恩智浦 (NXPI) 2007 Q4 法說會逐字稿

This is the NXP Semiconductors fourth quarter and full year 2007 results investors' and analysts' conference call at 14.00 U.K. time on March 4, 2008. The host for today's call is Frans van Houten.

Thank you very much. Ladies and gentlemen, welcome to NXP's fourth quarter and full year 2007 results conference call. I hope you have all seen the results statement, our press release and presentation, which you can find on our website.

Before we commence today's presentation, please be aware that forward-looking statements will be referenced during this call. I refer you to slide number two of our presentation, where you will find a short Safe Harbor statement. Regarding guidance, I remind you that, as before, we will mention only guidance for the next quarter sales to be reported.

You will already know from the statements from our peer group in recent weeks that the market did not see significant improvement in the fourth quarter of 2007. NXP delivered sales figures in line with the guidance, being low single-digit sales growth on a comparable basis, which we provided at the end of the third quarter.

We report today sequential comparable sales growth of 1.9%, which is a nominal sequential sales decline of 4%, with fourth quarter sales coming in at EUR1,162m compared to EUR1,211m in the third quarter. This represents a 9.3% comparable increase on 2006 fourth quarter numbers. In addition to increased sales, we have also realized a year-on-year adjusted EBITDA growth of 13.6% and achieved an improved gross margin, excluding PPA effects, of 39.7% of sales.

Full year sales amounted to EUR4,629m, a comparable increase of 1.4%. Compared to 2006 sales, we saw the unfavorable effect of the euro U.S. dollar exchange rate as well as lower sales in the business unit Home, partially compensated by stronger sales in Automotive & Identification. On a nominal base, full year sales fell 6.7%.

In terms of earnings progression through the year, the first half of the year was weak, in line with soft market conditions and seasonal patterns. But in the second half of the year, we saw a marked improvement as a result of slightly better market conditions and actions from the Business Renewal Program taking effect.

The full year adjusted EBITDA amounted EUR749m, down from EUR921m in 2006. NXP continues to make progress in its Business Renewal Program and exceeded cost savings of EUR100m on a run rate basis in 2007. In 2008, we are well placed to exceed the EUR250m cost savings target, which is a repeat of the first phase of the Business Renewal Program on a run rate basis.

Our performance in Q4 and the whole of 2007 has been against a backdrop of the euro strengthening against the U.S. dollar. Currency movements had a negative effect of 8% on our sales figures compared to last year. From an operational point of view, we are long in U.S. dollars, as more of our sales rather than costs are dollar-related. As a consequence, our operational performance is strongly challenged by the weakening dollar.

The closure of Boeblingen and our exit from the Crolles2 Alliance will help to partially mitigate this currency exposure, as will our focus on increased outsourcing as part of our asset-light strategy. We have chosen a capital structure where our debt is largely denominated in dollars to provide a partial hedge. The impact is visible in the line financial income. Starting 2008, we will switch our reporting currency to U.S. dollars, in order to be more aligned with our peers in the semiconductor market.

My colleague Peter van Bommel will go into the details of the fourth quarter and full year financial performance. Now, I will focus on the achievements of NXP in our first full year as an independent Company, as well as the management agenda for 2008.

From an operational perspective, we have rigorously executed upon our business strategy. We have continued shaping the future of our Company by pruning our business portfolio and focusing our R&D activities on our key [battle] areas. In addition, we have made several strategic acquisitions, strengthening our market leadership positions. We've progressed well with the implementation of our asset-light strategy and have consistently performed in line with the guidance on sales that we have provided during the year.

Looking back at the year, we have made considerable progress against the main elements of the 2007 Business Renewal agenda. Firstly, in terms of people, during the course of 2007, we have strengthened our leadership with new appointments in the executive management team to lead the business units Home and Mobile & Personal, Christos Lagomichos previously of ST Micro and Marc Cetto previously of Texas Instruments. We have also upgraded the core competencies and the talent base at various levels throughout the organization.

Whilst market conditions have been difficult across the semiconductor industry, NXP has executed and accelerated its business strategy and, as said previously, made strong progress in reducing the cost base of our operations.

In terms of specific restructuring projects, we have exited the Crolles2 Alliance by the end of 2007, at which time we also concluded the sale of our equipment at the Crolles facility. Furthermore, we are on track with the restructuring at Boeblingen, Nijmegen, Cabuyao and Eindhoven. Moreover, the IT disentanglement from Philips has been materially completed, starting to result in sizeable savings. All of these cost base reductions will have a continued impact in 2008.

Our drive for greater operational excellence is expressed in an ongoing emphasis on effective manufacturing management, leading to reduced costs, improved quality and higher levels of customer satisfaction. The manufacturing organization achieved an overall integral yield improvement of 2.2% compared to 2006, reaching an all-time high in December 2007. Our factory loading was 84% in the fourth quarter, up from 70% in the fourth quarter of 2006.

Management has an imperative to outperform market growth in our key focus areas and to tighten the business portfolio management to create stronger and more insightful value propositions. NXP continues to be an innovation powerhouse. We have maintained our investment in R&D throughout 2007 at a level of EUR970m.

Conscious, however, of the need to raise effectiveness of our R&D investment as a means to accelerate sales growth, we have revamped our R&D program for the next three years through a program called Roadmapping for Leadership, RFL. The objective is to focus our resources on more clearly-identified areas in terms of growth and profitability. As a consequence, NXP stepped up R&D investments in 27 product areas, maintained spending at 25 segments. We have right-sized spending in six and reduced R&D investments in 12 product areas. With these moves, we have shifted close to EUR135m of R&D investments to more promising areas. Of course, it will take some time before we will bear the fruits of this shift.

To further strengthen our product portfolio, we have acquired the cellular communications business of Silicon Laboratories, Sharp's BlueStreak ARM-based microcontroller range and GloNav, the satellite navigation chip company. These acquisitions are active steps towards growing our leading edge in technologies and building market leadership positions in our key battle areas. These were well-received by our customers and first additional design wins were recorded in the second half of 2007 already. In line with our ambition to focus, we have divested our Cordless & Voice over IP Terminal operations to the DSP Group.

Looking forward, despite the setback of a weak semiconductor market and continued weakness in the U.S. dollar, we believe we are on track. In 2008, management will continue to improve the underlying fundamentals of our business. We expect to see further benefits from the aggressive deployment of our Business Renewal Program and we will focus on exceeding the EUR250m cost savings program of the first phase.

We will continue to strengthen our product portfolio to enable organic growth. And, as we have said before, NXP intends to also play an active role in industry consolidation to ensure scale and leadership positions for our businesses. The signing of the Memorandum of Understanding to combine our can tuner modules operation with Thomson in a joint venture in February of 2008 is again an example of this ambition.

Thank you. And now, I would like to hand over to my CFO, Peter van Bommel, to take you through the financial details of our performance in the fourth quarter and the full 2007 financial year. Peter.

Thank you, Frans. In terms of the overall performance of the business, I will provide both year-on-year and sequential comparisons for the quarter and the full year in this call. However, when discussing the individual performance of the business units, I will restrict myself to sequential figures. The year-on-year figures are, of course, available in the full annual report.

Firstly, let's look at the overall picture. Our sales for the fourth quarter were EUR1,162m, which is a comparable 9.3% increase versus the fourth quarter in 2006. As Frans mentioned, we came in in line with our guidance, with sequential sales growth of 1.9%.

In the fourth quarter, our margin excluding the PPA effects improved year on year to EUR461m from EUR428m in the same period of last year. As a percentage of sales, this margin increased from 36% to 39.7% on a comparable basis. This improvement was mainly attributable to the higher utilization of our industry base. Fourth quarter adjusted EBITDA, excluding the effects of PPA, improved by 13.6% compared to the fourth quarter of 2006. The adjusted EBITDA was up 7.5% on a sequential basis and the adjusted EBITA amounted to EUR105m in Q4 2007.

The full year sales amounted to EUR4,629m, a comparable increase of 1.4%. Sales were affected by an unfavorable euro U.S. dollar exchange rate and lower sales at Home, which were partly compensated by stronger sales in Automotive & Identification. On a nominal base, full year sales fell 6.7%.

Now, let me turn to the financial performance of the individual business units. All figures that I quote exclude the effects of purchase price accounting and are provided on a comparable basis. The sales performance of the Mobile & Personal division improved in the fourth quarter, up 2.2% on a sequential basis to EUR390m. The adjusted EBITA was EUR2m compared to previous quarter [EUR17m], and that was mainly attributable to the unfavorable euro/dollar exchange rate.

The division launched an ultra-small Nexperia cellular multimedia baseband for HSPA and EDGE based on the 65 nanometer process technology, demonstrated the world's first software programmable LTE modem and launched a complete 3G and EDGE Linux system solution with outstanding multimedia features on a single processor. You may have also seen our recently-announced 3G win with Samsung.

In Home, the fourth quarter sales amounted to EUR167m, which was flat compared to the third quarter. I'm pleased to see that the Home restructuring program is on track, resulting in significant cost reductions in R&D and SG&A as compared to the third quarter. Adjusted EBITA performance in the quarter amounted to a loss of EUR17m, which, although still negative, has improved versus the third quarter and is progressing according to plan.

The Q4 highlights in Home include the announcements that we powered Sling Media's new Slingcatcher Set Top Box and that mass production has started of the latest generation DTV chips for a number of leading TV manufacturers. The impact of these wins will become visible in the course of 2008.

In Automotive & Identification, the sales amounted to EUR238m, which is a sequential increase of 1.3%. The Automotive operation showed solid sales, outgrowing the market during the quarter, while the market share of our Identification business showed modest growth compared to the third quarter.

Adjusted EBITA amounted to EUR48m, which is slightly lower compared to the third quarter. This performance was largely attributable to strong additional investments in automotive quality programs and innovation. Gross margin improvement has been evidenced in the business unit as a result of the strong value propositions of innovative products and cost management.

We continue to have strong traction at many customers in Automotive. For example, in cooperation with iBiquity, we introduced a multi-standard digital terrestrial radio solution for high-quality analogue and digital radio for in-car entertainment anywhere in the world. In Identification, we were the first to market with extended access control for passports to help address tighter security requirements and we started the German e-Passport shipments. Furthermore, we have design-in wins in the strongly-growing contactless banking market in Asia.

Sales in MultiMarket Semiconductors amounted to EUR300m compared to EUR302m in the previous quarter, which is equal to a sequential comparable increase of 3.2%. In a strengthening market, we maintained our market share in the fourth quarter. In Q4, application-specific standard products saw continued growth. In particular, microcontroller sales were strong. Q4 was also the strongest ever quarter for Logic.

The sound financial and operational performance in the business units was evidenced by an adjusted EBITA of EUR61m, which is equal to an EBITA margin of 20.3% and flat to previous quarter performance. We also welcomed in the fourth quarter Alexander Everke as Senior Vice President and General Manager of the business unit.

Sales in IC Manufacturing increased to EUR52m from EUR37m in the third quarter. The adjusted EBITA amounted to EUR36m compared to EUR24m in the third quarter. The exit from the Crolles2 Alliance was completed at the end of December. We received a payment of $129m for the first tranche of the Crolles equipment in December 2007 and the second payment is to follow in the middle of 2008. The closure of Boeblingen is on track and should be completed in the first half of 2008.

Lastly, sales from our Corporate and Other segments came in at EUR15m compared to EUR23m in the third quarter and which is mainly related to the reduced IP licenses sales.

Our book to bill ratio was 0.89 in the fourth quarter and our factory utilization was stable at 84%, up from 70% in the fourth quarter of 2006. At the end of the fourth quarter, our cash position improved to EUR706m compared to EUR681m at the end of the third quarter, largely reflecting the sale of equipment from the Crolles2 Alliance. The net cash provided by operating activities in the reporting period was EUR108m and the net CapEx amounted to EUR123m.

And now to outlook. In response to requests from analysts and investors, we have decided to also provide you year-on-year quarterly guidance, as opposed to the sequential guidance we have provided up until now. We do remain concerned about ongoing currency volatility, as well as a slowdown in the global economy that could impact sales performance.

In terms of the first quarter, the market remains soft and visibility in the order book remains short. Taking seasonal patterns into account, the Company expects a 9% to 13% sequential sales decline in the first quarter of 2008 on a comparable basis. And this translates into a year-on-year low single-digit sales increase on a comparable basis.

Thank you. We would now like to open up to your questions. Jan Maarten, can you take over?

Thank you, Peter. Hello. This is Jan Maarten [who is again], responsible for investor relations within NXP. As before, I will facilitate this call as necessary, the Q&A session, addressing the questions to Frans and Peter. And again, we would like to ask you to limit yourselves to only one question. That will give more people the possibility to ask questions. And any further questions may be answered [after the eventual] second Q&A poll by the operator or may be addressed directly to me after the end of this call. And with that, I would like the operator to start the Q&A session.

Thank you, sir. (OPERATOR INSTRUCTIONS). The first question comes from Mr. Lee Zeltser from Merrill Lynch. Please state your question, sir.

Hey, guys. What I was hoping you could provide for, as I know you don't give margin guidance, but, with all the changes in your cost structure, can you give us a sense of what your target adjusted EBITDA margins are over the intermediate term? Where would you like to get to in your model?

Yes, as what we have earlier indicated, we find it -- we will not give any forward-looking information other than the sales information that we already have guided to. And particularly because of the sort of business that we are in, the semiconductor business, things can change very rapidly, so we would like to stick to that what we already have earlier indicated.

Okay. Maybe I can ask the question a different way. What kind of detail or what kind of color can you give us to better assess the operating leverage, given some of the expectations you have in Q1 and then beyond that?

What we've tried to do already in the booklet, in the quarterly report, as well in the annual report, is to some color on the actions that we have taken. And that, in comparison -- in combination with the sales forecast that we are providing, is the information that we are willing to give as a Company on this moment.

Okay. We can move to the next one.

And the next question comes from Mr. Sundar Varadarajan from Deutsche Bank. Please state your question, sir.

All right, thank you. Could you talk about where your utilization level has been in the first couple of months in the current quarter, given that we're already into March, and what impact the disentanglement or withdrawal from Crolles is having on your overall factory loading as we are halfway through Q1?

First of all, the value utilization, the value utilization in the first half of the quarter is in line with what we have seen in the last quarter of 2007.

Then, you talk about the disentanglement of Crolles and the impact of that on the utilization. That is rather limited because, as you know, Crolles was in the advanced CMOS activity and, with stepping out of the Crolles Alliance, we don't have any longer an in-house production for advanced CMOS, so we are going to outsource that capacity completely to third parties. For that, we have already indicated that we have a longer-term alignment and agreement with TSMC.

So if I want to summarize your answer, you're still at around 84% utilization into Q1.

Yes. We are in the -- around that percentage, yes, in the first half of the quarter.

All right. Just one more question. On the IT disentanglement costs, when do you expect that to go away? We are already more than one year since we did the spin-off. When do we expect those costs to finally not show up in your results?

At the end of 2007, we have concluded basically 95% of all the activities that we have to do. So at the end of the first quarter, we expect that we will be ready. It was a very complex operation where we had to disentangle all the systems that we had. So that was causing the lengthy process that we have to go through for all the operations that we have in the different countries. So it will be concluded by the end of this quarter.

So from Q1, the [add back] you had for IT disentanglement, is it fair to say that number goes down significantly?

The IT disentanglement cost will, after the first quarter of 2008, go down substantially.

Okay. Then, I suggest we go to the next question. Operator, please.

Thank you, sir. The next question comes from Mr. Jeff Harlib from Lehman Brothers. Please state your question, sir.

Hi. I was wondering if you could bridge us from the EUR100m of savings at year end '07 to the EUR250m. What are the key actions either currently in process or planned to get to that number? And also, if you could just talk about what the cash savings are. I know there's some [D]&A in those numbers.

Yes. First of all, the information from EUR100m to EUR250m savings, that's the information that we already have indicated in previous calls. We have a lot of actions that we have started up in the different areas. That is as well in the cost of goods sold. There's, amongst others, the closure of Boeblingen that we have indicated. It's the stepping out of the Crolles Alliance. Those effects will become visible in the course of 2008, Crolles of course as from January 1 and Boeblingen in the course of 2008.

You will see also the benefits for the SG&A efforts that we have made. Amongst others, we just mentioned already the IT savings. Business Renewal is a continued process, so we will, as we speak, find and define new actions which will bring in in that process. So that will give us the full benefits of that. On a run rate basis, that will [lead] that we expect to surpass the EUR250m savings in the fourth quarter of 2008.

Okay. And a quick follow-up just on pricing, what you're seeing in your businesses in the weak demand environment. Are you seeing more price pressure in certain businesses?

The price pressure going into the year appeared to be on a reasonable level, but that is in part because NXP is also focusing to bring more competitive and differentiated products into the market. I spoke about the Roadmapping for Leadership, which is all about getting products that others cannot, let's say, one-on-one copy and have, as a way to improve the gross margin. In 2008, we are very focused on working on gross margin improvement, both through pricing as well as through cost reductions of the cost of goods sold. And we see opportunities to work on this, while we are in a slow market, that will still give an opportunity to improve margins.

But no major impact from pricing yet?

I think I gave you quite some color on pricing.

Thank you.

Thank you, sir. The next question comes from Mr. Michael Boam from BlueBay Management. Please state your question.

Hi, it's Mike Boam of BlueBay Asset Management. Just following up on the earlier question on capacity utilization, is it true that the higher the capacity utilization, the more efficient operations are and we should expect a higher EBITDA than last year for Q1?

The -- when the capacity utilization is high, then mostly the efficiency of the Company, of the factories, is better than under normal -- when you have low capacity. That's completely correct. What we have indicated, Mike, is that the capacity utilization in the first half of this quarter is in line with what we have seen in the fourth quarter of last year.

That's significantly ahead of last year, because you were running at 69% during the first quarter.

That's correct. That's correct.

And can I just -- just as a very brief follow-up, in terms of the Home division, can you give us some clarity as to what you expect in 2008? Do you see sales stabilizing around the EUR170m a quarter level or have we got another leg down to go here?

Yes, let me give you some color on the Home unit. I may bring to recollection that there were some questions last year on when the Home unit would go into breakeven and into black territory. And at that time last year, I said that that would happen some time during the second half of this year. We have worked and we are working strongly on cost reduction of the organization.

And in terms of the revenue picture, I'd like to bring to your recollection that there are basically three buckets. There's the very strong component business, for example silicon tuners, which is a business where we have leadership. That continues to perform very strongly. Then, there is the traditional analogue [COT]-based business that has been going down dramatically last year, but we are still doing sales there. Our market share is going up. But as the market will further mature and decline, eventually there is some exposure over the year.

And then, the third bucket is the -- is probably the most exciting one and that is where various competitors are trying to win the digital game. In the digital side, we have mentioned last year, during the third quarter call, that we have won several customers for our digital TV chips. And one of these customers, in the meantime, has gone into production, still modestly ramping up. The others will follow later this quarter and early Q2. We believe we will see significant growth in the digital side. But as it comes from a relatively low starting position, even significant growth will take time to become a very, very substantial number.

We do believe that we are on the right path with the Home unit. So seeing it through 2008, we need to have some patience. And I hope to be able to report some time during the second half, let's say, the better news.

Okay. But we shouldn't be looking at the same sort of declines that we've seen 2007 over 2006, by any means.

I think I've given you quite some color on the Home unit.

Okay. Thanks. Let's move to the next one.

The next question comes from Mr. Jake Kemeny from Morgan Stanley. Please state your question, sir.

Hi. When I look at the results of the adjusted EBIT in each of the business units, it looks like Mobile was weaker than I expected and in general they're down in some spots. So can you help me disentangle how much of the EBIT shortfall was because of foreign exchange and how much of the strength in the EBIT improvement in the Manufacturing unit was because of the exit from Crolles?

First of all, foreign exchange, what we have indicated in earlier calls is that approximately 20% of our results are -- that we have net exposure. We are long in dollars. That leads to the net exposure of 20%.

The average dollar rate that we have seen against the euro was, in the third quarter, 1.36 and, in the fourth quarter, that was 1.44, so we have an $0.08 deviation. And what we have indicated earlier in -- is that the currency effect that we have, the currency exposure that we have, will lead to approximately -- on an annual basis to a EUR12m result for every $0.01 deterioration. So you would take that up in the earlier explanation that I gave, $0.08 deviation, that's EUR96m on an annual base, so that's EUR24m in the quarter.

The other thing was the Crolles. Can you repeat your questions about Crolles?

Yes. The EBIT improvement in the Manufacturing unit fourth quarter '07 over '06 was very strong. And I was wondering how much of that was because of the exit from Crolles versus other initiatives, like the Business Renewal Program.

The exit of Crolles is only taking place in the first quarter of 2008, so we were still responsible for our part of the capacity in Crolles in Q4.

Okay, Jake. Thanks. Let's move to the next one.

Thank you, sir. The next question is from Mr. Eric Reubel from MTR Securities. Please state your question, sir.

Gentlemen, thank you for taking my call. You talked a little bit in your prepared remarks about the Roadmapping for Leadership, reassessing the R&D programs and reallocating EUR135m across your programs. Can you give me a sense of where I should be looking for the Company, thinking about its growth engine, if it's MultiMarket Semiconductor, Auto, digital Home or wireless? Where's the focus? Where should you be managing my expectations to see the growth engine emerge in '08 and '09?

Yes, I can give you some indications on the major shifts. So first of all, the Home unit overall is reducing its R&D investments, as you can anticipate, of course. Secondly, the Mobile unit has shifted R&D investments internally, overall staying more or less flat but shifting it more to the cellular baseband and system solutions versus the application engines and also emphasizing single function multimedia components, which are in good demand. So overall, M&P flat, but some internal shifts.

Then, the increases can be found respectively in MMS and in Automotive and in Identification. All three are stepping up their R&D investments in recognition of strong leadership positions and high-margin opportunities. And we expect that it will take some time before the return on investment on those increased R&D investments will come through, but we think that the investments are better placed in these areas.

And if we look out into '08, can you give us some color on which segments you think will be providing growth drivers on a qualitative basis?

From the listing of all the segments in the Roadmap for Leadership, you see that we have quite some product lines. And some will see quite significant growth, like the digital area in the BU Home. Some will be more stable and obviously some are at the end of the product lifecycle and may decline. So in this call, I cannot give you detail on the 60 product lines that we have, so -- and on the business unit level, we give a quarter -- NXP in total, we give one quarter guidance, which is already given before, which is a 9% to 13% sequential decline.

Thank you very much.

Okay. Thank you. Next one, please.

The next question comes from Mr. Guy Baron from Credit Suisse. Please state your question, sir.

Hi. How much of the effect in Q4 in terms of revenue was -- would you attribute to normal seasonality? And then, what's your view of normal seasonality in Q1, outside of the environment that you're seeing?

First of all, what we have indicated also in the press announcement is that we were growing q on q with 1.9%. And that was -- I was reading today also one of the analyst's reports, which was indicating that Q4 was weaker than normal, so that's what we saw also. So the 1.9% was making sure that we kept our market share there.

For Q1, the jury is still out. We see a seasonal pattern, but that -- the Q1 looks to come in more difficult than what we normally expect in a q-on-q decline. You might have seen Dataquest Gartner's announcement of the past days that they now also expect that the business environment is becoming more difficult and that their forecast for the year is coming down. So we see that already reflected in the Q1 figures and also the Q1 guidance that we have indicated.

Okay. And then, just a question on the M&A front. As you now look to drive top-line growth, do you foresee having to make additional customer-driven acquisitions, such as the Samsung-tied SiLabs acquisition?

Yes. Both acquisitions in the Mobile space were to complement our technology base in relation to the roadmap of products that we want to create. That's where you are on a road, you -- either you play to win or you may fall away. I don't see immediate similar weaknesses in the Mobile area as the two that we have fixed last year. Other than that, we continue to be vigilant on what is possible in the market.

As we've also stated in our press release, we continue to believe that creating leadership positions is the right way to create value, either by doing so in our own house or by facilitating others, such as we did last year with the cordless activity in the DSP Group. At this moment, I cannot give you any further details.

Okay. And then, just a quick item. The second payment on Crolles, is that -- should we assume that's the same as the first?

That's approximately the same as the first.

All right. Thank you.

Okay. Operator, please.

And the next question comes from Mr. [David Phipps] from Citigroup. Please state your question, sir.

Hi. Thank you. And most of my questions have been answered, so maybe we can talk about the CapEx plans for 2008. Any cash restructuring cost? And when we switch over to the U.S. dollar financials, are you going to post up some U.S. dollar financials for 2007 on a quarterly basis, so that we can compare them with our models?

Yes. We will make sure that you will have all the numbers comparable, as what we have done so far. So we will adjust the 2007 numbers to dollar numbers.

Okay. And then on CapEx and cash restructuring costs expected in 2008?

CapEx will be in line with the indications that we have provided earlier, so what we strive for is CapEx spending as a percentage of sales between 6% and the 8%. We will spend that mainly in maintenance investments, or the -- or in our front-end operations and in our back-end operations where we want to grow with the market. So depending on how that the market is developing and our sales are developing, we will spend either the -- on the left side of the 6% to 8% range or on the right side of that range.

The cash restructuring cost, the cash restructuring costs what we have announced so far were related to Boeblingen. Boeblingen, we have taken the results of that already in the first half of 2007 and we expect to spend the remaining amount of money in the first half of 2008.

Okay. Next one, please.

The next question comes from Mr. Ryder Campbell from Barclays. Please state your question, sir.

Yes. Could you just tell us what (inaudible) EBITDA was for the quarter and for the full year?

The EBITDA for the quarter was EUR240m -- (inaudible) EBITDA, and I have to look at it, sorry. The EBITDA for the fourth quarter of 2007 was $74m. And what was the other --? For the full year, it was $249m.

Great, thanks.

And the next question comes from Mr. Henning Lenz from WestLB. Please state your question, sir.

Yes. In fact, it is Alexis Renault from WestLB Mellon Asset Management. I have a couple of questions. First, regarding your EBITDA in Q1, shall we expect compared to last year a small improvement, taking into account the small growth you expect Q1 against Q1?

As what we have indicated at the beginning of the call, we only give guidance with regards to the sales development and we don't provide any guidance about EBITDA development.

But if you have achieved some savings, if you have capacity utilization flat and a small higher turnover, I struggle to understand why you do not expect any improvement of your EBITDA in Q1 against Q1 last year.

I appreciate your request, but we do not provide any information about the EBITDA development looking forward.

Regarding the cash restructuring expense for '08, you made comment without giving figure. Can you give us a concrete figure for the cash [restructuring] expense in 2008?

We have indicated in earlier calls that we expect that the cash spendings related to Crolles were around -- sorry, around Boeblingen were around EUR70m. We -- the major part of that will be spent in 2008.

Okay. And last question, when do you expect a turnaround of the business unit Home?

On the business unit Home, in one of the previous questions, I've given quite some explanation on what we are doing and what my expectation is, leading to achieving a breakeven black figure some time during the second half of the year.

Okay.

Okay. Thanks.

And the next question comes from Mr. James Croom from Regiment Capital. Please state your question, sir.

Yes. Could you just talk a little bit about your willingness to exit certain businesses? You mentioned consolidation, but at what point do you start considering either selling a business or closing it down, so maximizing return? And in that same vein, can you just talk about where you want your liquidity? You have EUR706m -- EUR600m. Is that some -- do you want to keep it at that level or are you comfortable taking it down to some other level and what would that be?

Okay. Let me start with the first question. In the Roadmapping for Leadership, actually we reduced investment in 12 businesses. That is quite significant. Some businesses that can be milked and therefore don't deserve further R&D investments, but we can milk them ourselves. Some businesses where we actually feel that merging it with a competitor would make sense.

I gave you the example of the DECT & Voice over IP business. Another great example would be just accomplished with the announcement is to merge our can tuner business with Thomson to create the absolute leader in this market. It's a mature business. The market is not growing any more, but, by combining it, we can take cost out and therefore we can improve profitability and prolong the life of this cash cow.

So quite good. And it also shows that we are willing to consider creative moves to achieve this. It turned out that NXP's business was slightly bigger than Thomson's business and, as a consequence, we will have the majority in this joint venture. But if it would have been the other way around, we would have been happy to deconsolidate that business and still create a leader.

So, with that example, I indicate that we have no prejudice against any of those type of transactions, as long as we create value and we think that the strategic imperative to create leadership positions is the right one in this industry. And where that will lead us during 2008, I will not make any prediction.

With regards to the cash, we feel very comfortable with the EUR706m cash that we have. We have indicated earlier that we need a certain cash amount for working capital requirements. When we started the Company, we expected to be between EUR200m and EUR300m. In the meantime, we have learned that we can do that with slightly lower amounts. And moreover, we would like to have some money available for doing restructuring actions, if required, or doing small bolt-on acquisitions. For sure, given the current market circumstances, we feel very comfortable with the EUR700m that we have in cash and we will manage around that.

Thanks.

Okay. Thanks.

And the next question comes from Mr. Matthew Williams from Canyon Capital. Please state your question, sir.

Hi. This is Bill Matthews from Canyon Capital. Can you give us a little more color in the ID area and the smartcard security IC area? What is the revenue side to that business now and where is the focus? Is it in authentication, ID passport? Where are you guys focusing and how fast is that business growing?

We do not separate out the ID portion of the Automotive & Identification business unit. I can say that it is a sizeable proportion of the total unit. We have consistently focused in that business line on high value-added product lines where we have significant differentiation.

Some of the strong segments that we have relate to the transportation segment. Think about MIFARE contactless smartcards, in the passport area, embedded chips in secure documents. Contactless banking is another area of strength. And we have, let's say, as promising future key products, technologies like near field communication, which will be embedded in mobile phones for having the electronic wallet in your mobile.

Compared to our competitors, who are more in SIM cards and contact smartcards, bank cards, we clearly operate in the higher-margin segments of the market. And this is thanks to years of commitment to innovation.

And could you name your competitors? Infineon, [Admel], [Sanyo], who would you consider to be your competitors in this area?

Well, you've just named a few. Some others, perhaps Inside Contactless, but you've certainly mentioned already several of them.

Okay, great. Thank you.

Okay. Thanks.

The next question comes from Mr. Steve Pawliczek from Goldman Sachs. Please state your question, sir.

Thank you. This is Steve Pawliczek from Goldman Sachs Asset Management. I just have a quick follow-up question. You reference your cash balance [versus] what you view as your minimum requirement. Have you looked at repurchasing any of your bonds, given where they're currently trading, or potentially with the Crolles -- the second portion of the Crolles proceeds?

That question can be answered very quickly and very clear with a no.

Okay. Thank you very much.

Operator, then I think we can go to a few more questions in a second turn.

Thank you, sir. We have a follow-up question from Mr. Lee Zeltser from Merrill Lynch. Please state your question, sir.

Hi. Just a quick question. With respect to your floating rate notes, have you guys engaged any swaps that [caps] in the fixed rate? And if so, if you can let us know how much and what the rate is.

We have looked at that. We didn't do anything in that area.

Okay. Is that something that's in your thought process going forward, given the decline in LIBOR?

To be honest, that will be always in our thought process.

Okay. Thank you.

We have another follow-up question, sir, from Mr. Sundar Varadarajan from Deutsche Bank. Please state your question, sir.

Thanks. You gave your revenue guidance year over year on a comparable basis. Just so that -- there have been too many moving parts in terms of asset sales and business [you've acquired]. Could you give us a sense for what your Q1 '07 revenues would have been based on your current mix today, so that it gives us a better sense for what you're talking about when you talk about slight growth on a year-over-year basis?

Yes. You can calculate it from different angles, but I don't think it's -- it's information that will be on the Internet in any case. So what we have done on a comparable base in the first quarter of 2007 was a sales number of $1,465m. So we will start --

$1,465m. Okay. Thank you.

Okay. Next one, please.

And we have a follow-up question, sir, from Mr. Guy Baron from Credit Suisse. Please state your question.

Hi. Just back for a few more here. Can you just (inaudible) adjusted EBITDA includes the EUR19m of stock option compensation?

Yes, that's included.

So that's -- okay. So that is already added back to the EUR243m.

No. That's not added back to the EUR243m, so we have not adjusted the EUR19m in the EBITDA. So when you would make it comparable with previous quarters, then you should -- you can add that back. But we think that it's prudent to show that as a normal part of our EBITDA.

Okay. Was there a similar expense last quarter?

No. There were no similar expenses last quarter.

Okay. And do you expect this expense to recur or is this really a Q4 item?

It's not a Q4 item. It will recur, but it will be now booked on a quarterly base instead of on an annual base.

Okay. And how much savings did you realize on an actual basis in Q4?

It's a number that we have -- we have indicated quite some details about how that [organization] was developing in the course of the fourth quarter and in the course of 2007. But we have not disclosed any specific information of the savings in the quarter.

Okay. And then, just a last one here, with the (inaudible) question, if I could. With a recent, I think, significant write-down in the value of their investment, the sponsors, I believe, obtained a much more active role in management and operations. What's your sense of the areas they're most focused on and then what's your sense of the major remaining transformation hurdles that you're facing near term here?

Okay. Let me give you a little bit of an overview. Let me first remark that the write-down by the KKR subsidiary reflects one out of the six sponsors that we have. In fact, two sponsors out of the six, but the -- and the others did not. I think we could say that it is largely in line with how the market -- the stock market has developed and how the semiconductor stocks have performed. And as such, we should not consider this to be an extraordinary event.

We also do not see that it correlates to a change in strategy for NXP. We have a plan. We are working on this plan. We are executing on it. We are delivering on it, both, let's say, our strategy to create leadership positions and our Business Renewal Program to enhance operational performance. And we have the conviction that this will eventually deliver the return on investment for our shareholders that they are looking for.

All right. Thank you.

Okay. I think we have --.

We have a follow-up question, sir, from Mr. David Phipps from Citigroup. Please go ahead with your question.

Thank you. My question has been asked and answered.

Okay. Last question?

Okay. Then I think we have one more minute for the very last question.

Mr. Phipps, do you have a question?

Asked and answered, thank you very much.

Right. Then I suggest that we close the call. I'd like to thank you very much for all your very good questions. And I hope that we are able to welcome you back in April, where we can continue to share with you the progress that we are making. In the meantime, we continue to be focused strongly on improvement and enthusiastic about all the improvement opportunities that we have. Thank you very much.

Thank you. This concludes the NXP Semiconductors fourth quarter and full year 2007 results investors' and analysts' conference call on Tuesday, March 4, 2008. For any further questions, you may contact NXP's Investor Relations department. Please visit the website, www.nxp.com/investor. Thank you for participating. You may now disconnect.