.

Additionally, the revenue growth is a clear validation of our strategy to leverage Lattice's expertise in the low and ultra-low density low power programmable market.

We are clearly positioned as the leader in this market and continue to gain mind share with customers that value low-cost, low-power, and affordable innovation.

As mentioned previously, shipments in the consumer market can be large and highly volatile, as successful programs ramp up and down over a few quarters.

Wins in one platform do not guarantee inclusion in the next platform.

Our strategy is to continue focusing on broadening our customer base in the consumer space, while seizing opportunities to expand in the broader markets we serve.

In other words, grow the base steadily while taking advantage of the huge opportunity in the mobile consumer.

As always, we continue to drive cost reduction strategy while supporting investments in our new growth opportunities.

The takeaway here is that Lattice is executing on our stated strategy.

We continue to gain traction in the consumer market, given the clear advantages we offer, led by our iCE40 product family.

We are also gaining operational leverage as we continue to strengthen our talent wherever we can.

This is giving us further advantages through the seasoned and coordinated global sales, marketing, and operations teams.

We are ideally positioned now with a strong product portfolio, highly capable team, excellent broad customer base, and a clear value proposition.

In terms of added color for the first quarter, the revenue mix of new, mainstream, and mature was 39%, 47%, and 14% of revenue, respectively, in Q1.

Revenue from our new products was up 48% quarter on quarter, reflecting strength in our ECP3 and iCE40 product shipments from both consumer and non-consumer areas.

Mainstream products were down approximately 4% quarter on quarter.

Revenue from our mature products was down about 17%, when compared to the prior quarter.

On a geographic basis, revenue from Asia, including Japan, was about 69% of total revenue, consistent with Q4.

On an absolute dollar basis, revenue from Asia increased approximately 9% quarter on quarter, due to consumer and a slight improvement in the communications segment.

The increase in revenue from Asia was muted by continued softness in Japan.

As widely reported, Japan continues to lag from a recovery standpoint.

Revenue from North America was down approximately 9%, Q4 to Q1, in an absolute dollar basis and comprised 13% of the total revenue.

Europe was about 18% of revenue, up from 16% in Q4.

On an absolute dollar basis, however, Europe was up about 21%, despite continued softness in the European disty channel.

On an end-market basis, communications represented 39% of revenue in Q1, compared to 38% in Q4.

Computing was down slightly at 10% of revenue in Q1, as compared to 13% in Q4.

The macro market remains challenging in both North America and Europe.

Industrial and others declined slightly as a percent of the total revenue to 26% in Q1 from 31% in Q4.

Auto remained a bright spot for us as we continued to penetrate into non-com's revenue opportunities.

Consumer increased to 25% of revenue in Q1, from 18% in Q4, primarily reflecting the continue ramp of our iCE family.

That concludes my initial comments.

I will now turn the call over to Joe.

Joe?

Thanks, Darin.

As noted earlier, revenue for the first quarter was $71.2 million, an increase of 8% from the fourth quarter and a slight decrease from $71.7 million in the year-ago period.

Gross margin for Q1 was 53.6%, compared to 54.2% in the prior quarter and 55.1% in the year-ago period.

Gross margin was at the midpoint of our original guidance.

Margins continue to be strong due to higher than anticipated OEM shipments, mix, and inventory management.

Margins will continue to fluctuate throughout the year, however, due to volumes in the consumer market.

We are offsetting some of this mix-related impact through continued cost reductions in operations.

Our long-term gross margin target remains at the mid-50% level.

Total operating expenses for the first quarter came in at $35.5 million.

This included $0.2 million in restructuring charges.

Net income for the quarter was $1.9 million, or $0.02 per diluted share, as compared to a net loss of $7.2 million, or $0.06 per basic and diluted share in the fourth quarter, and a net loss of $7.7 million, $0.07 per basic and diluted share in the year-ago period.

First quarter of 2013 financial results included income tax expense of $0.7 million, or $0.01 per diluted share.

Amortization expenses from acquired intangibles was $0.7 million and restructuring related charges were $0.2 million.

Fourth quarter of 2012 financial results included income tax expense of $0.4 million, amortization expense from acquired intangibles of $0.8 million, and $5.4 million of restructuring related charges.

First quarter of 2012 financial results included income tax expense of $7.9 million, or $0.07 per basic and diluted share; acquisition related costs of $1.7 million; and restructuring charges of $0.6 million.

For the quarter, diluted share count was approximately 116.7 million shares.

The share count reflects the retirement of approximately 0.6 million shares during the quarter, purchased at a cost of $2.5 million, under our previous stock buy-back program that expired in February.

We have not been active in the market under our new 2013 stock buy-back program due to share price.

We ended the quarter with a cash, cash equivalents, short-term and long-term marketable securities balance of $184 million, a decrease of $4 million from the December quarter and we continue to have no debt.

Accounts receivable at March 30 were $56 million, compared to $46.9 million at the end of last quarter, and days outstanding were 71 days, compared to 64 days last quarter.

Inventory at March 30, 2013 was $43.8 million, compared to $44.2 million last quarter.

Months of inventory now stands at four months, compared to 4.4 months at the end of Q4 2012.

We expect to see fluctuations in inventory levels in any given quarter driven by selective inventory positioning for future opportunities and opportunistic increases in wafer starts.

We spent approximately $3.1 million on capital expenditures and incurred $5.1 million in depreciation and amortization expense during the first quarter, compared to $2.4 million and $6 million, respectively, in Q4.

This concludes the financial review portion of the call.

I am going to turn things back over to Darin.

Darin?

Thanks, Joe.

In summary, we are optimistic entering Q2.

Our results reflect our ongoing efforts to grow in mobile consumer, with specific focus to penetrate into the worldwide smartphone market.

We continue to focus on broadening our customer base in all geographies and all markets.

We are aggressively managing potential volatility from shortened consumer product lifestyles, all being maniacally focused on keeping our costs down.

Our team is experienced in navigating business environments where demand can expand and contract instantly.

We are also positioned to benefit from many improvements in the broader communications market later this year.

In terms of our specific expectations for Q2 2013, we expect revenues to increase approximately 15% to 20%, compared to Q1.

Q2 gross margins are expected to be approximately 51%, plus or minus 2 points.

Total operating expenses are expected to be approximately $37.5 million, including approximately $1 million in R&D variable costs related to program timing, $0.5 million in variable spending related to sales increases, and $0.3 million in other expenses associated with the Company's move to a new facility in San Jose.

This concludes our prepared remarks.

Operator, we would now be happy to take any questions.

(Operator Instructions)

Tristan Gerra, Baird.

Could you talk about the OpEx outlook for the second half and the reason for the increase in Q2?

And basically, what you think you can do to bring those levels down into Q3?

We did talk about variability in OpEx related to when we have product releases, so there is $1 million in there that I will call related to product release.

We are still targeting the roughly $35.5 million per quarter run rate, but we will spend opportunistically, if we need to on R&D spending.

We are going to hold the line on sales and marketing and on G&A.

You also have some variable spending that we had talked about before, related to the increase in revenue in Q2.

We are still holding on the $35.5 million, but it's going to swing up and down as we go through the quarters.

Okay.

And then, in terms of communication infrastructure, are you seeing any pick up, and perhaps if you could talk about the design win momentum you have in China?

What type of timing should we be looking at in terms of a pickup at some large customers in China?

I think overall, Tristan, when I look at the comms market, it's spotty, to say the least.

It will see one or two customers that are upsiding because they'll win specific contacts in specific geographies, so I think that's what we saw this last quarter.

We have heard, at least some of the forecast that we have, of some large contract wins by different comms customers, so I think that will drive some of the comms rebound.

So it could be the fact that you are in a specific customer and that customer wins those contracts that will push things up or down.

We feel strong about the design wins that we have in the pipeline, specifically on ECP3 and XO2.

XO2 was primarily, really, the glue logic portion of the control plane, whereas ECP3 is the SERDES version of it.

Both play well in wireless and wireline, where people want cost and affordable innovation versus just the highest performance SERDES devices.

We feel good about that.

A lot of the stuff that we are shipping today was design wins we got in the last 12 to 18 months.

Okay.

Then, last question, looking at the volume momentum you have in Q2, how should we looking at the trajectory for SiliconBlue revenue?

Is it fair to assume that SiliconBlue revenue could double year on year this year?

Yes, so let's talk about the momentum that we have, and again, it's iCE40.

I want to re-correct you -- it is iCE40 Lattice products, not SiliconBlue.

Yes, coming from there into consumer, we would expect to grow pretty aggressively on that, as you saw even in the first quarter, and our projections for the second quarter are directed at that growth.

So yes, we expect some pretty large growth.

I don't want to give you any forward-looking guidance beyond Q2, which I can't.

We expect some pretty aggressive growth.

Very good.

Thank you.

Ian Ing, Lazard Capital Markets.

Congrats on the GAAP profitability and the strong revenue guidance.

Thanks.

Do you have any commentary on guidance for June by end markets, assuming most of it's coming from consumer?

Yes, from a market segment, I think consumer and comms will really be the best drivers of growth.

I think everything else, if you look at it, is probably struggling or flattish, being more of the North American and the disties in Europe.

We don't see a lot of rebound yet from that.

I don't expect Europe to rebound for the whole year.

I think North America has some opportunity to rebound, but most of our growth will come in specific comm segments and also within consumer.

Okay, great.

Then, in terms of, Joe, the commentary on fluctuation on gross margins for the rest of the year, we do have this backdrop of consumer seasonality.

Can you give us a sense of the range of gross margins or the directionality after this June guidance?

Are there scenarios where you've got cost reductions, any industrial recovery, enough to offset or more than offset?

Thanks.

You're hitting it.

If we start to see some of the global macro go up, we're going to see uplift in the margins.

We also have cost reductions that are continuing to flow through that we anticipate will come in in Q2, as well as Q3 and beyond.

So we see an uptick, and we are still holding to the mid-50%s number that we've talked to.

A lot of this is a function of industrial not really coming back hard, it is somewhat soft.

Although Europe stayed stable for us quarter on quarter, and we saw little uptick, so that's a good news kind of thing for us.

We are still not calling any large increase in the last half of the year, but if comms comes back and the macroeconomic conditions and industrial come back, we think we can be at the mid-50%s very well.

Okay.

Is comms at or below corporate average?

I thought sometimes it is --?

It is dependent upon where it's at.

We have been -- and Darin talked to the growth in our new products at 48%, I believe it was, this quarter.

A lot of that growth is expanding beyond our core customers in some of the comms-type businesses that we have.

It's things like video, surveillance, automotive; all of those markets are what we are trying to do to balance the base of margin.

Some comms products, as Joe had mentioned, are lower margin than other.

Some of the higher performance and newer products might be lower, but some of the control function products that we have been shipping for many, many years are actually quite a bit higher.

We have a balanced portfolio of products in the comm segment, depending on which product family it is.

Depending on mix, I am above corporate average on comms.

Okay.

Thanks for clarifying.

Last question here -- where are you in terms of consumer OEM diversification?

I think you've got a good OEM with smartphones and tablets, one of the leading ones in the world.\ Where are you with OEM diversification?

Let's talk about it.

There is really about six that are meaningful in volume.

We have programs and target programs for all of those.

There is probably two that are meaningful today, that we're balancing that portfolio with.

Let's not forget that some of the consumer mobile stuff goes into digital still cameras, which is still a big business for us.

We have diversified, both within Asia too, because we've got some digital still camera stuff that's in Korea and also in Taiwan, so there is quite a bit of diversity we have there.

But our biggest challenge is really getting to those top six guys.

Okay.

Thanks.

I'll re-queue.

(Operator Instructions)

Richard Shannon, Craig-Hallum.

Very nice results and guidance here, guys.

I guess a couple questions for me, and I'll follow up, I think the last one here, regarding consumer mobile customer diversification.

How many more customers could we see in the next, say, two to four quarters?

What does your crystal ball tell you there?

Our goal would be three of the top five.

That's the goal that we are putting out for ourselves.

I think that's reasonable for us to get to that point where you can get some design wins and traction.

These things aren't 18 month design cycles like everything else, they are usually 6 to 9 months.

Okay.

Three to five by the end of the year, is that --?

That's our goal target is to really establish the relationships because again, this is a different type of design process than you typically would do in a comms market.

So, it's really getting in, and now that you have some proof points on the valuation as far as turning development cycles much, much faster than what people have thought for some of the feature sets that we're helping design and develop.

I think that makes a big difference, now that you are actually shipping volume.

Okay.

Maybe probing into the consumer mobile opportunity another way.

Darin, how are you seeing the mentality of the engineering and even the management of those customers and target customers embracing programmable logic, where maybe they haven't used it before?

Is it becoming embedded in any way such that you might see perhaps a little bit more stability than you might expect normally from the consumer market?

I think right now, if I look at the overall market being one of feature-rich, the sensations are look at my smartphone is a better form factor or it has these cool features that somebody else has.

I think there's points in those development cycles where if somebody comes up with something you didn't think about in that design -- and it is out of your design cycle, you have two choices; you either stop your design cycle and redesign, or you possibly put an FPGA in those.

We have some opportunities where we have more than one FPGA in some of the smartphones, and that's just because one does one thing and another does another thing, and they are adding features.

The nice thing is, they have the flexibility to then add or subtract those features, depending on the phone model or depending on the geography the phone model ships into.

It's a nice deal for people because that's one of the areas where, unlike in ASIC, you can have two different FPGAs, yank one off and you don't have those features on that phone because the market doesn't need it.

Okay, fair enough.

Jumping over the topic of gross margins, maybe to expand on a previous question, here.

Joe, can you remind us what kind of level of revenues, or range you would expect to achieve with a mid-50%s gross margin on, maybe if I can push you to quantify the mix that you were qualitatively describing earlier?

It's all mix.

It really is.

If we hit this $80 million, I could be at 55%, mix dependent.

So, if I've got a good mix of the broader market products, some of the stuff from the industrial side, and we have our comms market continuing to expand outside of the core customers we have serviced in the past on new products, I will be at 50%.

So, it is much, much more mix dependent than it is volume dependent.

Anything over $80 million helps me on my overhead allocation.

It also helps us related to costing, because now we have more leverage on cost side.

Okay --

The biggest swinger is still mix.

Okay.

Joe, are there any opportunities for step-ups in gross margins on your iCE40 products, or is that a stable cost-reduction cycle right now?

There are opportunities on iCE, again, related to volume and raised to potentially derivative products that we develop going forward.

Okay, but anything like on yield, as an example?

Yields are pretty darn good, but there's still clearly always opportunity on yield.

Got it.

Okay, I think that's all the questions I have.

I'll jump out of the line, guys.

Thank you.

Ruben Roy, Mizuho Securities.

Darin, I wanted to see if you could comment a little bit more on some of the discussion you had in your prepared remarks around volatility on the consumer side?

When you came into Q1 earlier this year in January, the guidance was a bit lower, and you had a nice uptick during the quarter.

The Q2 guide was well above where I think expectations were.

So, it seems like that were some programs ramping during the first half of the year that perhaps you hadn't seen earlier.

As we sit here in April and we think about some of those comments back in January, you were thinking that second half of the year would be a little stronger than first half.

How are you looking at that now?

Does that have something do with the volatility that you talked about?

I guess what I am trying to get to is, do you think that the consumer business can grow half over half, when you look out to the second half of the year, based on the design wins that you have right now?

It's always a possibility to do that.

Let me go back to your first question, which is we entered Q1 and gave guidance, and then all of a sudden stuff blew up on us for the good.

That's an artifact of the fact that when you win something in the consumer market, you are not really sure when their ramp vehicle is because you've got so many other suppliers that they're dependent on once they build or validate a given platform.

Once they validate that platform, they'll just walk in -- consumer is a little different than comms.

They'll walk in and say okay, I need this many parts tomorrow and pull all this stuff in, which is why you have to position your inventory a little bit different than you do in the consumer market, where you are more lead-time based and forecast based.

In this particular case, you have to be able to take your inventory that you have and be able to operate in a mode where stuff goes up and down really fast.

And so I think what ended up happening is people just started to pre-build in a lot of some of the volume ramp products that they have, and that's what you saw.

It is just the quicker ramping and a pulling of a ramp that you already had a design win on that you thought would possibly occur in Q2 rather than Q1.

Right --

For the second half, it's just depending -- the second half of the year will really be dependent on the models that you are in and the success of those models in the market.

Okay.

It's an interesting segue, I guess, into inventory, given that inventory was down a bit in Q1.

I'm wondering, what's the lead time that you get on a build -- on a consumer build?

Typically, on a typical situation it's probably six to eight weeks is what we'll see.

So if you look at the volumes that these things run, you have got to position -- so, even though inventory is down overall, in certain areas it could be up because it's down from a dollar perspective.

So, there are certain products that might be up slightly, other products that might be down slightly, depending on why we build.

Because again, remember, we build for opportunity, forward looking that has high probability.

We also build for lower cost in some cases, where we can drive volumes to drive the cost down.

In areas where we need that cost focus, you may see us build inventory there.

Now that we've got the mix where we want it, we can flex it back and forth depending on cost structures and depending on availability of ramps.

Right.

Okay.

Last question, Darin.

Did you have a 10% or better OEM customer in Q1?

Did I have a 10% --?

We don't disclose that except annually.

Okay.

All right.

Thanks, guys.

(Operator Instructions)

Bill Dezellem, Tietan Capital Management.

Would you please discuss your design win trends in the recent past versus the past which actually is driving your success today?

What I am trying to drive at is, we recognize there is a lag time between those past design wins, and really trying to understand the momentum going forward?

We have Salesforce.com is really our design opportunity pipeline.

It doesn't help you a lot in the consumer market.

The reason for that is because you will be working on a design and you don't -- it may be an opportunity, but we judge it down so low that in that first couple stages of the pipeline, that you are not going to get a lot of benefit up.

Then, when they hit, they just take off, so they move very quickly from opportunity to revenue.

Whereas the Salesforce.com is probably more appropriately used when you look at the other products such as XO, XO2, ECP3, and our power management.

If I go back to XO2 -- remember, that's our 65-nanometer device that's got non-volatile memory, and we go back and look at the pipeline that we have established since probably late 2010, mid 2011, and it's right on track with what we would have anticipated for XO, which before iCE, was our fastest ramping vehicle.

We feel very confident about our XO2 pipeline.

Our XO continues to grow very well.

iCE just helps to be a different program that's hard to track on those design wins, because it just happens or it doesn't happen.

So, it's very digital, and it is hard to keep track of that in Salesforce.com.

Overall, our pipeline continues to increase with the new products.

And, we still have a lot of opportunity for some of our older products, like 4K and that we call mainstream, but have moved from new to mainstream in the last year or so.

I think your last statement, qualitatively, your pipeline does continue to grow.

So, from your standpoint, this is the beginning of a build in revenues rather than a quick shot in the arm that, once this consumer product you are in fades away, then --

It's more the comment that I made in the call where I said look, we're trying to broaden the base and build that base as we take advantage of these consumer mobile opportunities.

And, some consumers, longer than others; smartphones are a very quick and dirty kind of thing.

I dealt with that a lot of years in the flash market, whereas consumers like TVs may take a longer duration and ship for a much longer time.

So, when we talk about consumer mobile, it's usually stuff that's battery driven.

Consumer itself could be multiple things.

Those types of opportunities I consider those more of our volatile or lumpy things.

But, the other things that we really focus on is building the base.

Both the base product lines and the control plane for wireless and wireline, being XO, XO2, and we can actually sell iCE there too, and then it's the higher-end communications devices like ECP2M or ECP3.

We look at those pipelines.

Obviously, we have to refresh our communications SERDES version high-performance pipeline, which we're doing as we roll out our next product.

Thank you.

Sundeep Bajikar, Jefferies.

Nice job on the consumer front.

Just a couple of quick questions there.

Is it fair to say you're shipping to two major smartphone platforms, which are making majority of your shipments for iCE40 at this point?

It's around that.

It's fair to say that.

Okay, great.

Is there a way to characterize which geographical end markets those products might be shipping into?

Do you have any visibility into that?

They ship all around the world, because one platform may go to multiple geographies that may have different features.

It may have -- for instance, there could be applications in China that aren't used in Japan or the United States or Europe.

Okay, great.

Just quickly on gross margins for iCE40 relative to corporate average as of Q1, are you able to share how they compare?

It's a little lower than what our corporate margins would be, and that's what our big focus is at this point, is really -- there's two ways that you drive the margins up in consumer mobile.

One is with volume-weighted pricing, which is what we are doing with our own suppliers as we drive that and the cost down.

The other one is, as we develop the next generation products, which also happens quickly, you are really trying to design and define a cost reduction strategy built into the product.

So, what we ship today is blocking and tackling cost reductions, but what we ship tomorrow is more the innovations for cost.

Understand.

Switching gears into ECP3, could you give us an idea how ECP3 revenues did sequentially?

And also, what portion of ECP3 revenues were shipped into communications versus non-communications, as in surveillance and those types of applications?

ECP3 would have been up quarter on quarter, which is nice.

We don't ship a significant amount into automotive or some of the surveillance applications yet.

Although, we are -- we have a lot of design wins in the pipeline that we're working on.

And as Joe had mentioned earlier, the goal for us on ECP3 is really diversifying beyond just being a comms data product or high-end control plane product, but into other things like video.

So, we are really trying to focus ourselves in some of the HDR video applications for surveillance and in some of the collision avoidance stuff for automotive.

Okay, so in other words, you are saying the majority of ECP3 revenues are still coming from the communications market?

Yes, and another thing is margins are up quarter on quarter too for that product.

That's again a blocking and tackling deal to get the product cost down.

Okay.

Great.

Thank you so much, and nice job, again.

Thanks.

(Operator Instructions)

David Duley, Steelhead Securities.

Most of my questions have been answered, but just a couple of housekeeping ones.

With you guiding revenues up substantially and gross margins down, I imagine most of the growth in the upcoming quarter is going to come from the consumer space.

Can you give us an idea of what you think the communications space sequential growth will be in the June quarter?

Let's talk about it, so a lot of the growth will be consumer, but don't count out communications as a growth in general.

If you look at it, there will be both growth, and that's the challenge that we have.

As Joe alluded to, the margins start really coming back when we get to the overall distribution and the other product mix in play.

We have tried to be somewhat conservative, if we walk through it, but we need the overall macro to improve to get more of a distribution mix of the products that we ship overall.

Okay.

Any guess on what you think comm business will grow in the second quarter?

No, not really.

I think, today, it will grow modestly is probably all I would say.

Okay.

And then, real quick, what do you think whatever net income we end up with, what is going to be the tax rate that we see in the quarter?

We're running at around 26% right now, and we are going to probably be in that space as we go throughout the quarter.

Thanks much.

Ian Ing, Lazard Capital Markets.

Just a couple quick follow-ups here.

As you look at the comm infrastructure market, it seems some of the emerging OEMs are more flexible in their vendor selection, including using Lattice.

Big OEMs are doing some acquisitions, like Cisco, for example.

Any chance of getting onto more approved vendor lists and preferred vendor lists at big OEMs because of this?

Yes, funny you should say that, that's exactly some of the focus we've had in the base communications markets.

And, we've actually had some pretty good success at doing that.

Yes, absolutely, what we're doing.

I think what helps us a lot is the fact that we provide the low power, low density approach to them with value propositions of not EOL-ing things for long periods of time.

I think that gives us a stable position in all of those customers' eyes.

Great.

Then for Joe, the new tax rate for the rest of the year, what's driving that versus the original guidance for the year?

What's driving that is, as we move towards profitability and as we get the new tax structure in place in where we sell, it's really a function of, basically, how the money moves through inter-co transfers and stuff like that.

What we need do is get a sustained profitability and show profitability in our offshore spaces, and then we'll start to see a better rate decline as we move forward.

Okay.

That's it for me.

Thanks.

(Operator Instructions)

There are no further questions.

I'll now turn the call back over to the presenters.

I appreciate everybody joining us on the call today.

Again, our upward guidance is actually a result of a lot of hard work over the last couple of years.

It is also part of our acquisition of the SiliconBlue technology and our iCE40 product.

It's been a really good focus of ours, and we're starting to see some of the results that you heard on the call today in some of the forward-looking guidance that we've given you.

Let's also not forget that we're still one of the biggest communications suppliers, as far as the control plane and other areas that we focus on, so we are not just going all consumer.

There is still a broad base of products that we supply, and we continue to evolve and develop capabilities for all of our markets, not just consumer.

Even though consumer is the big story today, we have a lot of benefit in our other products and a lot of products that are lining up quite well for the future.

Again, thanks for joining us on the call.

We will talk to you next quarter.

That concludes today's conference call.

You may now disconnect.