Maxlinear Inc (MXL) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the MaxLinear Q4 earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions.

(Operator Instructions)

This conference is being recorded today, February 5, 2013. I would now like to turn the conference over to Nick Kormeluk with IR Sense. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's fourth quarter 2012 financial results. Today's call is being hosted by Dr. Kishore Seendripu, CEO, and Adam Spice, CFO.

During the course of this conference call we will make projections or other statements regarding future conditions or events relating to our products and business. Among these statements we will provide information relating to our current expectation for the first quarter 2013 revenue including expectations for revenue growth in our cable and other products segments, anticipated trends in our cable and terrestrial revenues, and our efforts to expand our addressable markets, gross profit percentage and operating expenses, the potential impact of our pending litigation with Silicon Labs, our current views regarding trends in our markets, including the anticipated impact of new design wins and the size and potential for growth in our markets and our competitive position in our target markets. These statements are forward-looking statements within the meaning of federal securities laws and actual results may differ materially from results reflected in these forward-looking statements. We are subject to substantial risks and uncertainties that could adversely affect our future results. Our business and future operating results could be adversely affected if our target markets, including the cable market, do not grow or if we are not successful in expanding our target addressable markets through the introduction of new products. In addition, substantial competition in our industry, potential declines in average selling prices, intellectual property litigation, such as pending matters between MaxLinear and Silicon Labs, and cyclicality in the semiconductor industry could affect future operating results. A more detailed discussion of these risk factors and other factors you should consider in evaluating MaxLinear and its prospects is included under the caption Risks Factors in our filings with the Securities and Exchange Commission, in particular our most recently filed 10-K for 2012. These forward-looking statements are made as of today, and MaxLinear does not currently intend and has no obligation to update or revise any forward-looking statements.

The fourth quarter 2012 earnings release is available on the Company website at www.maxlinear.com. In addition, MaxLinear reports gross profit income or loss from operations and net income or loss and basic and diluted net income loss per share in accordance with GAAP and additionally on a non-GAAP basis. Our non-GAAP presentations exclude the effect of stock-based compensation and its related tax effect, expenses of investigation and estimated fines and penalties related to [export] compliance matters, accruals under our equity settled performance bonus plan, expenses associated with acquisition of certain new market-related technology licenses, a valuation allowance on federal deferred tax assets and expenses related to our current patent litigation matter with Silicon Labs. Management believes that this non-GAAP information is useful because it can enhance the understanding of companies' economic performance and MaxLinear therefore uses non-GAAP reporting internally to evaluate and manage the Company's operations. MaxLinear has chosen to provide this information to investors to enable them to perform comparisons of operating results in a manner similar to how the Company internally analyzes its operating results. The full reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release, issued earlier today. The earnings release and reconciliation is available on our website and we ask that you review them in conjunction with this call.

And now let me turn the call over to Kishore Seendripu, CEO of MaxLinear.

Thank you, Nick, and good afternoon, everyone. Thank you all for joining us today. Before jumping into the financial highlights, I would like to note that 2012 marked a year of record revenue for the Company. We not only grew our revenues by 36% annually, but we also made focused investments to expand the scope of our business. We are addressing new service provider markets, maintaining our product cycle driven revenue growth momentum, making progress towards achieving operational scale and improving our profitability. Most notably in 2012, we extended our position in a new DOCSIS 3.0 data standard base cable [gold] platform. As a result, our revenues derived from cable more than doubled year on year. Additionally, we began converting design wins into revenue with our best-in-class super radio family of digital and hybrid TV tuner solutions. Simultaneously, we worked to establish satellite TV as the next major growth opportunity for MaxLinear. We were able to do this in a challenging macro market environment and despite adverse impact on our fourth quarter demand [due to several other] cable customers drawing down the inventory levels towards the end of the year.

We are rapidly garnering a significant number of design wins in cable, terrestrial TV and in our new target market for satellite applications. We remain confident in our competitive position and design win momentum in terrestrial markets, enabled by our industry-leading Super Radio hybrid TV tuner and our tuner demodulator solutions. We are encouraged by our continued technology leadership in cable, with the launch of proposed generation broadband, RF mix signal platform, namely, our Full-Spectrum Capture technology. Our successful target addressable market expansion initiative into new and emerging satellite market applications leverages this Full-Spectrum Capture platform. We expect our Full-Spectrum Capture technology platform to have a wide range of applicability in brand new large markets, such as infrastructure opportunities in wireless, cable, satellite, and other broadband data delivery communications markets. We have recently announced major cable and satellite OEM customer design wins for cable data, and cable and satellite video gateways that incorporate our latest Full-Spectrum Capture receiver products.

Moving to the financial specifics, net revenue in the fourth quarter was $24.8 million, down 11% from the third quarter of 2012, up 29% from a year-ago quarter and slightly below the low end of our guidance. GAAP and non-GAAP gross profit in the fourth quarter were 63% of revenue, well above our prior guidance of 61%. GAAP net loss in the fourth quarter was $4.6 million or $0.14 per diluted share, and non-GAAP net income for the fourth quarter was $0.7 million or $0.02 per diluted share. As announced earlier, in the fourth quarter of 2012, we repurchased for $2.8 million an additional 0.5 million common shares from our only remaining venture capital investor. This new transaction brings the total number of shares repurchased from our venture capital investors in 2012 to approximately 2.2 million shares contributing to a total cash expenditure of $12.1 million. These repurchases will not only address venture capital shareholder dynamics but also validate management's confidence in MaxLinear's future growth. We implemented this [special] repurchases while still preserving ample liquidity to fund our future growth initiative.

I will now discuss current trends in our business. Consistent with our prior guidance, cable revenues in Q4 of 2012 declined approximately 10% relative to Q3 of 2012, and some of our larger cable data OEM customers drew down their inventories towards the end of the year. Encouragingly for us, we continue to experience an increase in demand for our cable video applications. We are pleased to note that towards the end of the fourth quarter, our bookings for cable data recorded a healthy recovery.

Here are some specifics related to our cable revenues. In the fourth quarter of 2012 cable represented 65% of our total revenue. While cable video revenue grew 10%, it was not sufficient to offset the decline in revenue from DOCSIS 3.0 voice and data gateways resulting from the previously mentioned inventory correction. We continue to experience strong customer momentum in strategic cable [front-end] technology platforms for our 16 channel and 24 channel Full-Spectrum Capture cable receivers for a broad range of next generation DOCSIS 3.0 products. Most notably, recently NETGEAR selected our Full-Spectrum Capture digital cable front-end receiver, MxL267, for a new family of DOCSIS 3.0 cable modems and gateways. NETGEAR gateway products will be the world's first cable (inaudible) high-speed cable data gateway supporting close to one gigabit per second data speed.

Moving to the terrestrial and satellite TV markets. Terrestrial revenues decreased by approximately 12% quarter-on-quarter with particular weakness in Japanese automotive and terrestrial set-top box applications. These decreases were partially offset by growth in our MxL601 hybrid TV tuner and our MxL683 ISDB-T digital TV standard tuner demodulator SOC solution for Japan and South America. Some notable highlights in terrestrial and satellite in Q4 2012 are the Sumi Corporation started mass production shipments of its latest generation of six channel time-shift TV network interface module for use by a major Japanese television OEM for ISDB-T digital TV broadcast standard regions. It is based on MaxLinear MxL683 tuner demodulator SOC. These new generation of televisions using time-shift technology let consumers automatically record all of the TV programs on their six favorite broadcast TV channels within a rolling 15-day period. SiliconDust selected the MxL603 global digital TV tuner for use in its latest generation of ATSC and DVB-T2 digital TV standard HD HomeRun products that enable customers to receive live broadcast television and stream it to any device in the home.

Finally, our first satellite application design win. MaxLinear's MxL584 eight-channel single chip satellite full-spectrum receiver will power the next generation AirScreen satellite-to-IP gateway from Inverto Digital Labs. This satellite-to-IP gateway distributes satellite TV signal in IP or internet protocol format to a maximum of eight computers, smartphones, tablets, connected TVs or other IP devices. In conclusion, we are excited by the fact that the fourth quarter brings to a close a strong revenue growth year for MaxLinear. During 2012, we also made significant progress in executing on our vision of expanding an addressable market opportunity with world leading broadband RF front-end technology solutions.

Now let me turn the call over to Mr. Adam Spice, our Chief Financial Officer, for a review of the financials and our forward guidance.

Thank you, Kishore. I will first review our results and then briefly discuss our outlook. In summary, our Q4 revenue of $24.8 million was slightly below the low end of our guidance of $25 million to $26 million and proves challenging in the face of late-breaking inventory correction cable. While our Q4 revenue declined on a quarter-on-quarter basis by 11%, it grew by a robust 29% compared to the year-ago quarter. As Kishore noted, our revenues from cable took a modest step back in the quarter following four consecutive quarters of growth. The weakness in cable was restricted to our DOCSIS 3.0 voice and data modem products. And we estimate that the deployment momentum behind DOCSIS 3.0 modems will remain strong with major MSOs in 2013.

Now moving to the rest of the income statement. GAAP and non-GAAP gross profit for the fourth quarter were both approximately 63% of revenue, above our prior guidance of 61%. This compares to 63% in the third quarter of 2012 and 61% in a year-ago quarter. The significant improvement in gross margins relative to our guidance was largely due to a combination of cost improvements driven by our supply chain team, favorable product mix changes and less than anticipated declines of our products' ASPs. Our Q4 GAAP operating expenses were $20.1 million, which includes $2.8 million of stock-based compensation, $1.3 million for an accrual related to our performance-based equity bonus plan for 2012, and $1.1 million in net professional fees related to the Silicon Labs patent litigation and previously disclosed export compliance matter. As we've discussed previously, payouts under our 2012 performance bonus plan will be settled in shares of MaxLinear stock. Net of these items, OpEx was $14.9 million, which is in line with our prior guidance of $15 million.

Fourth quarter GAAP OpEx included $12.6 million of R&D expenses, which in turn included stock-based compensation of $1.8 million and $800,000 related to the 2012 bonus plan. The step up in R&D spending relative to Q3 2012 as per the guidance was primarily due to project-driven engineering expenses related to a 40-nanometer R&D tape-out targeting our new satellite initiatives. Fourth quarter GAAP OpEx included $7.5 million of SG&A which includes $1 million in stock-based compensation, $600,000 in bonus plan accruals and $1.1 million in net professional fees related to the Silicon Labs patent litigation and previously disclosed export compliance matter. $1.1 million in net professional fees benefited from a $300,000 accrual reversal for potential fines and penalties arising from any potential violations of US export controls and sanctions laws. We are pleased to note that these US export compliance-related matters have been closed out with the relevant government agencies with no resulting fines or penalties.

At the end of the fourth quarter 2012, our head count was 276 as compared to 264 at the end of the third quarter and 255 at the end of 2011. Within the increased head count in the quarter, we are beginning to realize the benefits of our efforts to optimize R&D expenses by appropriately balancing hiring across our R&D design centers in the US, India, China, and Taiwan. GAAP loss from operations was $4.4 million in Q4 compared to income from operations of $400,000 in the prior quarter and GAAP loss from operations of $4.2 million in Q4 of last year. GAAP loss from operations was $12.9 million for the full year 2012 versus GAAP loss from operation of $15 million for 2011.

GAAP net loss per share in the fourth quarter was $0.14 on fully diluted shares outstanding of 32.6 million. GAAP net loss per share includes $2.8 million in stock-based compensation expense, $1.3 million for an accrual related to our 2012 performance-based bonus plan, and $1.1 million net professional fees attributable to the Silicon Labs patent litigation. Net of these items our non-GAAP earnings per share was $0.02. For the full year 2012 GAAP loss per share was $0.40 and non-GAAP income per share was $0.14 compared to full year 2012 GAAP and non-GAAP losses per share of $0.68 and $0.11, respectively, on a fully diluted basis.

Moving to the balance sheet and cash flow statement, our cash, cash equivalents and investments balance was approximately $77.3 million at the end of the fourth quarter 2012 compared to $80 million in the prior quarter and $85.7 million at the end of 2011. Our cash generated in operations in the fourth quarter 2012 was $1.4 million, approximately $4.9 million less than in the third quarter 2012 and approximately $3.3 million better than the year-ago quarter. As you recall, we used $2.8 million of our cash to buy back 500,000 shares from our lone remaining VC investor in the fourth quarter. This brings the total share repurchase for the full year 2012 to 2.165 million shares for a total of $12.1 million. Accounts receivable totaled $14.6 million at the end of the fourth quarter compared to $16.3 million in the prior quarter and $10.4 million at the end of 2011. The days sales outstanding for the fourth quarter was approximately 56 days or four days higher than in the previous quarter and 16 days more than the DSOs of 40 days in the year-ago quarter.

The year-on-year increase in DSOs is primarily a function of customer mix. As we have moved to more direct sales for cable customers, we benefited from lower distributor costs but generally experienced less favorable and slower payment terms that have adversely affect our DSOs -- that affect our DSOs. We remain comfortable with the quality of our accounts receivable aging, having experienced very limited bad debt expense. As a reminder, we only recognize revenue on a sell-through basis, and as such we're not subject to revenue fluctuations caused by changes in distributor inventory levels. Our in-house inventory at the end of the quarter was $9.9 million, up approximately $1 million compared to the $8.9 million in the previous quarter and up approximately $1.8 million versus the $8.1 million at the end of 2011. Our inventory turns declined 3.9 times in the fourth quarter compared to 4.7 times in the third quarter, and improved relative to the 3.5 times at the end of 2011. We continue to elect to build inventory of new products to support outside opportunities, primarily in cable and hybrid TV.

That leads me to our guidance. We are pleased to note that we expect revenue in the first quarter 2013 to increase approximately 5% to 10% sequentially to $26 million to $27 million. Built into this range we expect our cable revenues to increase on a quarter-on-quarter basis by approximately 7% to 10%, with growth across all applications, but more so in DOCSIS 3.0 data and voice modems and cable DTAs. In our terrestrial applications we anticipate revenues to be flat to up 5% on a quarter-over-quarter basis, with growth, if any, arising from sales of our hybrid TV tuners.

Recent feedback from our larger customers in the cable and data modem applications indicate that the dynamics behind our customers drawing down their inventories in the fourth quarter of 2012 have largely passed. Although bookings continue to lag somewhat relevant to recent quarters, as we entered the quarter we registered strong bookings for our cable customers. We are also encouraged by the increased activity in the TV business for our new hybrid TV solutions, which being more of a turns business continues to be difficult to predict accurately with any given quarter.

We expect GAAP and non-GAAP gross profit percentage to be approximately 61% in the first quarter. Our gross profit percentage forecast could vary somewhat depending on product mix and other factors, in particular the relative contribution of cable and terrestrial applications. We continue to fund strategic development programs targeted at delivering attractive top-line growth in 2013 and beyond, with a focus on increasing operating leverage in the business. We expect Q1 2013 GAAP operating expenses to be flat relative to the prior quarter at around $20 million, with normal seasonal payroll-related step-ups that are further impacted by recent US payroll tax rate changes. Our stepped up payroll-related expenses include the full quarter effect of our incremental Q4 hires and anticipated Q1 hiring. These step-ups will be partially offset by a lack of R&D tape-outs expense in the quarter and an anticipated step down in expenses related to the Silicon Labs patent litigation. We expect that Q1 2013 non-GAAP operating expenses will also be relatively flat at $15 million, with payroll-associated increases again offset by a lack of any expense R&D 40 nanometer tape-out related expenses in the quarter.

In summary, we are pleased to report that despite delivering slightly lower than projected revenues in Q4, we realized significant gross margin upside of 200 basis points. OpEx came in on target and we were able to deliver another quarter of positive operating cash flow. More importantly, our guidance for Q1 2013 revenues growing by 5% to 10% over the prior quarter signals optimism regarding the resumption of product cycle-driven top-line growth.

With that, I'd like to now open the call to questions. Operator?

(Operator Instructions)

Tore Svanberg with Stifel Nicolaus.

A few questions here. First of all, could you talk a little bit about your visibility for the quarter. You mentioned bookings improving towards the end of Q4. Just wondering how that has continued so far in this quarter and how much are you expecting as far as turns is concerned.

As I mentioned in the commentary, we went in a little bit light. We went in about -- booked about 77% to the midpoint of the range that we just provided for Q1. In the prior couple of quarters we've gone in more in the low 80s percentile, so we came in a little below that. But I would say that the bookings picked up momentum in -- after we entered the new year. The amount of turns business that we're expecting in Q1 is actually relatively low. We have what we would consider good coverage from backlog in billings to date.

Checking into the cable channels specifically, we feel we are very strongly positioned to have a pretty robust data modem business growth back off the Q4 step-back moving into Q1 and Q2 as well.

And on gross margin, you guided for $61 million. You did that last quarter. You came in quite a bit better. Are you just being conservative? Or does mix really swing things so much?

I think that we really -- when we enter the quarter and we give you the guidance, we really give you based on the mix and what we forecast at that particular point in time. We give you a very realistic guidance of where we expect gross margin to be. But having said that, we've always maintained that it varies plus or minus 2% relative to the mix.

In Q4 we really benefited from the fact that some of the benefits of the supply chain vendor mixes that we've been implementing in the earlier part of the year and the inventories and the products that benefit from the COGS improvement, et cetera, started shipping in Q4 and then we had a decline in certain revenues of certain products in the lower end of the gross margin. As a result the gross margin came up 2% higher. So we really are not being conservative. We try to be as accurate as far as we know at the point we entered this call.

That's very fair. And I'm not sure how much you can say about this. But given Arris's acquisition of the Google set-top box business. Arris is your largest customer. Can you comment on that at all? Is that an opportunity for you? Could that account potentially start to grow again -- the account meaning the old Motorola account.

Tore, even before the acquisition, Motorola (unintelligible) we had press releases. We do ship product to their video segment and to their data segment. But there's a larger opportunity in video Motorola -- with Motorola. Motorola is one of the biggest video players in the cable segment and even beyond the cable segment. For example, this applied to the Verizon platform as well.

So I think it's a great opportunity for us. We have fantastic relationships with Arris as one of our premier customers. We're a major supplier to their data business. I think that is a very positive development for us. Having said that, there's going to be time for all the changes that are typically related to any acquisition. So at this point, we are cautiously optimistic about the future with this acquisition. But it's business as usual for us as far as 2013 goes.

Last question, just a housekeeping for Adam. What tax rate should we use for 2013?

As you know, we've given our net operating losses. We aren't forecast to be a taxpayer -- a cash taxpayer in 2013. As far as the tax provision, I would say we've been using around 20% as a guidepost. It's probably a good place to still be.

Ross Seymore with Deutsche Bank.

This is Bob for Ross. I was just curious about the operating expenses. Seems like it's pretty lumpy with the tape-outs. But you do have some color on the headcount. How should we think about it after the Q1? Is there any significant tape-outs that you have in your mind's eye at the moment or is it just steady growth as the headcount expands?

I would say, Bob, that obviously, a tape-out -- 40 nanometer expense tape-out obviously does introduce some lumpiness when you look at the overall size of it. When you take into consideration the mask itself plus wafers with that initial run and PCBs used to deliver samples to customers and so forth, you could be looking anywhere between $1.25 to $1.5 million when it's all said and done. We do foresee another 40 nanometer mask set in the second half of the year.

As far as the trending of the OpEx throughout the remainder of the year, obviously we don't give guidance beyond the current quarter. I think it's safe to say we don't see any significant step-ups beyond tape-out related expenses. We think we're-- they'll be modest, I would say ebbing and flowing between the various lines of the OpEx statement. You should expect this to be a relatively tight band I think from an operating expense perspective in 2013. The only reason to vary much from where we are in our based on our Q1 guidance would be a tape-out.

I also know that you guys -- how about on the CapEx side. Is there anything big or lumpy on that side of the business? Or is that pretty much a steady state right now?

It's pretty steady state. There's nothing significant going on on the CapEx side of things to speak of. Just to provide a little more color on the OpEx. We guided (based) to a non-GAAP OpEx of about $15 million. I mentioned that the tape-outs can be somewhere between $1.25 million and $1.5 million when everything is taken into consideration.

I think you're also looking at a further -- the full effect of the payroll changes that will hit up in the Q2 period along with our merit process. So overall, I think that you're probably in a range, if you want to take -- if you want to look at Q1 as being the low point of OpEx for the year at $15 million non-GAAP. I think you could probably peg the high end being somewhere closer to the call it $16.5 million. And then the other quarters will bounce in between that in that range.

Alex Gauna with JMP Securities.

I was wondering if you could give us an idea with the outlook what might be coming from the DOCSIS 3.0 upgrade cycle, maybe how much a percentage of the mix that is and maybe how far you think the industry is in the deployment of 3.0 at present.

I think you asked two questions there. One is the mix of DOCSIS 3.0 for the industry and second is how is that -- how much is it penetrated in the US? Is that the correct question?

Also for you as well. What kind of contributor to you is it of the seasonal upside here?

Firstly, we don't categorize it as seasonal upside. In Q4 we went through an inventory down cycle let's call it and if you look at the seasonality in the terrestrial business too, we're at declining Q4 also for the terrestrial business.

So it turns out that our customers have depleted their inventories to a place where they see now an urgency to build back their inventory position and the demand seems to be very robust because, as Adam pointed out, that deployment of DOCSIS 3.0 in the US seems to be really very strongly progressing and our estimate is that last year maybe of all the DOCSIS modems deployed in the United States, maybe 65% were DOCSIS 3.0 and the rest were DOCSIS 2.0.

And the other point is that all the DOCSIS 3.0 that is shipping in the United States now is our kind of DOCSIS 3.0. By that I mean the eight channels downstream, four channels upstream DOCSIS data modems. There are no four by four modems shipping in the United States. So we feel very good that we are positioned to be in a very good place along with Intel at our back to benefit from this upgrade that's happening.

The other important point is that to date we are now feeling very good that there'll be no market share loss relative to the Intel MaxLinear combination platform on the data modem, regarding which we had some fears. Because last year also we had a very, very good market position on the DOCSIS 3.0 modems vis-a-vis the -- our competitor's platform.

I think that market share seems to continue to hold as we move into Q1. Q4 was a purely (unintelligible) situation and some of the leading cable customers that MaxLinear had. And looking to this year, it's hard -- once you're at 65% to 70% penetration of DOCSIS 3.0, it's hard to say it's going to be 90% or 100%, but it's moving pretty robustly. And we feel very good about it.

And just to clarify a little more, I think that Adam had said that the Q4 strength or mix was favorably influenced by DTA and DOCSIS 3.0. Is DTA also a part of the more favorable outlook in Q1?

Yes. The DTA is, along with the cable modem, the favorable part of the outlook. I think Adam may give a little bit more color here.

I think you're right. If you look at what's driving the growth on the cable side, it is disproportionately the DOCSIS 3.0 voice and data and the HD DTA portions of our business.

In answering my last question, you talked about them building backup inventory. Is there any risk at this juncture? Do you think that could end up in a lag looking out to June. I know you don't guide two quarters out, but for building backup. Is that somewhat of a risk factor we should think about or not in your opinion?

At this point if you would ask me the question, honestly I don't have any real negative opinion that that is going to be the case. Right now, I feel the demand is robust. And it's pretty linear. It turns out that even though our customers pulled back some inventory in Q4, when we looked at their own shipments, not much has changed. So we took the brunt of that (unintelligible) inventories is our view of the situation.

(Operator Instructions)

Anil Doradla with William Blair.

A couple of questions. Adam, you've talked about some of your growth profiles in terrestrial for Q1, some positive, negatives. But as we progress in 2013, how does terrestrial business shape up? Clearly you're quite bullish with your hybrid TV tuners. But can you give us more color?

Sure. I think if you look at the growth profile as we see it moving forward in 2013 on the terrestrial side, certainly we anticipate more growth coming from the hybrid TV relatively speaking versus other parts. But we're seeing also -- forecasting optimistic growth on the terrestrial set-top box side and non-hybrid TV side. We talked on earlier calls about our ATSC tuner demod solution. That's going to contribute, we believe, to the growth in 2013 as we move forward. I think it's going to be more growth skewed towards hybrid TV than other parts of our terrestrial portfolio.

And you said that was more of a turns business rather than bookings, right?

Correct.

In terms of visibility, we could see some (unintelligible). You wouldn't just have visibility more than what, 30 days, 40 days? Or is it one quarter at a time?

I'll let Kishore speak to the funnel process.

If you really look at the TV business, we do have very good visibility over the designs we have won and which platforms we're on and what is going to drive the volume. And TV being the, again, be they manufactured in Asia and their ordering patterns are more like turns business. And I think that we generally -- entering the quarter we are not booked more than, let's say -- we are booked less than two-thirds on the terrestrial business whereas on the cable business, we are booked more than two-thirds. I think that would be the kind of color I could provide you, I think.

One of our checks are pointing that the industry is skipping 16 channels altogether and going from 8 channels to 24 channels. Does that resonate well with your guys? Or do you think that's just not true?

I think as we move forward on the cable side, you're going to have a tiered market. You're going to have the 8 channel market, 16 channel market and 24 channel market. I think the 24 channel market -- we mentioned next year being the big -- the first cable app 35 data gateway. That's MaxLinear's product.

We are the only ones that are capable of supporting 24 channels right now in the industry. And in the 16 channel, too, we are the only ones qualified. I think between these two new offerings with a full spectrum capture position, we feel we are in the pole position to be beneficiaries of that along with our partners.

Having said that, we do believe that the market will be tiered. There will be a lot of eight channel shipments over the next two, three years and they'll be overlapping with that. In the following year they'll be more 16 channel and they'll be some 24 channel. People need more data speed. Right now the bigger demand of the 24 channel is for more like gateway type of applications where there's a lot of over the top video applications too being supported.

For the data modem, voice modem 16 channels would be the workhorse. But with the higher end where video is a big part of it, 24 channel will be the bigger driver. We don't have a philosophical view on this. But our own understanding it's going -- the market is going to be tiered, because cost is a big driver, even for the MSOs.

And final question is if we step back and look at 2013, 2014, can you remind us once again what are the different layers of growth over your current cable ramp? You've made some adjustments, R&D investments, so can you remind us how you look at the growth profile over the next two years.

Cable specific or just --

No, beyond cable. Obviously we know there are a lot of product cycles taking on cable but beyond cable.

I think the cable is still going to be a big -- let's go down the list here. We've got a very, very healthy product cycle portfolio developing now. We had some gaps in the earlier years that are now nicely being closed so we forecast good steady growth going forward for the Company. Cable is going a big leg up for growth into the next two to three years.

In the data/voice modem side with the 16 channel, 24 channel, we'll continue to be a reasonable player, a meaningful player in the space and we're going to get incremental revenues with ASP increases and new platforms where video gateways are going to be replaced by media server type of gateways.

The other big part of cable growth is video boxes. Today, our share of the video market is very low. So we expect to see big growth with these multi-channel systems that are going to go to 24 and 32 channels where we are going to have a hybrid video and data gateways.

We have made significant investments in satellite. Now it's kind of public information. We have unveiled the product at CES. And we have announced a design win with Inverto, which is a major player for outdoor units applying to the number one operator in the world, DirectTV for example, and BSkyB and those operators. So those people have designed the satellite IP gateways where satellite televisions are directly going to be distributed over IP.

The same product is also going -- is also destined to go into some major operator platforms slate in the future. And they're being designed in. That would drive growth in late 2013 in a minor way, but 2014 will be the big start of the year of the revenues for satellite. We have investments going on in infrastructure in satellite. Those we hopefully will start paying revenue through the end of 2014 into 2015.

And on the terrestrial side we expect that the hybrid TV to be pretty big growth driver through 2013 and 2014. And our ISDB-T tuner demodulator SoC to be a growth driver through 2013, 2014 and even into 2015. So that's the -- some of the portfolio of products that are publicly known and that we're investing in right now. And there are a few others we're investing in which we will let you know as time plays out toward the later part of this year.

Thank you, and we have no further questions at this time. I'll turn it back to management for any closing remarks.

Thank you very much, everyone. Thank you, operator. As a reminder, we will be participating in the Stifel Nicolaus conference in San Francisco on February 7 and hope to see many of you there. We thank you all for joining us today and we look forward to reporting on our progress to you in the next quarter. Thank you.

Ladies and gentlemen, this concludes the MaxLinear Q4 earnings conference call. You may access the replay system by dialing 1-800-406-7325 or 303-590-3030 and entering the access code of 4588060. Thank you for your participation. You may now disconnect.