MACOM Technology Solutions Holdings Inc (MTSI) 2012 Q3 法說會逐字稿

Welcome and thank you for joining the Mindspeed Technologies third-quarter fiscal year 2012 conference call. All participants are in a listen-only mode until the question and answer portion of today's conference. (Operator Instructions). This call is being recorded. If you have any objections, you may disconnect at this time.

I would now like to introduce Mr. Kevin Trosian, who will chair this afternoon's conference call. Go ahead, sir, you may begin.

Thank you and good afternoon to all of you who have joined us for today's call to discuss Mindspeed's fiscal third quarter of 2012 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 CEO Raouf Halim will provide some key milestones for the business, a discussion of our announced restructuring and the strategic focus of the Company going forward. Following, Stephen Ananias, our CFO, will review fiscal third-quarter financial results and provide financial guidance for our fiscal fourth quarter of 2012.

Before we begin, I want to remind you that our comments today will include forward-looking statements within the meaning of federal securities laws. Forward-looking statements include, among others, statements regarding our expectations, goals or intentions, including but not limited to our current assessment of the demand environment in our target markets, our assessment of growth opportunities in specific product markets, the anticipated financial and operational impact of the restructuring that we announced today including our ability and anticipated timeframe to achieve profitability, the revenue and margin targets required to achieve profitability, and our current expectations for fiscal fourth-quarter net product revenue, non-GAAP gross margin and non-GAAP operating expenses.

These forward-looking statements are based on Management's current expectations, estimates, forecasts and projections, and are subject to risks and uncertainties that could cause actual events and results and events to differ materially from those stated in the forward-looking statements. For example, we cannot provide assurances that our announced restructuring plan will result in our achieving operating profitability within the currently anticipated timeframes, if at all.

Our businesses and any financial projections provided today are subject to numerous risks and uncertainties, including our ability to realize the revenue growth anticipated from various product markets, including any incremental revenues realized from the Picochip acquisition, fluctuations in operating results and future operating losses, loss of or diminished demand from one or more key customers or distributors, our ability to successfully develop and introduce new products, pricing pressures and the potential for intellectual property litigation.

Additional risks and uncertainties that could cause our actual results to differ from those set forth in any forward-looking statements are discussed in more detail under the caption Risk Factors and our Annual Report on Form 10-K for the fiscal year ended September 30, 2011 and will be included in our Quarterly Report on Form 10-Q for the quarter ended June 29, 2012 as well as our future filings with the SEC.

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.

During our call today we will be making reference to non-GAAP financial measures, which exclude stock-based composition expense and related payroll costs, asset impairments, acquisition-related costs, restructuring charges, revaluation of contingent considerations, integration costs, employee separation costs, restructuring charges, profit in acquired inventory, amortization of acquired intangible assets and non-cash interest expense on convertible notes. For a reconciliation of GAAP to non-GAAP to GAAP financial measures, please refer to the investor section of our web site at www.Mindspeed.com, and our earnings 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 just because of our inability to project restructuring charges, employee separation costs and stock-based compensation related expenses. With that, I will now turn the call over to Raouf Halim, our Chief Executive Officer. Raouf?

Thank you, Kevin, and good afternoon, everyone. I'm pleased to report that Mindspeed achieved the three key milestones that we set out last quarter despite facing a difficult macro environment.

First, we met our revenue goal. Second, we exceeded our gross margin forecast due to strong product mix. And third, our wireless business continues to ramp as expected.

In the quarter we recorded over $4 million in wireless revenue, greater than 10% of total quarterly revenue. Critically, our wireless initiative is well on track. In the quarter we recorded three new design engagements, including one with a new tier 1 European OEM, bringing our total to 28.

And in a strong confirmation of our leadership position in small cell wireless base stations, we are pleased to report that we have production orders on backlog for our 4G/LTE Transcede products in the first wave of Korean deployments for this coming calendar fourth quarter.

Now, as I'm sure many of you have seen from today's press release, we have begun a significant global restructuring. At Mindspeed one of our core operating principles is to evaluate both near-term as well as long-term opportunities in our industry, and to align our investments accordingly. In order to remain a global leader in the areas in which we compete, we must adapt to evolving market realities.

Previously our Company had been investing for higher volumes in its more traditional wireline markets. The restructuring we're implementing will rationalize our operating expenses with near-term market realities while maintaining our focus on broadband CPE processors, high-performance analog and small cell wireless base stations. By adjusting our optics, we can increase our focus on our growth markets in which we hold significant market share or a sustainable technology lead.

And most importantly, these moves accelerate our path to profitability and provide significant earnings leverage as our business grows in fiscal 2013.

While we have initiated the restructuring already this quarter, it was not a rash decision. Stephen, formerly with Broadcom, is focused on balancing our investments and growth initiatives while delivering earnings leverage to our shareholders, and he and his team have been a driving force behind this restructuring. And just a couple of months ago, we rehired [Pete Burke] from Freescale, bringing with him decades of experience to lead the CCP processor business in its next stage of growth.

Before I discuss our actions in detail, I would like to express that these were difficult decisions to make and we do not take these actions lightly. We appreciate the dedication and hard work that all of our employees have put in, and recognize that they have built Mindspeed's leadership position across multiple business lines.

We have instituted the plan to reduce quarterly non-GAAP operational expenses by 13% from last quarter to approximately $22 million per quarter, saving approximately $13 million on an annual basis once fully implemented. This, therefore, brings us back to our non-GAAP OpEx levels before we made the Picochip acquisition. The implementation began this quarter we expect to reduce our non-GAAP OpEx run rate to our target of $22 million beginning in the fiscal first quarter of 2013, i.e., fully realized next quarter.

With this restructuring we anticipate that we can reach non-GAAP operating profitability at approximately $37 million of revenue per quarter and a 60% non-GAAP gross margin in the first half of fiscal 2013.

Upon completion of these initiatives, we will have reduced headcount by approximately 15% of our workforce. Ending headcount will be approximately 500 employees. Roughly one-half of the restructuring savings will be in SG&A and support functions and the other half in R&D, with the largest reduction coming from our legacy wireline businesses such as our core network, voice over IP business.

When complete, this presents a strategic shift in our R&D investment profile to better align with the exciting growth opportunities ahead for Mindspeed, including broadband CPU processors, high-performance analog and small cell wireless base stations. Stephen will provide more on the financial costs in a few minutes.

As you may have seen in our earnings release, Mindspeed has opened a search for an independent director from the wireless telecommunications service provider industry to add to the breadth of its Board. The new independent director is expected to assist the Company in its strategic vision for building on its leadership position with small cell wireless base stations and other communications and network infrastructure initiatives. Our Board has retained Heidrick & Struggles to conduct the search.

I would now like to turn the discussion to the market opportunities ahead of us. In our CCP business, we are seeing growth opportunities driven by FTTX deployments worldwide and our strong corresponding market share.

While fiber to the building, or FTTB, in China remains muted this year, we're seeing fiber to the home demand increasing worldwide for both GPON and GEPON. The ramp in fiber to the home directly benefits both our CPU processor business as well as drives the ramp in demand we are witnessing for PON PMDs out of our HPA business.

Looking at our C2K processor platform, we are seeing new opportunities being generated in the storage, security and routing markets for this best-in-class gigabit dual-core ARM processor, reporting a number of design wins from tier 1 OEMs in these important new areas. We believe this product line provides solid revenue growth potential in 2013.

Moving onto HPA, I'd like to point out that this is a business that we believe is sometimes overlooked. Within HPA we provide state-of-the-art switching, transport and fiber to the home, analog IC solutions for next-generation enterprise, telecom and customer premise gear. This quarter HPA delivered 8% sequential growth.

For those of you less familiar with this business, it is increasing its leverage to the enterprise and broadcast video infrastructure. In the video market the 3G/SDI broadcast rollout continues with new studio builds, such as for the 2012 London Olympics, as well as within BRIC countries transitioning to HD and digital broadcasts. And within data centers, as data rates and protocols continue to advance, our end customers need more advanced chips for signal conditioning and high-speed switching.

And finally, but certainly not least, I would like to provide you with an update on our strategic wireless initiative for the small cell base station market. As mentioned earlier, we exceeded our goal of 10% of revenue last quarter being generated from wireless and have fully integrated the Picochip acquisition. We believe that Picochip was the right acquisition at the right time, propelling us to the number one position in the small cell SOC market, while bringing us critical 3G HSPA wireless know-how.

As evidenced by recent carrier announcements, dual mode is a critical requirement going forward. We believe we are in the pole position for 3G/HSPA, 4G/LTE and dual-mode rollouts worldwide, and expect our wireless business to continue growing rapidly. Recent reports on small cells show a market ready to hit its inflection point, and with what we believe is an available TAM of $1 billion in 2016.

Many of you had the chance to learn more about this market on our webinar on June 29, which is still available for replay on our website.

And in a clear confirmation of our small cell SOC leadership position, we have production backlog for volume deployments of our 4G/LTE Transcede products in the December quarter of this year, as I mentioned earlier.

From a design standpoint, we increased our number of engagements to 28, and importantly, garnered another of the three major European OEMs. A number of carriers are readying their networks for large-scale deployments in 2013. For instance, in June Telefonica indicated that it will launch small cells across Europe and Latin America.

Also Alcatel-Lucent's metro cells were recently highlighted in multiple publications for small cell deployments across high-traffic locations. We are very excited about the size and growth of this market. But more importantly, we believe we are the best positioned Company to meet the needs of the carriers for dual-mode solutions.

There are a few key requirements that carriers and OEMs request of their SOC supplier, which we believe Mindspeed is uniquely capable of offering. Number one, they're looking for a supplier that has integrated stack on a single dual-mode SOC. Second, they want a power optimized solution for high performance. And third, they want to work with companies that have a proven track record of providing system solutions for carrier networks.

Now, to conclude my remarks before turning it over to Stephen, I would like to lay out three key milestones that we expect to achieve in the coming 12 to 18 months. First and foremost, we're committed to reaching non-GAAP operating profitability in the first half of our fiscal 2013. Given the continued weakness in wireline spending and the general macroeconomic environment, we're rightsizing or Company to achieve operating breakeven at modestly higher revenue levels.

Furthermore, we expect Mindspeed topline revenue to grow and fiscal 2013 versus 2012, and therefore expect to deliver to our shareholders significant earnings leverage going forward.

Second, we anticipate stabilizing our non-GAAP press margins at approximately 58% to 60% for the next couple of quarters. Third, we forecast taking meaningful share in the rapid growth small cell base station market. We already hold the lion's share of the market for 3G/HSPA and we anticipate garnering significant share in the first wave of 4G/LTE deployments in North America, in Japan and of course in Korea.

I would now like to turn the call over to Stephen to provide more detail on the restructuring on last quarter's financials and guidance.

Thank you, Raouf. I will now review our financial results for the fiscal third quarter, discuss the financial implications of our restructuring plan, and provide our financial outlook for our fiscal fourth quarter of 2012.

First, let's talk about our Q3 performance. Total net revenues for the fiscal third quarter were $35.5 million, consistent with our guidance. Product revenue from our high-performance analog business, or HPA, represented 48% of total fiscal third-quarter product revenue and increased by 8% sequentially.

Product revenue from our communications convergence processing business, or CCP, contributed 41% of total fiscal third-quarter product revenue and decreased 4% sequentially. Lastly, our legacy wide-area networking business, or WAN, contributed the remaining 11% of fiscal third quarter product revenue and increased by 1% sequentially.

Product revenue for the fiscal third quarter was split by geographic region as follows. Asia Pacific at 75%, Americas at 18% and Europe at 7%. China specifically represented 34% of total fiscal third-quarter product revenue. No end customer represented product revenues of 10% of greater in the fiscal third quarter.

Now turning to gross margin, non-GAAP gross profit was $21.5 million or 60.5% of revenue. This was up sequentially compared to 59.8% of revenue in the prior fiscal quarter.

Total non-GAAP operating expenses were $25.3 million. Fiscal third-quarter non-GAAP operating expenses were comprised of research and development expenses of $17 million and selling, general and administrative expenses of $8.3 million. The resulting non-GAAP operating loss for the fiscal third quarter was approximately $3.9 million.

Now finishing the income statement for the fiscal third quarter, non-GAAP other income and expenses totaled a net expense of approximately $654,000. This consisted of other income of approximately $84,000 and net interest expense of approximately $738,000. The provision for income taxes was $165,000.

Non-GAAP net loss for the fiscal third quarter was approximately $4.7 million, and resulted in a non-GAAP net loss per share of approximately $0.12 based on approximately [38.8 million] weighted average shares outstanding for the quarter.

Turning now to the balance sheet for the fiscal third quarter, cash and cash equivalents were $55.1 million at the end of the fiscal third quarter of 2012. Net of the $30.6 million net proceeds from the convertible notes offering that closed in June, and $7.8 million of cash consumed in the quarter, down from $10.4 million last quarter.

Accounts receivable at the end of the quarter were $14.9 million, resulting in net days sales outstanding of 38 days, down from 57 days in the prior quarter.

Inventories at the end of the quarter were $9.7 million, resulting in non-GAAP inventory turns of 5.8, up from 5.5 turns in the prior quarter.

Turning to the restructuring we announced earlier today, the plan includes a global reduction in force of approximately 15%, with an ending headcount of approximately 500 employees and the impairment of several facilities. We expect to incur total charges ranging from $4 million to $5 million, of which approximately $3.5 million to $4.5 million will be cash expenditures over the next three quarters. As a result of the restructuring plan, we expect to reduce our non-GAAP operating expenses to $22 million in the December quarter, returning to pre-Picochip acquisition levels.

We have completed a very thorough process to evaluate the appropriate levels of investment across our portfolio. Our priority was to protect the investments in our most strategic and highest returning programs. Coincidentally, many of the identified reductions were -- consequently, many of the identified reductions were centered on mature core network wireline infrastructure product lines. Ultimately, the expense reductions were split roughly equally between R&D and SG&A support functions.

While these reductions are difficult to make, as they impact people's lives, we believe this action is critical for the long-term health of the Company. We're committed to returning the Company to profitability in the first half of fiscal 2013 and delivering increasing value to our shareholders. Finally, I would like to provide our outlook for the fiscal fourth quarter of 2012.

Generally orders have picked up, especially for our focus and growth product lines including CPU processors, fiber to the home PMDs and small cell wireless base stations. While we expect continued growth from our wireless business, we're mindful of the seasonal summer slowdown this quarter. We expect net product revenue to be flat to down 6% versus last quarter.

We expect non-GAAP gross margin to range between 58% and 59%. And with a partial quarter impact from the restructuring, we expect non-GAAP operating expenses to be roughly $24 million in the fiscal fourth quarter of 2012.

Operator, we're now ready to open the lines for questions.

(Operator Instructions) Quinn Bolton, Needham & Co.

I know it's tough, but sort of -- good job on the expense control and your target to getting back to profitability in the first half of next fiscal year. Just wanted to sort of start on that.

If I heard you right, I think you said that operating -- to reach operating profitability you are assuming sort of $37 million in revenue. So, I know you're not giving guidance beyond September, but I just want to make sure that I've got that revenue level right for you to hit that operating profitability goal in first half of next year.

Yes, you understand correctly.

Great. Second question -- you mentioned a new engagement on the Transcede side with a second of the three leading wireless OEMs in Europe. I was wondering if you could mention -- is that an application that is 4G or LTE-only, or is that engagement now for dual-mode capability?

Yes, Quentin, this is Raouf. Excellent question. We are very proud of that instantiation, working very closely with that very large OEM. Initially in the very first deployment, it is going to be LTE-only. But they're counting on the dual-mode functionality as an upgrade to the platform that they're developing with us right now, so it is going to be both LTE and eventually dual-mode 3G/LTE.

And Raouf, you had mentioned that the production orders were on hand for Transcede to begin ramping in the December quarter in Korea. Any sense -- you have grown wireless, or wireless was sort of tracking in line with plan in the June quarter at roughly $4 million or a little bit more than $4 million.

As you proceed into September/December, can you give us some sense as to whether wireless will continue to grow in that timeframe, despite kind of the tough carrier CapEx level -- sorry, CapEx environment? Or do you expect some and pause in wireless before that Transcede business starts to kick in, in the December quarter?

So, Quentin, as we look at this current September ending quarter, we believe our wireless revenues continue to grow sequentially. So they're going to be up from the $4 million-plus that we reported this last June quarter. And then as we hit the December inflection point with deployments of LTE small cells in Korea in addition to our 3G continued growth, we expect that to be a very good quarter for our wireless business, certainly as compared to either the September or the June ending quarters.

Great. And then just a last one for Stephen. Stephen, usually on the guidance you give us some sense of non-operating expenses and share count. Just wondering if you might have those figures handy for our models.

Yes. So the combined other income and expense and provision for income taxes should be approximately $1.1 million, and our average weighted shares outstanding will range between 39 million and 39.5 million shares.

Perfect, thank you.

Dale Pfau, Cantor Fitzgerald.

Thanks for taking my question. Could you give us a little bit of an idea on what your growth rate has been for your new wireless products? I know you didn't acquire Picochip until recently, but over the past year tell us a little bit about what the growth rate has been and what -- just kind of a CAGR that you expect over the next several quarters?

Sure. The best way to think of this is as a percent of revenue, and if you go into our fiscal Q1 it was less than 1% of our revenue. In fiscal Q2 it was more than 5% of revenue. And in the most recent quarter, fiscal Q3, it was more than 10% of revenue, so significant growth as a percent of our overall revenues.

And can I presume that since you are guiding to gross margins in that range that these products are currently carrying gross margins at least at the corporate average?

The margin profile of our wireless business is slightly below the corporate average which we've guided before. They range between 56% and 60%.

And will that margin profile continue for the dual-mode products also?

It is too early to say, based on volumes and mix of that business line going forward, but today it is 56% to 60%.

Great, thank you very much.

Krishna Shankar, ROTH Capital.

Yes, as you look at the guidance for Q2, can you talk about each of the four businesses and the drivers there -- CCP, HPA, wireless and the legacy business? What's growing, what is shrinking and what is sort of stagnant? Can you give us some sense for the drivers in each of the four businesses for the September quarter?

Yes, Krishna, this is Raouf. Certainly we can do that. So, as we look at our September ending quarter, fourth fiscal quarter, we are seeing some good trends in the business. We are seeing orders start to pick up, in particular in the high growth CapEx categories that we have focused on as a Company.

For example, our Comcerto 1000, 2000 series of CPE processors for fiber to the home applications -- strong order trends of there. As you look at our high-performance analogs business in particular, our fiber to the home PMDs backlog is very strong. It's close to record levels at this point. So that looks very, very good.

Also, as we look at our wireless businesses, we alluded to in the past couple of questions, we are absolutely expecting our wireless business to grow sequentially. Backlog is significantly up for our wireless SOC processors for shipments in the current quarter as compared to what it was a quarter ago. So, we are very pleased with the trends that we are seeing there.

You know, we think overall perhaps the WAN business and some of our older legacy wireline businesses may be slightly off this quarter, maybe slightly overall the HPA business after three quarters of ramping strongly. But I think, Krishna, in particular as we look at seasonal trends in the summer quarter, we're mindful of the fact that August is always pretty slow. So although this quarter started very strongly, we are anticipating things to slow down a little bit next month for the month of August, and we're baking that into our guidance at this point. Okay?

Great. And then it's good to see the wireless business showing good sequential trends. As you look at the business now versus, say, six months ago when you acquired Picochip, can you talk to the adoption of small cell technology by the carriers globally? What has been some of the positive and what's been the factors that seem to be delaying deployment?

Well, I guess I would say, Krishna, that we are really very encouraged -- honestly very, very encouraged by the momentum we're seeing for LTE and ultimately dual-mode small cell base stations. You're probably aware of some of these data points, but we're seeing carriers worldwide pay great deal of attention to this category of equipment, and a much stronger belief as well as operational plans being put in place for large-scale deployment of small cells.

I'll give you a couple of data points. For example, June of this year AT&T -- it became clear that AT&T has launched an RFI for small cells. They have been advocating for small cells for several years, and now are getting very serious about deployment starting 2013.

Verizon is probably -- the best guess is that Verizon is probably little bit ahead of AT&T, in fact, in this regard, and are absolutely planning on small cells to enhance LTE capacity, and of course LTE coverage in general.

We are, of course, seeing the early movers -- in particular Korea Telecom and SKT -- get ahead of the curve. And as I mentioned earlier, we have production orders on backlog from OEMs serving both of Korea Telecom and SKT on the books today. And we think they're going to be -- we don't think, we know they are going to be the first to deploy LTE small cells on a global basis starting, in fact, as early as December quarter this year, which is something we've been saying now for over a year and we're happy to see it coming to fruition.

But beyond Korean carriers, AT&T, Verizon North America we're also seeing Sprint, Telefonica, Vodafone are clearly developing and finalizing their plans for LTE and dual-mode small cell rollouts starting 2015 and beyond. These are carriers that we would consider to be wave one LTE small cell carriers. So we're very excited about what we're seeing there.

And finally, I'd say a very important data point is that the FCC in the US has actually dedicated a special 100 megahertz band between 3.5 GHz and 3.6 GHz specifically for small cells. And, as you know, that is a very big, very valuable asset for the FCC to dedicate to a very important class of new equipment, and I think that is a very strong endorsement of this technology.

Thank you. And Stephen, can you talk about the balance sheet in terms of the restructuring actions? And can you talk about the cash burn going into the September quarter?

Sure. So, from a cash burn perspective, we don't guide cash specifically. As I mentioned in my prepared remarks, we consumed $7.8 million of cash last quarter. We expect cash burn from operations to narrow in the next quarter, but beyond that, we're not guiding cash.

In terms of the restructuring, as I mentioned again in my prepared remarks, we expect total charges to range between $3.5 million to $4.5 million. And the cash charge related to that -- or total charges ranging from $4 million to $5 million and cash expenses to be between $3.5 million and $4.5 million.

Good, thank you.

(Operator Instructions) Dave Kang, B. Riley.

The first question is, with a seasonally strong September quarter expected to be flat to down, should we expect December and March quarters, which are seasonally weak, should we expect normal seasonality? Or should we expect some kind of growth, especially with the way wireless is expected to ramp?

So, Dave, this is Raouf. So you know, we guide one quarter at a time like most of our peers, so it is a little early to provide you comments on the December quarter and the March quarter. What we have said very clearly in our prepared comments is that we expect to reach breakeven -- non-GAAP breakeven in the first half of our fiscal year, which of course ends in March of 2013, at revenue levels that are higher than our current revenue level, modestly higher, call it $37 million and a gross margin of 60%.

So we clearly do not anticipate any significant downside from here. And I think it would be fair to read flat to up from here, certainly in the first half of FY 2013, so -- in December and the March quarters. Okay?

Okay. And then the OpEx of $22 million, I'm assuming that is $22 million at $37 million, that is how you get to breakeven or slightly profitable. How much of an incremental growth can you support at $22 million with -- before you start to add back?

Sure Dave. So first of all, $22 million will be realized in our fiscal first quarter, meaning the December ending quarter, regardless of revenue levels. So we are going to be there starting next quarter, okay, on a full quarter basis, so that's what we anticipate reporting for the December ending quarter is $22 million in total OpEx, independent of the revenue line.

Sure.

We expect to get to at least $37 million in the first half of FY '13, so either in the March quarter or the December quarter?

Okay, and with all of this restructuring, post-restructuring what kind of a revenue mix -- it sounds like most of your cut will be from legacy business. What kind of revenue mix should we expect with the HPA, CCP, and WAN?

Well, if you look at this last quarter, the June quarter that we reported, that we just reported HPA was almost half of the revenues. (multiple speakers) CCP was about 40% and roughly 10% was WAN, just round numbers.

As we look forward to fiscal year 2013, you're going to have a richer mix of CCP which is where our wireless business resides. So that's not to say HP will stay flat or even decline. It will clearly continue to grow, because we have some very exciting growth drivers in enterprise, video, fiber to the home behind our HPA business.

So we expect in absolute dollar terms HPA will grow, but we think the blend will be significantly richer of CCP because that is not only where our fiber to the own processors lie, but also wireless small cell base station business comes out of.

WAN as a percentage of the blend will probably decline. We have not invested in WAN solutions for 10 years, and that businesses gradually declining over time and has been, and we continue to expect it to continue doing that. So I think the percentage that will be WAN will go down over time.

I hope that answers your question.

I just wanted to clarify. So, wireless is in CCP? I thought it was in HPA, because is that why HPA revenue was up 8% sequentially, because of wireless doubling sequentially? I just wanted to clarify.

No, our HPA business -- we can speak about this off-line, but it is really focused on the analog solutions primarily for enterprise, video and fiber to the home. Our wireless SOC revenues are reported within the CCP category.

Okay, I see, got it. And the last couple more, on the optical access, how big is that optical access segment right now? And is it mostly in Asia, I guess specifically Japan and China at this point?

Our fiber to the X business, or optical X, if you will, comprises fiber to the home, fiber to the building, fiber to the node, fiber to the curb -- all flavors of optical fiber access technologies. It is served from both our high-performance analog business, where we provide PMDs for optical modules as well as our CCP business where we provide triple play processors, voice, video and data CPE processors for the CPE infrastructure.

Within both of those businesses, FTTX is a strong driver for us. It is certainly strong in China. It's also very strong in Japan where we have a dominant market share of NTT, so a very strong business in both of those.

I would say overall FTTX represents at least 30% or more of total Mindspeed revenues at this point, and we expect it to continue to be a strong driver for our business going forward.

Got it. And a last question is regarding Picochip, when you made that acquisition do you expect -- you expected about 50% growth this year, which translates to about $20 million, $21 million. Are you still sticking with that or has that changed?

Yes, so Dave, we are expecting significant year-over-year growth from the Picochip wireless SOCs. Last year Picochip did about $14 million of revenue. This year is clearly going to be up significantly from there. Whether it is $20 million slightly below, slightly above, it is really too early to tell. But we are certain this business will continue to grow year-over-year.

As I mentioned in answer to an earlier question, we have a very strong backlog for Picochip processors at this point as compared to the same time last quarter. We're expecting growth this quarter over last quarter for our 3G or Picochip solutions, and in fact, we expect continued growth in the December quarter. Of course in December it will be coupled as well on top of that with our LTE Transcede solutions.

Got it.

We are expecting Picochip to continue growing strongly. We don't know if it's exact 50% higher, lower. We can give you an exact number right now, and of course we just started the second half of the year.

Got it. All right, thank you.

I will now turn the call back over to Mr. Raouf Halim. Go ahead.

Thank you all for participating on the call. Look forward to talking to you again in the quarter. Thank you very much and goodbye.

This concludes today's conference. Thank you for your participation. You may now disconnect.