萊迪思半導體 (LSCC) 2014 Q1 法說會逐字稿

Good afternoon.

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

At this time I would like to welcome everyone to the Q1 2014 conference call.

All lines will be placed on mute to prevent any background remarks.

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

(Operator Instructions).

Thank you.

I will now turn the call over to David Pasquale of Global IR Partners.

Mr. Pasquale, you may begin your conference.

Thank you, Operator.

Welcome, everyone, to Lattice Semiconductor's first-quarter 2014 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, where 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 2014.

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 public 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 2013 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 will also be presented within the requirements of SEC Regulation G regarding generally accepted accounting principles, or GAAP.

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.

We started 2014 off with the same strong momentum and excitement that we ended 2013.

As a result, we are pleased to report that Q1 was our fifth consecutive quarter of revenue growth.

Our revenue growth of nearly 8% in Q1 over Q4, is even more impressive when you consider the strength in Q4.

We delivered gross margin 56%, above the high end of our guidance, and earnings of $0.10 compared to $0.06 in Q4 and $0.02 in Q1 of 2013.

The bottom line is, we are executing to our growth strategy, and continue to drive the Company forward.

We are confident in Lattice's future, our ability to add value to our customers, and finally, to increase our shareholder value.

A few key takeaways from Q1 are, number one -- demonstrated business model in sustainability.

We have implemented, and are executing to plan, as evidenced by our results of the last five quarters.

Number two -- quick-turn product introductions and ramp.

Great products get us in the door.

Our ability to develop quick-turn product introductions and ramp those products into high volumes, allows us to increase opportunities with our customers.

This includes our demand forecasting, inventory management and support.

Stability and reliability are essential.

Number three -- margin leverage.

Our high-volume production is delivering leverage in our cost structure as we expand in the consumer market.

In Q1, this leverage helped us drive gross margins to 56%.

Number four -- continued customer momentum.

Our ability to execute is allowing us to diversify a single win at a single customer into multiple wins across multiple platforms.

This is the case of success building on success, and is opening the doors for us at new customers.

Several of these wins are at large global consumer OEMs, while other wins are at companies seeking to harness the power of programmability to enhance their products and accelerate their time to market.

Number five -- finally, our value proposition to mobility is driving growth in other markets.

We are actively applying what we learn about mobility into industrial, scientific, medical and computing.

This approach ultimately increases our customer base that requires low-density, low-power, customizable solutions.

One example of our traction and success is our relationship with Google.

We are pleased to announce last week that Google's Advanced Technology and Project Group selected Lattice FPGAs for its Project Ara initiative.

Under this ambitious initiative, Google will deliver the world's first modular smartphones for customers to configure from a variety of modules.

Lattice will enable critical connectivity between reference implementations of removable modules in the Project Ara endoskeleton.

The low power and small footprint of Lattice FPGAs meet the system requirements of thermally constrained environments.

They also provide the flexibility to support the MIPI UniPro network protocols that will be used for connectivity between the modules.

Finally, our FPGAs allow developers to go from protocol to production fast, reducing the product development effort and time to market.

Another growth opportunity our strategy supports is the proliferation of the Internet of things.

A recent report from Morgan Stanley put the Internet of things at a potential reaching tens of billions of units in 2030.

To put this in context, the mainframe is believed to have created 1 million units, the PC 100 million units, and the mobile Internet a billion units.

The numbers are big.

Programmability is attractive to a wide range of devices, because it can allow updates, facilitate communication, create differentiation, and enable last-minute feature [additions].

As part of the strategy of pursuing these potentially high-volume opportunities, we continue to make strategic investment in our roadmaps for the future.

One such launch we are excited about is our ECP5 family.

The ECP5 family is ideal for small-cells, microservers, broadband access, industrial video, along with other high-volume applications, where the lowest possible cost, lowest possible power, and the smallest possible form factors are crucial.

We are effectively removing development obstacles, and breaking the rule that conventional FPGA should be the highest-density, power-hungry and expensive.

We expect to be qualified and shipping volume orders of our ECP5 devices in Q3 of 2015.

Let me give you some additional data points about the quarter before turning the call over to Joe.

Revenue from new products increased more than 23% in Q1 to $50.9 million.

This was led by the increased demand for our iCE40 and ECP3 products in support of our consumer and comms businesses.

Revenue from mainstream products declined about 8% to $33.1 million, while revenue from mature product increased about 3% to $12.6 million.

These results continue to be consistent with market trends, and also reflect the mix shift in our business.

On a geographic basis, revenue from Asia, including Japan, increased 7% and represented 75% of the total revenue.

Growth in consumer market and a key customer in (inaudible) communications market in Asia was partially offset by Asian distribution decline.

Revenue from the Americas comprised 10% of the total revenue and was about -- and was down about 16% on a -- or approximately $1.7 million.

Revenue in Europe accounted for about 15% of the total revenue and was up 36%, or approximately $3.9 million.

The improvement in Europe continues to be slow.

On an end market basis, industrial, scientific, medical and computing was about 28% of the total revenues in the first quarter, compared to 32% in Q4, and down about 7% on a dollar basis.

Communications represented 41% of the total revenue in both the first and fourth quarters.

On a dollar basis, comms revenue increased nearly 10% sequentially.

The ongoing buildout of China communications infrastructure continues to drive this market.

Our consumer market revenue increased to 31% of the total revenue in the first quarter of 2014 from 27% in Q4.

On a dollar basis, the consumer market revenue increased more than 23% quarter on quarter.

That concludes my initial comments.

I will now turn the call over to Joe.

Thanks, Darin.

Revenue for the first quarter was $96.6 million, increase of nearly 8% from the fourth quarter, and an increase of almost 36% from $71.2 million in the first quarter of 2013.

Gross margin for Q1 was 56%, compared to 54.3% in the prior quarter and 53.6% in the first quarter of 2013.

As Darin mentioned, our Q1 gross margin strength was helped by product cost reductions due to high-volume production and mix.

The Fujitsu process transition initiated in Q3 continued to have a minor negative impact on Q1 gross margin.

We expect costs associated with this transition to impact margins through Q2.

Our long-term gross margin target remains in the mid-50% range.

Operating expenses for the first quarter came in at $40.7 million.

There are several puts and takes within OpEx.

The bottom line is, we came in approximately $2.2 million above our Q1 guidance, primarily due to variable costs driven by our significantly higher revenue.

As a percentage of revenue, OpEx declined to 42.1% in Q1 2014, from 45.1% in Q4 and 49.9% in Q1 2013.

Net income for the first quarter was $11.98 million, or $0.10 per basic and diluted share, as compared to net income of $6.5 million, or $0.06 per basic and diluted share in the fourth quarter, and net income of $1.9 million or $0.02 per basic and diluted share in the year-ago period.

For the quarter, diluted share count was approximately 119 million shares.

Operating cash flow was $2.9 million for Q1.

We ended the quarter with cash, cash equivalents and short-term marketable securities of approximately $219.5 million, and continue to have no debt.

Accounts receivable at the end of Q1 were $66.7 million as compared to $50.1 million at the end of the last quarter.

Days sales outstanding were 62 days compared to 50 days last quarter.

The increase in both accounts receivable and DSOs is a function of our strong Q1 revenue coupled with our year-end balance being our traditional accounts receivable low point for the year.

Inventory at quarter end was $58.2 million compared to $46.2 million at the end of 2013.

This expected increase in inventory reflects builds of our XO and XP inventory in conjunction with the Fujitsu fab transition, which we have previously discussed, as well as an additional ECP3 inventory to fulfill specific future demand.

Months of inventory now stands at 4.1 months compared to 3.4 months at the end of Q4.

We've spent approximately $2.4 million on capital expenditures and incurred $5.9 million in depreciation and amortization expense during the quarter, compared to $2.3 million and $5.6 million respectively in Q4.

There was no activity under our share repurchase program in Q1.

This concludes the financial review portion of the call.

I'm going to turn it back over to Darin for a look at the second quarter business outlook.

Thank you, Joe.

In summary, Lattice is in great position, based on our team's hard work and extra effort, to create innovative solutions that then deliver with flawless execution.

We have very compelling opportunities in front of us, and are focused on keeping the ball moving forward.

Our vision -- to be the undisputed leader in providing low-cost, low-power, small-footprint FPGAs to applications where time to market is crucial -- is becoming a reality.

While we have momentum, there's still more to do.

We can achieve our goals based on the strength of our strategy, technology, customers and employees.

In terms of our specific expectations for second quarter 2014, we expect revenues to be flat to plus 4% compared to Q1.

Q2 gross margins are expected to be approximately 55% plus or minus 2 points.

Total operating expenses are expected to be approximately flat on a sequential basis.

This concludes our prepared remarks.

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

(Operator Instructions) Tristan Gerra, Baird.

I think last year you had mentioned that you thought you would be in 8% to 10% of smartphone units.

Do you have a revised target for smartphones and also tablet for this year, in terms of percentage adoption rate you think iCE40 can achieve this year?

You know, Tristan, we were -- originally, we said, hey, we'd like to get to about 10%.

Last year we were probably right around that number, if you look at it from a unit basis.

I think this year as we look at it, we'll do a little bit better than that, based on the wins we have.

And I think long-term, if you asked me what's the total that you could achieve, I'd say short-term or mid-term it's probably 30% to 40%.

And then after that, who knows, based on, you know, the different opportunities that come about.

And there are some other things that go on in the ecosystem, like Google and -- that can change some of that slightly.

So, it's hard for us to tell, long-term.

But I think the goals short-term are very clear.

Do better than 10%, the goal, probably medium-term, is somewhere around 30% to 40% if we can get there.

Okay.

And then Xilinx, who we know is not your competitor, inferred on the call yesterday that some of the China-based OEMs were ordering ahead of planned demand, presumably due to supply concerns.

So, is that a trend that you're seeing?

I think Altera is also saying today that they expect China Mobile ordering to kind of flatten in Q3; so, Q2 being kind of the last [ceiling], at least very near term.

Is that a trend that you are seeing?

How would we -- should we look at your communication revenue into the second half?

I don't know that we have the same markets they do.

Again, we started really ramping up on the comms section in Q3 of last year.

But I think that you're going to start seeing the whole China buildout -- it's probably going to level out.

I've got two different views on it from different people within China.

One says, no, that buildout lasts till the middle of next year, but it's not going to go up from here; it'll just kind of flatten and move.

And then there's other people that think at the end of this year it will start to slow down.

But if you look at traditional things that we have seen, typically Q4 is not as strong as Q3, right?

Two out of three years.

But I'm fairly -- I'm confident that, as we look at Q3 being consistent with Q2, that's not a bad thing.

I think the bigger challenge is going to go beyond Q4 of next year -- do they continue that buildout in an aggressive manner?

Okay.

That's very useful.

And then just one quick one -- you mentioned that you're building inventories of ECP3.

Is that related to China or are those new design wins?

Any color that you could provide on this?

They're related to China.

Okay.

Great.

Thank you.

(Operator Instructions).

Richard Shannon, Craig-Hallum.

Congratulations on some very nice numbers here.

Great to see.

A few questions from me.

Maybe a first couple on the mobile side here.

I'm kind of curious -- on your first-quarter results, your consumer meeting -- suggesting mobile doing very well in the quarter.

Can you give us a sense of what was driving that?

Would that be your single largest customer, or were there other customers helping to drive that strength there?

Single customer is the primary, but there were some other customers that were coming online from design wins from last year.

Okay.

Maybe if you can follow up on that, Darin, as we look forward, you know, like, how many customers can we see, you know, maybe by the end of the year?

And any of them -- you kind of alluded in your prepared remarks to one or more that could be platform-oriented -- that could be sizeable in volume.

Can you give us any more characterization of that, please?

Yes.

We took a goal to get to the seven out of ten shipping in production, right, by this year.

I think we'll be pretty darn close to that by the end of the year.

Okay.

Any sense of how many could be sizeable platform type of wins?

I don't -- yes, it's kind of, if I tell you that then you know more than I'm supposed to tell you.

Right?

So, I think the key is, we're in all of the key ones that we want to be in.

Right?

There's probably a couple that are going to take some time to get into the biggest, highest volume.

But we're comfortable with the strategy that we have and we're comfortable with the momentum that we have.

Okay.

Fair enough.

One more on mobile, if I could, guys.

As you look out, four to eight quarters or so on your mobile business, how do you view ASPs and gross margins there?

Is that something where you can kind of keep the ASPs level with where you've been the last few quarters, or is there going to be some pressure on that at some point?

Well, first, let's talk about the difference in probably comms and consumer from a market perspective, just so it's clear.

So, consumer market for us is usually the highest in Q3, not in Q2.

Comms is usually the lowest in Q4.

Right?

And if you take those kind of in combination, you can see how consumer kind of slows down a little bit in Q1, and starts to ramp back up a little bit in Q2, and then it grows in Q3, and sometimes it's flattish in Q4.

That kind of has helped us to offset some of the revenue declines that we've seen in the past.

So, if you look at it, that's kind of what goes on.

Within that consumer market, if you look at the product shipments that we have in specific terms for specific customers, I would expect more second-half smaller customers and newer platforms to ramp in, versus the first half of this year it's more, you know, our big player.

Right?

Okay.

That is helpful and just --

That actually enables us to help out with the margins.

So, it gives us a little bit of potential relief on margins.

There still will be margin pressure going forward.

But if we do get that broader base, we get a little bit of support there.

And we still have cost reductions that come into play as the volumes maintain.

Right.

And those ASPs, Richard -- the way that you try to maintain your ASP, or even raise them is you suck in functionality from other devices, so that the bill of material from your OEMs goes down overall.

So, even though your ASP may stay the same, you're pulling in more features for them.

If you want it to go up, then you're pulling in more devices from outside of what you do, so the overall bill goes down, and your ASP can go up or flatten, depending.

And our cost structure is built on it flattening, so if we go up it increases the margins.

Got it.

Okay.

One last one from me, just regarding your guidance revenues for the second quarter.

Give us a sense by end markets which -- where you're going to see growth or declines in those three areas.

I think it's -- so, in consumer it's probably going to go down slightly, and communications it'll probably be flattish, and the overall rest of distribution and other markets are going to come up.

So, that's how we get to the numbers that we did.

Okay.

Fair enough, guys.

Thanks a lot.

And once again, congratulations.

Very nice quarter.

(Operator Instructions).

David Duley, Steelhead.

Thanks for taking my questions.

I was wondering, on the comms space, do you anticipate the spending broadening out there beyond the China buildout, or is there any other geographic regions that are percolating there?

Or is that pretty much it?

We hear a little bit about some further builds in Europe and also some further builds in the US, right, that people are talking about.

I don't anticipate those to be as large as the China buildout.

But again, I think those things are starting to come on.

I think people are starting to increase the investment as things are moving along, as they've repositioned to get their subscribers and also get the data plans all in place.

The US is pretty much covered on LTE.

Europe has zero.

So, as you go over to Europe, I think France was the only LTE signal I've ever gotten in all of Europe.

So, I think you're going to start to see Europe bounce back.

And then there's other countries within Asia that'll start to build out a little bit, but nothing that's significant, I think, long-term.

When I say long-term, it's probably 2015 -- into 2015 and 2016.

And was -- did the European revenue grow sequentially, and what was the reason behind that?

It grew.

It grew, but it was just more -- we do a broad market distribution play there.

So, you know, it's just -- it's more our industrial, scientific and medical.

And so, some of that comes back -- there are some direct customers in there, so it gets a little bit mixed.

But overall, it's just strength in Europe.

And we were talking about that a long time ago, where if we could just get a little bit of strength in Europe, our margins will get a little bit of uplift.

You saw a little of that; but it's not enough to really write home to.

It's not like it's coming back in a big way.

I mean, last quarter we talked about it not dropping.

This quarter, it went up again.

So, it feels like we're in hover mode.

But we had some nice uptick this quarter.

This is our first call that there's a turn, though.

So, the European uptick wasn't behind why the gross margins were surprisingly better.

No.

It helped, but it was not the driver at all.

Okay.

And just along -- you know, just to follow on with that, just the key -- the number one or two levers why margins were better than you had expected, were what, again?

Volume.

Volume, and we had some cost reductions that flowed through faster than we'd anticipated, because of that volume.

(multiple speakers)

And do you anticipate moving the iCE product line to 28-nanometer any time soon?

Is that on the roadmap or something like that?

I wouldn't say that -- you're always going to see the iCE family beyond 40 for certain types of those products, because there are certain capabilities 40 has.

As we move to 28-nanometer, it'll only be a movement when we can get substantially lower power and lower cost.

And what will happen when we move iCE, which eventually will go to 28-nanometer, you're going to start seeing quite a bit of different functionality on FPGAs and mobile than you do today.

Okay.

And final question for me is, do you have an idea of how much -- do you have small-cell revenue now, and could you just give us an update as to what you might see in that marketplace?

Yes.

There's not a lot of small-cell revenue that you would, again, write home about today.

It's about the design wins that you're seeing.

I think, more importantly, beyond even the small cells is some of the trending that we're seeing in the microservers and some of the other backhaul-type applications where people are moving to even smaller pinouts, smaller form factors, less fan.

So there's not a lot of ventilation in the units, and they can handle the tighter package pitches that we're offering.

Because I think in the old, traditional thing you had giant fans, bigger pitches, giant boards, lots of power.

And people are starting to realize that they want to have significant reductions in the overall power, which takes smaller form factors, lower-power devices, and it takes enclosures where you don't have ventilation.

So, I think that's going to be it.

You hear people refer to some of that as pizza boxes.

You hear them talking about very small network things that you'll start seeing in business and things.

It's different than Wi-Fi.

It's like a -- it's a portal for either a wireless LTE network that then, you know, connects into the AT&T or Verizon for the US.

Okay.

Thank you.

Sundeep Bajikar, Jefferies.

Thanks for taking the question.

First one, on mobile -- can you just give us an update on the competitive dynamics for iCE?

Has the landscape changed, given the solid success that you've seen in that area?

Yes.

I mean, I think in iCE, where we started and where we are today is vastly different.

Right?

Because where we started with some simplistic functions -- you know, people talk about, you know, IrDA.

They also talk about some of the fingerprint recognition things.

And there's a lot of differences in today's iCE shipments than there were in -- when we started.

And I think the key of staying ahead of that is, you look around you.

And for instance, there's just simple things like capacitors, resistors -- a bunch of things -- that when you look around and you see that within the device, the actual board layout, we've stuck some of those things in simplistically, and then offer even smaller form factors.

Plus, we're evolving those feature sets.

The device that we have today, that's an iCE-based product, actually has a bunch of drivers and different things on it than it did before.

Because now, it has the ability to integrate even more that's on that board than it had.

So, it's quite a bit different.

There's a lot of competition.

We don't play in sensor hubs as much as people think.

You know, we are kind of a complementor in the sensor hub technology.

So, when you hear about micros entering in different things, those are different functions.

Micros -- very instruction set-oriented; very processing-oriented.

What we do is like the feature-rich enhancement, and then the connection of different devices with the interfaces that we serve, along with adding features that they want to add last-minute.

Because a lot of these guys will walk up to us last-minute and say, we need this.

The smaller-tier guys -- they -- just give me this as a standard platform and I'm good.

So, it's two different models -- high-end model with very aggressive differentiating guys; it's all about the new features and how they add value and create new whiz-bang stuff that people want to adopt.

The lower-end phones is more about, just give me canned, low-cost solutions.

So, two different markets.

The focus is on two different models we support.

Okay.

Great.

That's extremely helpful.

And then, back on the product cost, can you just help us understand where Lattice is in terms of all the product cost reductions, excluding the volume benefits flowing through?

Are most of the cost reductions you had planned for, now flowing through the model, or is there a continued trajectory that we should expect?

There is still opportunities for cost reduction.

We have package changes; we have different products coming out with different pitch packages that will help us long-term on cost also.

So, there is still a trajectory for cost improvement.

It's in play.

Great.

Awesome.

Not necessarily volume-specific there.

Sure.

And then, on the computing side, are there any structural changes that you're seeing there?

I noticed that you're not reporting that separately any more.

If you can provide some color around the dynamics underlying computing, that would be great.

Particularly, when do you start to see meaningful shipments and revenues from microserver, or to that extent the cloud buildout, more broadly speaking.

Yes.

So, it comes down to a lot of the new form factor blades and servers, and people are coming out with a small pitch.

Right?

Because a lot of that stuff is the hot thing, and I think with cloud computing you're going to begin to see that.

We took that out because it was a small portion of our revenue.

It's easier as we go through it to combine that with other portions of the market.

Because, unless there's something big that we're focused on, that's it.

We use -- our computing products actually are an offshoot of our comms or our ISM products anyway.

So, it made more sense to align it there, than it does to call it out separately.

But we can tell you, the trends on computing are really going to be all about low cost, low power and small form factors.

And in the old days they were about high pin count packages with 1-millimeter pitch, and they were super-expensive.

And I think the whole microserver -- maybe Google, maybe Facebook, all these other guys getting into clouds, are driving a completely different model.

We're prepared for it.

And, you know, if that market got gigantic then, yes, maybe we'd have to call it out separately; but for today, with the revenue base that we have, it just didn't make sense.

Okay.

Great.

And just a last one from me.

If you could talk more about the ECP5, and help us understand how it compares with the ECP3 or even the iCE line of products, and if it expands your addressable market in any way.

Think about ECP5 as a cost reductions on steroids for ECP3.

So, it's a very small form factor device.

An 85K, ECP5 fits in a 10 x 10 package and it's super-low-cost.

So, what we chose to do, instead of going after the, you know, 300 million LUT or 300,000 LUT device -- we chose to go after super-low price point.

So, when we look at our devices, it's like, $3, $5, $10 -- how much can you cram in a $10 ASP product at the lowest power on the planet?

And that's what we did.

And you still have SERDES capabilities and --

Yes.

Still has the same SERDES.

It still has a lot of that stuff.

We just made sure that the SERDES was very low power and the entire product footprint was small enough to even call -- even lower standby current.

So, we took a different approach than our competitors, and we think it's more -- in fact, our die size on 40-nanometer with our architecture, on a 25K LUT device, is smaller than both Xilinx and Altera by quite a bit.

So, we can compete on our technology with devices from a tech generation behind, because of the choice of densities, the choice of technology and the choice of architecture that we play with.

Fantastic.

Thank you very much.

Nice job with the quarter.

Richard Shannon, Craig-Hallum.

A couple of follow-ups on some other questions.

Want -- maybe want to follow up on the one on the competitive risks.

You mentioned, you know, talking about microcontrollers.

Wonder if you could specifically address whether you are seeing, or maybe you're hearing rumors, or seeing some greater competition, from programmable logic guys -- either the ones that are bigger than you or smaller than you.

We don't see a lot from the bigger ones.

And as you and I have talked about a little bit, the smaller ones are typically more focused on specific products -- the products that -- like, when we talk about the IrDA products that go on.

I don't want to give you the details on all the [IrDA].

But where it was 2 years ago is not where it is today.

It's got a lot more complex than people think, and it's not the only function.

So, for the most part, when we do an advanced device on iCE, the IrDA is one of many things that we do.

So (inaudible) the customer looks at it as almost free.

So, that's the competition that -- the message you would give to people that want to get into this market.

And there are microcontrollers.

If you look at most remote controls today, there's microcontrollers that drive IrDA in a standard remote control.

So, obviously, that's a great opportunity, I think, for a microcontroller to jump in there.

But then they go head to head with us.

We're smaller; we're lower-power; we have more features; we're adding all of this other stuff.

So, you know, the question is, if they only did an IrDA, then that's one thing.

Because then it comes down to, who can do it in the smallest form factor and the smallest packet?

We would probably still win it.

But I'm not sure that's the market that we're really enamored by.

Our market is about all of the other features.

It could be antenna tuning, barcode labeling -- all this other stuff that we do.

So, that's the kind of thing that you want to think about, is, it's not just one specific device; it's multiple devices, and it's the platform itself.

Okay.

That's fair enough.

My other question was on the -- your communications business.

I notice that the reported [earnings] within first quarter was the -- was even a little bit higher than your previous peak back in 2011.

I think there was a previous question about looking forward on that.

If we start to look on it kind of on a yearly basis, what would be the puts and takes to thinking about, you know, 2015, and the comms being higher or lower than what it could be this year, and what would be the drivers of such a trend?

Yes.

So, if you think about it, you have to look at it from a product perspective.

So, in 2010 and 2011, the comms revenue was primarily driven by MachXO as the primary comms product.

It was the highest-volume product that we had, and it was pretty substantial.

2014 is driven by ECP3, XO and XO2.

So, now you've got two different products that are coming in, with Sapphire coming online next year.

So -- which is ECP5.

I always call it Sapphire because [internally] -- but ECP5 comes on next year.

We're already -- because of ECP5 attractiveness, we're already getting people that are asking us to close on business that ramps next year.

Right?

So, that's what's interesting.

It -- normally, it takes a year and a half to two years, sometimes three years, to get these, you know, high-end comps.

And I think that's a testament to the fact that they're doing cost reductions of existing platforms, and they want to have different, even smaller form factors, and lower power than they had on the initial one.

So, ECP5 gives us the ability to begin to recover if ECP3 begins to fall off.

XO2 begins to parlay on top of XO in the comms backhaul and all the other devices.

Because XO and XO2 play in the entire thing, from the remote radio head all the way through the backhaul.

And now we've also introduced XO3, which then is an even higher I/O, lower-LUT device that we launched last year, that has opportunity to play -- and, once again, to backhaul all the way through to remote radio head.

So, as we had before, we had one product in 2011 that was shipping.

Today we will have XO2, XO3, we will have ECP5, and then you'll still have XO and ECP3.

Okay.

That's great perspective.

Thanks a lot, guys.

Appreciate it.

There are no further questions at this time.

I will now turn the call back over to Darin Billerbeck, CEO, for closing comments.

Okay.

I appreciate that everybody joined us on the call today.

Obviously, it was a solid quarter for us and we're proud of that.

We're proud of our employee base, and more importantly, we're proud that the strategy we put in place over 3 years ago is beginning to actually resonate with our investors, our customers; and we continue to drive the technology the direction we want.

So, thanks again for joining us on the call.

We'll talk to you next time.

Thanks.

This concludes today's conference call.

You may now disconnect.