MACOM Technology Solutions Holdings Inc (MTSI) 2011 Q4 法說會逐字稿

Welcome and thank you for joining the Mindspeed Technologies Fourth Quarter Fiscal Year 2011 Conference Call. All lines will be in a listen-only mode until the question-and-answer session of today's call. (Operator Instructions) I'd also like to inform parties that this call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to introduce Andrea Williams, Mindspeed's Vice President of Corporate Communications, who will chair this afternoon's call. Thank you.

Thank you, Operator. Good afternoon to all of you who have joined us for today's call to discuss Mindspeed's fiscal fourth quarter of 2011 financial results. Our press release issued this afternoon detailing these results may be accessed in the Investor section of our website, at www.mindspeed.com.

Today, our Interim CFO, Kristen Schmidt, will begin the call with a review of the fiscal fourth quarter financial results. Our CEO, Raouf Halim, will follow Kristen with some perspectives on the quarter and financial guidance for our fiscal first quarter of 2012, and will end with an introduction of our new Chief Financial Officer, Stephen Ananias, who is with us today.

Before we begin, I want to remind you that our comments today will include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include, among others, statements regarding our expectations and financial guidance for our fiscal first quarter of 2012; the future of our businesses; product features and their benefits; industry, business, technology and product trends and cycles; domestic and foreign economies, and markets for our products and potential growth opportunities; our financial performance and liquidity position; business drivers, design wins and the effect of such design wins; customers and competition; backlog, market share, inventory absorption, deployments, supply levels, capital expenditures, inventory turns, share count, customer demand, and other anticipated future events and results.

Forward-looking statements made during this call are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results may differ materially from those projected in any forward-looking statement, as a result of certain risks and uncertainties, including but not limited to loss over diminished demand from one or more key customers or distributors; pricing pressures and other competitive factors; fluctuations in our operating results and future operating losses; and others noted in our earnings release and our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2011, and our other filings with the SEC.

Today during our call, we will be making reference to non-GAAP financial measures, which exclude employee separation costs, legal settlements costs, stock-based compensation expense and related payroll costs, employee option exchange costs, special charges, and non-cash interest expense on convertible senior notes. For the reconciliation of non-GAAP to GAAP financial measures, please refer to the Investors section of our website at www.mindspeed.com, and our earning press release and our Form 8-K furnished to the SEC today. We do not provide a reconciliation of the forward-looking non-GAAP measures to GAAP measures because of our inability to project special charges, employee separation costs, and stock-based compensation related expenses.

With that, I'd now like to turn the call over to Kristen Schmidt.

Thank you, Andrea. I will start with a detailed review of the financial results for our fiscal fourth quarter of 2011. Product revenue for the fiscal fourth quarter of 2011 was $40.8 million, representing a 3% sequential decline as we experienced a weaker demand environment in the fiscal fourth quarter of 2011, primarily impacting our high performance analog and legacy Wide Area Networking businesses.

Product revenue from our Communications Convergence Processing business, or CCP, contributed 50% of total fiscal fourth quarter product revenue, and increased 9% sequentially. The growth in CCP in the fiscal fourth quarter was largely attributable to the strength in optical access markets worldwide, benefiting our SOC solutions selling into FTTX applications for video, voice, and data convergence applications.

Product revenue from our High Performance Analog business, or HPA, represented 30 -- 36% of total fiscal fourth quarter product revenue and declined by 5% sequentially. The sequential decline in HPA was largely attributable to near term softness in demand trends in the OTC market, due to the post-Japan earthquake inventory buildup that we spoke of last quarter.

Lastly, our legacy Wide Area Networking business, or WAN, contributed the remaining 14% of fiscal fourth quarter product revenue and declined by 29% sequentially.

Product revenue for the fiscal fourth quarter was split by geographic region as follows -- Asia Pacific at 76%, Americas at 18%, and Europe at 6%. China represented 34% of total fiscal fourth quarter product revenue, down from 45% of product revenue in the fiscal third quarter of 2011. Only one end customer, VTE Technologies, represented product revenues of 10% or greater in the fiscal fourth quarter.

Now turning to gross margins, non-GAAP gross margin was $25.1 million, or 61.5% of product revenue, which was down sequentially compared to 62.3% of product revenue in the prior fiscal quarter. The sequential decrease in non-GAAP gross margin was due to the effect of product mix in the quarter, as well as less absorption of overhead, as we required less product builds in fiscal Q4 as part of our work down of excess inventory post the Japan earthquake. Total non-GAAP operating expenses were $24.5 million, consistent with our stated guidance range.

Fiscal fourth quarter non-GAAP operating expenses were comprised of research and development expenses of $15 million, and selling, general, and administrative expenses of $9.5 million. As we mentioned last quarter, our Q4 non-GAAP SG&A operating expense included a benefit of approximately $850,000 as a result of a long standing health claim payment we had been previously expensed in SG&A in prior periods. The resulting non-GAAP operating income for the fiscal fourth quarter was $.6 million, or a 1.5% non-GAAP operating margin.

Now finishing the income statement for the fiscal fourth quarter, non-GAAP other income and expenses and the provision for income taxes in the aggregate totaled a net benefit of approximately $420,000, which consisted of approximately $400,000 of benefit for refundable R&D incentives, an income tax benefit of approximately $300,000, all of which was offset partially by approximately $300,000 of direct interest expense.

Non-GAAP net income for the fiscal fourth quarter was approximately $1 million and resulted in diluted non-GAAP earnings per share of approximately $0.03, based on approximately 33.4 million weighted average shares outstanding for the quarter.

While Raouf will provide our formal guidance in a few minutes, there are a couple of additional items I wanted to point out as we look forward to the next quarter. First, we expect our non-GAAP other income and expense to be approximately $400,000, including our tax provision. And second, we expect weighted average shares outstanding for the fiscal fourth quarter to be between 33.5 million and 33.9 million shares.

Turning now to the balance sheet for the fiscal fourth quarter, cash and cash equivalents were $45.2 million at the end of fiscal fourth quarter. During the fiscal fourth quarter of 2011, the Company generated $2 million of cash. The cash generated was largely due to the sale of inventory purchased in prior periods and strong collections of accounts receivable, offset by payments toward license intangibles, capital additions for test equipment, and [photo mass].

Accounts receivable at the end of the quarter were $13.4 million resulting in net days sales outstanding of 30 days, down from 35 in the prior quarter. Inventories decreased from the prior quarter as expected by approximately $6.2 million to $14.2 million, resulting in inventory turns of 4.4, up from a rate of 3.1 turns in the prior quarter. As we look ahead in the current quarter, we expect to see a lower inventory balance and a return to a more normalized level of inventory and higher inventory turns, as we finished depleting the inventory that built up as a result of the earthquake crisis in Japan.

I would like to now turn the call over to Raouf for some perspectives on the fiscal fourth quarter and our outlook.

Thank you, Kristen. As Kristen mentioned, the fiscal fourth quarter was a mixed quarter for Mindspeed as we experienced generally softening order trends, most pronounced in our HPA and WAN platforms as the quarter progressed. That said, we also experienced strong revenue growth in our CCP business in Q4. This strong quarter for CCP was driven by record revenues for CPE processors into fiber-to-the-home markets worldwide, as well as continued strength in fiber-to-the-building, particularly in China.

In HPA, while we had some inventory overhang in our OTM solutions, we had another record optical module, or PMD quarter, as our leading market share position strengthened in both GPON and GE-PON fiber-to-the-home markets worldwide. Notably, fiscal Q4 was again a significant quarter from a market traction perspective, with design wins increasing almost 50% sequentially. Particularly, CCP design wins were up strongly sequentially due to the robust design win pipeline for our Transcede 4G LTE big band processor, as well as our Comcerto convergence processor solutions in FTTx applications worldwide.

I would now like to provide you with a summary update of our progress in the 4G LTE markets with our Transcede platform. Our award winning Transcede family of 4G LTE baseband processors represents by far our largest growth opportunity, expanding Mindspeed's TAM by over $1 billion by 2016. We are currently supporting customer engagements with over 18 separate OEMs, up from 15 at the end of last quarter. These span the range of carrier class 4G LTE microbase stations in pico and enterprise femto applications, targeting from eight all the way up to 128 LTE users in key service provider LTE network rollouts worldwide.

Significantly, some of our lead microbase station customers placed pre-production orders for Transcede in the fourth quarter for the build of prototype systems entering field trials in the first half of 2012 at some of the largest carriers in both North America and in Japan. These field trials should result in full production orders consistent with our expectation for the ramp of Transcede in the second half of calendar 2012.

With that, let's talk briefly about each of our three businesses, starting with Communications Convergence Processing, or CCP. CCP grew 9% sequentially in the fiscal fourth quarter and grew 8% year-over-year. This strong sequential growth was primarily driven by demand trends in the fundamental strategic business driver, the fiber optic access, or FTTx, worldwide. Fiscal Q4 is seasonally strong for shipments of fiber-to-the-building or FTTB access processors, specifically to the Chinese markets. And this Q4 was no exception as key customers, such as ZTE, Huawei, and Fiber Home, ramped shipments into the largest FTTB networks worldwide, such as China Unicom, China Mobile, and China Telecom, in conjunction with growing their export business to BRIC countries.

Our CPE solutions also had a record fiscal fourth quarter with shipments to customers such as OKI and Mitsubishi and to NTT. Our dual core ARM-based Comcerto 1000 CPE processor enables our customers to build gateways with all the features and performance necessary to deliver the latest broadband services at carriers such as NTT and others with industry leading power efficiency.

We are enthused about the emergence of an exciting high growth new class of CPE systems that are driving our CPE broadband home router portfolio. Motivated by the need to capitalize on the very large installed base of DSL, cable, and PON broadband subscribers, service providers are deploying a new high performance class of CPE equipment known as service offload platforms, or SOP, to support the deployment of value added services, such as control of home, smart appliances, energy monitoring, e-Health, and home security services without having to replace the massive installed base of broadband routers.

As our press release earlier today describes, Mindspeed is helping to enable this new class of service offload platforms with a new Comcerto series named SOP Box. This carrier grade, carrier installed CPE hardware will enable subscribers to receive value added gateway enabled cloud applications with no changes to their existing broadband infrastructure. Mindspeed's single and dual core Comcerto 1000S SOP Box processors are the first in a family of Comcerto application specific SOC processors optimized for the cost, speed, bandwidth, and compact footprints that are required for powering this new class of CPE hardware.

Our current design win pipeline for CPE is 50% driven by this emerging SOP functionality. We anticipate this market to be a significant revenue contributor for our CPE business in fiscal 2012 as our solution is ideally positioned for carriers such as NTT, AT&T, Deutsche Telecom, and others.

In terms of CCP design wins in the fiscal fourth quarter, we had another record quarter, the fifth in a row, of design wins for our latest generation of Comcerto 300 convergence processors for optical access. In Q4, we also won multiple very significant designs for the Comcerto 1000 CPE processor in the broadband home gateway market in Europe and North America.

Moving on to high performance analog, HPA revenue declined by 5% sequentially in the fiscal fourth quarter and declined by 1% year-over-year. The sequential decline for HPA in the fiscal fourth quarter was driven primarily by the softness in demand trends due to channel inventory absorption in the OTN markets, particularly for our cross point switches. In contrast to OTN solutions, we experienced a record quarter for our optical module PMD portfolio for both GE-PON and GPON fiber-to-the-home deployments, as we continue to expand our leading market share position in the fiber-to-the-home optical module market worldwide. Design win activity in HPA in the fiscal fourth quarter was again strong, with significant design wins across the cross point switch portfolio for carrier OTN and enterprise markets, as well as continued strong design win momentum for the optical PMD portfolio and fiber-to-the-home build outs.

Turning to WAN, our WAN business declined by 29% sequentially in the fiscal fourth quarter and declined by 50% year-over-year, as we saw significant softness in demand for older WAN technologies as carriers continued to shift to IP based solutions. Our lower visibility into WAN demand trends at this time leads us to believe that WAN may be at these lower revenue levels of approximately $4 million to $5 million for the next few quarters.

Now turning to our guidance for the fiscal first quarter of 2012. Based on current backlog, order trends and customer forecasts, we expect fiscal first quarter total net revenues to decline between 8% and 12% from the fiscal fourth quarter of 2011, or to a range of approximately $35.9 million to $37.5 million. We believe the current demand trough, which we first experienced during fiscal Q4, is temporary and primarily driven by weak macroeconomic conditions. Based on our customers' forecasts and the start of a recovery in channel inventory sell through, coupled with the flattening of channel inventory trends at our distributors, we believe that the current weakness in demand will be a two-quarter phenomena at most.

We expect fiscal first quarter non-GAAP gross margin to be in the range of 60% to 62%. This gross margin range is due to the under absorption of many faction variances as we continue to reduce our inventory levels, as well as the anticipated effective mix in the quarter. As previously mentioned, we expect gross margins to trend back to within our historical corporate gross margin range of 62% to 65% as revenue growth picks up.

Given the uncertainty of demand trends in certain of our end markets, we have implemented several expense reductions. For fiscal Q1, we now expect operating expenses to be approximately $22 million as we benefit from the restructuring we announced last quarter, as well as non-structural expense reductions we are implementing, such as suspension of accruals for management bonuses. We expect Q2 operating expenses to remain at that reduced level.

Lastly, I would like to introduce you all to our new Chief Financial Officer, Stephen Ananias, who joined us just last week after 11 years at Broadcom. We are delighted to appoint a new CFO of Stephen's caliber with a demonstrated management track record in the semiconductor industry. Stephen has a compelling combination of strategic planning and corporate development expertise with a proven record of driving operating profitability. I look forward to working closely with Stephen as we pursue the growth opportunities ahead of us.

Thank you, Raouf, for this tremendous opportunity. In a nutshell, what attracted me to Mindspeed was the combination of technology and leadership in today's core network infrastructure markets combined with the opportunity to help the team execute on its biggest growth initiative ever, namely 4G wireless infrastructure. In the next few months, I look forward to meeting with many of you in person.

In closing, I'd like to say that we are navigating this time of uncertainty by making prudent choices in our operating expense profile and while continuing to realign our investments for the highest growth opportunities in both CCP and HBA. Importantly, we also continue to believe that long term growth for Mindspeed will be based on our strong design win pipeline for market leading solutions and key global networking initiatives, such as optical infrastructure and most significantly, our expansion into 4G LTE wireless, where we have proven our technology leadership position and have the most significant design win pipeline of Mindspeed's history.

I want to thank our employees, our customers, and our stockholders for their continued support.

Operator, we are ready to open the lines for questions.

Thank you. (Operator Instructions) And our first question comes from Kevin Cassidy of Stifel Nicolaus. Your line is open.

Hi. Thanks for taking my question. Maybe if you could just qualify what you said about a two quarter downturn. Does that include the fourth quarter and now first quarter for what your outlook is, or are you thinking first -- another quarter besides that?

Yes, Kevin, this is Raouf. So when I mentioned two quarters, let me first be clear about the fact that this is really a perspective that is developing. It's -- we're not 100% certain of just how long this trough will be. But we are seeing some rather positive signs. As I mentioned in our prepared comments, we are seeing inventory build kind of top out and start to decline, and we are seeing the start of a pickup in point of sales or POS sell through. Put together those data points with our customers' forecasts -- bottoms-up forecast, that is -- it looks like it's about two quarters inclusive of this current quarter, so we'd expect the March quarter to sort of be the second of those two. But again, it's difficult to say. The best perspective we have at this point is that we'll have -- the worst will be behind us by the end of the March quarter and we should start to see a recovery in the June quarter.

Okay, great. And just in your outlook, how does that get split up between the three product groups? It seems like WAN is at the $4 million to $5 million level now, and how about between HPA and CCP?

Kevin, I don't actually have the exact breakdown in front of me. As you know, the December quarter is always seasonally pretty weak in China. The carriers typically will start to reduce their capital expenditures in the December quarter and we typically see a decline in our CCP revenues in the December quarter. So overall, I expect HPA to decline a little, CCP to decline a little, and WAN obviously to remain in that sort of $4 million to $5 million range. I don't have really a mix in front of me here, but I'd say that their representative mix will be similar. It may change a little bit from Q -- fiscal Q4 of 2011, but not that dramatically.

Okay, great. I'll step out of the queue or get back into the queue afterwards. Thank you.

Our next question comes from Krishna Shankar of ThinkEquity. Your line is open.

Yes, Raouf. The HPA business, can you talk about the state of inventory there in the Asian distribution channel? And is that typically seasonally down in the March quarter, which could perhaps explain your outlook for sort of a two quarter correction?

Yes. So Krishna, first of all, to your first question about inventory trends, we clearly saw some inventory buildup in the channel and also with key customers post the Japan earthquake. If you remember, there was a heightened level of concern in our customer base about securing supply and in hindsight there was clearly some double, maybe even triple ordering in some cases by large OEMs. So that -- we expected -- there was some digestion of the inventory in Q4, the quarter we just reported. This will continue in the December quarter. But we expect HPA to experience some positive trends in the March quarter. Certain segments may decline as is typical with communications CapEx in the March quarter. Put together, I would expect HPA to be flattish in March, and then start to pick up from there.

But I think, to your other question, we're seeing sort of an overall softness, I would characterize, sort of a caution that's driven by the current weak macroeconomic conditions, a caution really emanating from our customers' customers, carriers who are in essence dialing back where they can on their outlays to manage their businesses prudently in this time.

So that's really the fundamental cause of it. And I would add to that that our positions in our design wins continue to improve across the portfolio. And as I mentioned in our prepared comments, we're particularly excited about the 4G initiative.

And relating to Transcede, congratulations on adding I guess three more customer engagements this quarter. Can -- it sounds like you're getting pre-production revenues perhaps a little ahead of schedule. Can you talk about the future ramp there and what the profile there for the Transcede revenues over the next 12 to 24 months?

Yes, Krishna. So you are correct that we are very excited about the progress of Transcede. As you know, our customers have developed systems that are targeted towards specific carriers deploying LTE in so-called microbase station implementations, also sometimes known as small cells.

The way this thing progresses is carriers will typically put out an RFI; once they get information back from the various vendors, they're progressed on RFP; and then from the RFP, they'll come up with a short list of vendors. In many cases, we have multiple customers using Transcede and competing to win those RFPs. And then, ultimately, they are down selected to maybe just one or possibly two suppliers in some cases and they enter field trials. Where we are right now with Transcede is we're getting pre-production device orders for prototype systems that multiple customers are building using Transcede, that will enter field trials at carriers in the first half of 2012. Okay? So the first six months of calendar '12, we expect to be in a number of significant and I think extremely important field trials with LTE carriers worldwide.

Now from there to the time when our customers' prototype system is approved by the carrier and ready to roll out, it is typically certainly no less than three months, sometimes it's up to a year. You put that together, it kind of points towards late 2000 -- calendar 2012 for the ramp of the device. And as I said earlier, it really comfortably supports our perspective for the ramp of Transcede in late 2012.

Great. Thank you.

Our next question comes from Scott Searle of B. Riley and Company. Your line is open.

Just a quick clarification. I just wanted to confirm China for the quarter at 34% of the mix. And if that's the case, Raouf, could you provide a little bit more color? It sounds like you're chalking that up to OTN inventory and softness. But it's a pretty significant down quarter. We typically see that type of a decline as we go from September into December. What are your expectations for China then going into December? I would assume it's seasonally down, but are you getting a good look at budgets then to see that bouncing back in the March quarter?

Yes, Scott. You are spot on correct. China was 34% of total revenues in our fiscal Q4. And you're also correct in that the majority of that down draft, if you will, came from OTN deployments. As you know, we have very high market share in the OTN space in China and that's exactly where there was some inventory that had built up in prior quarters, we think largely as a result of concern after the Japan earthquake around supply. So it is in fact that inventory that's starting to burn off, that particular pocket of inventory that is burning off.

Now, from a seasonal perspective though, March tends to see a recovery in the Chinese budgets. And so, are you getting a good look at that at the current time, that we should start to see a bounce back at least in the FTTB builds and otherwise, or too early to call?

Yes, Scott, it's a little early to call. It is sometimes the case that our customers in China provide us less visibility than we would like and that we get from other customers. So it's not surprising to me that we don't have much visibility into the March typical updraft, but we do expect it to be there. Everything we're hearing from our customers would indicate that indeed CapEx is going to start growing once again in the March quarter in China, but I can't tell you that it's on the books, if you will. But that doesn't surprise me because it's rarely on the books at this point.

So what are your expectations at the current time when you're talking about two quarters of work and there are some inventory issues? What is your assumption for China as we go into March? Because typically we'd see a slightly up seasonally March quarter for you guys. How much of a recovery in China are you baking into your just thought process?

Well, so right now, I would tell you, Scott, that we're being somewhat conservative around China and the demand trends in China as we start 2012. We think there are a number of factors, both push and pull. We see a little more -- a little richer mix of fiber-to-the-home versus fiber-to-the-building. We have less share in fiber-to-the-home as compared to fiber-to-the-building. Conversely, we see OTN inventory depleting and some pickup in demand in OTN, potentially material pickup in demand, in the March quarter.

So as I said, you see some things going one way and others going the other way. Net-net we're not baking in any expectation of a huge uptick in China in the March quarter. We're taking a somewhat conservative stance on that.

Got you. And just in terms of gross margins then as we're entering the March quarter, you did a good job of burning down inventory this quarter. The turns have tightened up. You had pre-bought a lot of more expensive inventory in the wake of the Japanese earthquake. So should we expect that a majority of that more expensive inventory is worked through by the end of this quarter, hence we start to see a bit of a recovery from a gross margin standpoint into the March quarter?

So Scott, yes, I think that is generally correct. You'll see more burn off of inventory in this current December ending quarter. Whether we're going to be exactly at our target inventory level, which is sort of 10 million'ish or maybe slightly less than that, or if some of that will be consumed -- what's left over will be consumed in March, is hard to say. Again, there's mix is a factor, but I would expect this quarter to remain sort of in the guidance range we talked about -- 60% to 62%. And I think of March as being more or less the same way. It's a little early. We are not guiding yet for the March quarter, obviously, but it would reasonable to think about again some factors pushing margin up, others pulling it down a little bit. So for now, I'd think about it as being relatively consistent with the December ending quarter.

And lastly, if I could, on the Transcede front, I think in the past you had indicated somewhere in the ballpark I want to say of about four tier one type trials from an operator perspective in the first calendar half of 2012. What's the updated number on that front? And if you could just give us an idea as well of what you're seeing from a competitive landscape standpoint? I was just out at 4G World, and it seems like it's a two horse race between you and Freescale. Could you just give us your updated thoughts in terms of what you're seeing in the competitive bidding process? Thanks.

Certainly. So maybe just to clarify the data point around customer engagement, Scott, as we mentioned in our prepared comments, our -- we've added three more customer engagements just this past Q4 to the 15 we had reported before. So now we're at 18 customer engagements targeting carriers worldwide. Roughly half of those are tier ones. Within that we include tier one OEMs in Japan, in Korea, in China, and of course, some of the big guys in Europe. So we're quite enthused about that number. Hard to say if all of them or some subset of them will enter field trials in the first half of 2012. We're certain, of course, that some of them will, but we can't say for sure that all will be in field trials within the first half of 2012. I would venture to say that probably some would spill over to the second half of 2012. So once again, we're pretty enthused about the pipeline and the prospects for Transcede.

To your second question about competition in general, frankly, the competitive environment has not changed whatsoever for us. It's continued to be largely a two horse race -- us and Freescale, as you correctly indicated. Occasionally we see Texas Instruments. So if you wish to be generous, you could call it a three horse race between us, Freescale, and TI. We, of course, have heard proclamations of new LTE SOCs from some of the other semiconductor players. I would tell you that we don't believe that they are real at this point, although it certainly supports our belief that this is a very exciting market that over time will have more competitors for sure. And what that does is certainly validate our perspective this is a very exciting market and one that cannot be missed, and also validates our perspective that we're at least two years ahead of any other competitor with the real high performance SOC that enters the market today.

Great, thank you.

And our next question comes from Kevin Cassidy of Stifel Nicolaus. Your line is open.

Thanks for taking my follow-up. Just carrier spending -- there's a lot of conversation right now on carrier spending being cut. Do you think the microbase station is I guess important enough that those developments won't be cut?

Yes, Kevin, that's a very important question. And to give you a succinct answer, we believe that the development and early deployments of microbase stations is not going to be curtailed by carriers. It is one of very, very few architectural alternatives that carriers have to cost efficiently deploy broadband wireless. If you think about the more traditional macrobase station topology, it's very expensive to carry increasing amounts of data over that somewhat archaic architecture, if you will. So I think in many ways carriers have no choice but to move to these more distributed architectures that are based on microbase stations. That's a way they can leverage their CapEx dollar most efficiently and also their OpEx dollar. So we're not seeing any abatement in the level of interest, engagement, or activity by carriers and tier one OEMs in the LTE microbase station markets.

Okay, great. Thank you.

And Mr. Halim, that will end the Q&A segment.

Thank you, again, for joining us for our call. And we look forward to speaking with you again soon. Thank you.

That does conclude today's conference. Thank you all for participating. You may disconnect your lines at this time.