恩智浦 (NXPI) 2009 Q1 法說會逐字稿

Welcome to NXP Seminconductors First Quarter 2009 and analyst conference call on the 29th of April 2009. Doing the introduction are Mr. Rick Clemmer, CEO and Karl-Henrick Sundstrom, CFO of NXP.

All participants will be in a listen-only mode. After the introduction there will be an opportunity to ask questions. Please note that this call will be recorded. I will now hand the call over to Mr. Rick Clemmer. Please go ahead sir.

Thank you very much. Ladies and gentlemen, welcome to NXPs first quarter 2009 results conference call and also my first call since becoming CEO. We were not in a position to talk to you earlier because of the bond exchange that started on March 3. So I'm very pleased to have the opportunity to talk to you today. I hope you have all had an opportunity to see a copy of the results, press release, and the presentation on our website.

Before I start today's call please be aware the forward looking statements will be referenced during the 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 only give guidance for sales for the next quarter to be recorded and no further detailed guidance.

Let me begin with a few comments on our first quarter results, a summary of the market conditions that we face, and to talk about some of the key developments during the period. I will then hand the call over to Karl who will provide you with more detailed information on our financial performance and on each of the individual business units.

All of you are well aware we are in the midst of an unprecedented global economic slowdown and widespread turmoil in the financial system. Many of our end-market sectors have been significantly affected by considerable demand decline and by the challenging credit markets. As a result, conditions in the Semiconductor industry continues to be very challenging with very low visibility in true end demand. The impact of these factors were significant with Q1 comparable sales declining 29.4% from Q4 2008.

Towards the end of first quarter we did see an increase in orders. However, given the lack of visibility in the end-markets it is not possible to determine whether the demand was coming from a sustainable improvement in end-demand or more likely from a combination of [one-off] factors such as supply chain replenishment. We are certainly not confident enough to be calling the bottom at this stage.

Within the context of this challenging market environment we have been focused on driving four key actions. First, driving our 2009 revenue performance. Second, taking significant actions on costs through our Redesign Program. Third, reviewing our product line strategies and investments given the impact of the market downturn. And finally, completing our debt exchange.

Our first priority is to drive profitable revenue growth and grow market share. Let me highlight a number of examples of this across our businesses.

In MultiMarket Semiconductors we have recently seen increased demand for wireless infrastructure in China as a result of their stimulus package, the business that's successfully taking advantage of this opportunity and through expedited deliveries and was able also to get additional design wins and leading base station manufacturers.

In Home we have started mass production of the TV543 with key European and Japanese OEMs. Also, fully functional samples of our new 45 nanometer digital TV platform, the TV550 have resulted in a major design win and significant engagements with Tier 1 TV OEMs.

In Automotive we can report, amongst others, a design win for our next generation Car Radio Tuner as a leading Japanese Infotainment manufacturer, a major design win for Complete Car Access System for a large European car maker, and a first pilot production order for our Telematics solution.

In Identification we have an excellent win with Moscow Metro, which is the worlds first major transport system to operate fully contactless. Even with paper tickets using NXPs MIFARE Technology. Also, we had a Mobile Pay TV design win at a large European Smart Card supplier for the Chinese market and Oberthur Technologies. NXP is also moving ahead with NFC deployment compatible with MIFARE Infrastructures.

Our second priority has been driving our Redesign Program, I'm pleased to say that significant progress has been made on execution of the large scale program announced in September of 2008. The actions being taken are designed to both enhance efficiencies and deliver world-class processes and to improve cost competitiveness with a target for benchmark manufacturing and operating costs throughout the businesses.

Since the announcement we have made significant progress in detailing the redesign program and deploying the required measures within global NXP. This included taking a restructuring charge of USD500 million in the third quarter of 2008 and completing the required consultations with unions and employer representatives.

In light of the deteriorating financial and market conditions that started in the third quarter of 2008 and has been accelerated in the fourth quarter we have taken steps to accelerate and expand the redesign program.

Savings are now expected to be realized more quickly than previously anticipated. We also expect that savings will be higher than the USD550 million we originally estimated. We also expect that the cost of the program will be lower than initially expected and estimate the total cost of the program at no greater than USD700 million rather than the original USD800 million projection.

Third, during the first quarter the management team and I spent a great deal of time going through a deep dive process with each individual product line. With complete discussions about their customers, market potentials, market opportunities, competition, technology, the product status, and requirements on how to win in the businesses we choose to participate. We have one of the broadest product portfolios in the industry.

As a these deep dives we are selectively refining our product line strategy. You will see the results of this as it develops over the coming quarters.

Finally, a few weeks ago NXP completed our debt exchange offer to reduce the company's overall debt and related interest expense. As a result of this offer NXP has reduced its debt by roughly USD500 million and reduced its interest payments by around USD30 million on an annual-basis. This is a significant achievement, especially in the current market.

We are continuing to investigate all alternatives to further improve our capital structure. It is, however, too early to give any further comments on that.

That concludes my overview of the first quarter in terms of the market conditions and the priorities we are working on within the businesses.

I would now like to turn it over to Karl to take us through the financial details of our performance in the first quarter of the year.

Thank you, Rick. The first quarter has been very disappointing as we progress the execution of the Redesign Program and complete the debt exchange, as Rick mentioned earlier.

On today's call I intend to provide a brief overview of the financial performance of NXP as well as some of the key points of the performance of the individual business units during the quarter. In terms of the overall financial performance, all figures all quoted in US dollars.

We recorded sales, excluding Wireless business wafer sales for the first quarter of USD673 million. The [direct attempt] at 29.4% decline from the fourth quarter in light of extremely challenging market conditions within the semiconductor industry. This number excludes USD29 million of wafer sales for ST-Ericcson wireless loan venture.

There was a significant decline in gross margin in the first quarter compared to the first quarter last year mostly explained by the lower sales volume and the (inaudible) Wireless manufacturing operations.

First quarter adjusted EBITDA, excluding effects of PPA, came in at a negative USD71 million, down from a positive USD183 million in the first quarter of 2008, and consequently USD112 million compared to the fourth quarter.

Adjusted EBITDA for the quarter was negative USD188 million compared to a profit of USD41 million in the first quarter of 2008 and a loss of USD84 million in the fourth quarter 2008.

Deterioration from the fourth quarter was largely explained by lower sales and only partly compensated by the cost reductions.

Operational cash flow for the first quarter was negative USD368 million of which USD92 million relates to restructuring costs for our Redesign Program.

While we managed further reductions in inventory levels and a lower level of CapEx, this was more than offset by the short decline in sales combined with the effects of the high proportion of fixed costs in our cost sales.

Let me talk now to the performance of the individual business units. All figures I quote exclude the effects of purchase price accounting, PPA, and incidental items and are provided on a comparative basis unless stated otherwise.

Furthermore, we have introduced a new method of cost allocation operations in corporate and others to the individual business units in order to account for fully allocated P&Ls to the level of EBIT of the business units.

The allocated costs include, among others, costs related to corporate activity that are for the benefit of the business units and the capacity costs of the manufacturing operations. The segment information for prior periods have been restated to reflect this new allocation.

Automotive and Identification. Sales came in at USD179 million compared to USD263 million in Q4 2008, a comparative decline of 31% and USD337 million in the first quarter of 2008. This decrease was largely driven by continued deterioration of the automotive markets during the quarter.

Adjusted EBIT amounted to a negative USD44 million compared to a positive USD16 million in the fourth quarter of 2008 and USD44 million in the first quarter of 2008. The decline in EBIT is directly related to the reduced sales and only partly offset by lower cost levels.

MultiMarket Semiconductor sales amounted to USD315 million compared to USD424 million in the fourth quarter of 2008 and compared with a decrease of 25% and USD549 million in the first quarter of 2008.

With the effect from January 1, 1009, the remaining activities of the former business units Mobile and Personal are consolidated in the MultiMarket Semiconductor segments. Results of previous years have been reprinted to reflect this.

Adjusted EBIT came in at a negative USD60 million compared to a negative USD47 million in the fourth quarter and compared to USD81 million in the same period of 2008. Adjusted EBIT during the period was impacted by reduced sales levels.

In business unit Home, sales amounted to USD135 million compared to USD223 million in the fourth quarter of this year and compared to US205 million in the first quarter of 2008. The sequential decrease of 38% mainly caused by the continuous erosion of the analog market.

Adjusted EBIT showed a loss of USD79 million compared to a USD40 million loss in Q4 and a loss of USD34 million in the corresponding period last year. The EBIT margin has been effected by lower sales and under loading in manufacturing. The consolidation effects of the Conexant acquisition were substantially offset by the redesign savings achieved in the acquisition.

Third party Manufacturing Operations excluding wafer sales for ST-Ericsson joint venture amounted to USD32 million compared to USD47 million in the fourth quarter and USD62 million in the first quarter 2008. The decrease mainly relates to lower sales for third parties of our manufacturing joint venture.

Adjusted EBIT was a loss of USD9 million compared to a loss of USD20 million in the fourth quarter and a loss of USD7 million in the same period last year. Adjusted EBIT was impacted by under loading and reduced sales in the manufacturing for third parties.

The utilization of our manufacturing base dropped to 36% in the first quarter 2009 versus 56% in the fourth quarter 2008 and 87% in the first quarter of 2008. The disappointing decline in utilization rates is largely due to the weakened demand in the semiconductor industry. However, the actions being taken in our Redesign Program will [work reduced] footprints and excess capacity we should reprotect utilization.

Sales in Corporate and Others were USD12 million relating to IP licensing and sales from NXP software compared to USD22 million in the fourth quarter of 2008 and 80 million in the same period last year.

Adjusted EBIT was a loss of USD5 million compared to a profit of USD1 million in Q4 2008 and USD2 million in the first quarter of 2008.

Regarding our liquidity position, cash at the end of the first quarter stood at USD1,706 million. This includes USD92 million from the sales of the ST-NXP Wireless and USD200 million drawn from the NXP revolving credit facility in the first quarter. At the end of the quarter the credit facility was loaned for an amount of USD600 million. The Q1 cash positions compared with the USD1,796 million at the end of the fourth quarter 2008. We continue to improve working capital and to lower CapEx.

Net cash provided by investing activities was USD105 million which provides a cash proceed of USD110 million from the divestment of our remaining 20% in ST-NXP Wireless and the sale of our remaining in DSPG.

Book to bill ration in Q1 2009 improved to 1.18 compared to 0.71 in Q4 2008. We believe the improved book to bill is primarily driven by supply chain replenishments as opposed to any fundamental improvements in the semiconductors market. Market condition remains extremely challenging for the semiconductor industry with very low visibility.

In terms of outlook, visibility of sales development going forward remains extremely limited. The very weak macro-economic conditions are still continuing. Although we recently experienced positive order book developments, we believe the improved book to bill is primarily driven by supply chain replenishment as opposed to any fundamental improvement of the semiconductors market.

Under these circumstances, a 10% to 25% sequential sales increase in the second quarter on a business and currency comparable basis could be achievable, which excludes wafer sales to the ST-Ericsson Wireless joint venture. It is still very unclear how the overall market sentiment in the remainder of the year will develop.

Thank you and we would like now to open up to your questions. (Inaudible) take over.

Thanks, Karl. This is Jan Maarten again. As usual I will facilitate this Q&A session addressing your questions to Rick and Karl.

Again, would you please limit yourselves to only one question as this will give more people the possibility to ask questions. And as you know, any further questions may asked in an essential second Q&A poll, in private] or may be addressed directly to me after the end of the call. And with that I would like the operator to start Q&A session.

Thank you, sir. If any participant would like to ask a question please press the star followed by the two. (Operator Instructions). There will be a short pause while participants register their question. The first question comes from Sundar Varadarajan of Deutsche Bank. Please state your question, sir.

Good morning. I was wondering in terms of your restructuring plan if you could give us some more [mind] in terms of how you see that $700 million being spent over the next four to six quarters and when we should see the savings being realized in terms of on an annualized basis? And also if you could clarify how much of the cash restructuring payments have already been made out of that 700 and does Q1 reflect any of the savings that you are currently expecting from the Redesign program?

Sundar, that was a lot of questions in one question but to start with the timing, we believe we're ahead of time and if you go to report you would see that if you take away the Wireless business we are doing well in the Redesign. The previously announced amount is the same but we've been slightly ahead of the game.

And when it comes to the total amount we have said if it costs USD700 million and we spent 48 in Q4 last year, we spent 92 in Q1 this year, which means there's USD562 million to be spent initial and as we said, after a maximum where we believe no greater than 700 in total. And the timing of those we believe will be according to what we have said before.

But we are a little bit unsure when the banks will. But we also say in the press release that we have substantially increased between Q1 and Q2 and sometimes it's a little bit hard to understand exactly the timing but the bottom line is there's 560 left.

Okay. Thank you.

The next question comes from Michael Boam, BlueBay Asset Management. Please state your question.

Can I just ask a follow-up to the last question? Can you give us some definitive milestones as to where the savings should be on a quarterly basis throughout this year please?

We can give you some indications of that. Clearly we've talked about our official wafer fab facility that was originally planned to be shut down later in third quarter and we've now accelerated that where we anticipate being able to close that facility by June 30. So the savings associated with that facility, we would be able to reflect the bulk of those in an ongoing annual basis in the second half of this year.

How much is it?

We don't break down the savings by a specific facility but it's clearly a significant portion of the manufacturing operations savings that we have reflected.

If I can very briefly, is it possible, in terms of the last time you had a conference call I know you've posted one half page that provides pro forma data but commenting on last years numbers, if at all possible on a pro forma basis to try and guess some comparison as to how the business is performing comparably. And finally, can you tell me what you think you will spend away from the restructuring program this year on CapEx?

We're going to pro forma, we did (inaudible) last year. We sent in a 6K regarding the pro forma on our debt of how our business --

But that was just the P&L, I think. There was no balance sheet, no cash flow depreciation items. So it doesn't say anything in terms of the information.

Okay. I see what you say. When it comes to CapEx we have previously said that we believe it's going to be some -- we haven't really given guidance on that one. It's going to be substantially down and in this quarter we have probably 100 less than Q1 last year and we are about the same level as Q4.

Should we view some of the USD35 million to USD40 million as being a quarterly run rate from here? You obviously do have a budget for this year so there must be a number.

Yes, we have not talked about that publicly but clearly during this economic environment we've taken significant actions to reduce our CapEx investments and we'll continue to moderate those with the uncertainty of the market, but then want to make sure we can make the appropriate investments to take advantage of the market uptake and the increased demands that begin to materialize.

Okay. I suggest we go to the next --.

Michael, most of our CapEx excluding the Wireless business is demand driven and basically in the back end. So depending on volumes on certain products we have a different mix of CapEx. And with this very big uncertainty right now I think we don't help anybody by giving a number.

Okay. Next one please. Thanks fellows.

The next question comes from Jeff Harlib of Barclays Capital. Please state your question.

Yes, I should say I'm Marcus. You give guidance of 10% to 25% in Q2, if you go through each of the businesses, Automotive, ID, MultiMarket, Home, talk about what you see in the end-markets in those businesses and also how you are seeing inventories?

Sure. So in the Automotive market, I mean, car production levels continue to be quite depressed with the one exception and a little bit of uptick in automotive sales in Germany that we saw in first quarter due to the government incentive program. So we continue to see a fairly depressed end-market associated with the auto manufacturers. We have seen that as they have significantly adjusted their supply chain some, a little bit, not a lot, a little bit of improvement in current timeframe but they just have to drive quarters to replenish their supply chain.

In the ID business, it's really driven more on an individual-project-basis, at least a portion of it as it comes to government and banking and it has seen some affects associated with that in recent times.

In MMS, a big chunk of our MMS business actually goes through distribution and you can look at the results of most of the distributors to know that it continues to be a fairly depressed market. We have seen some uptick out of China with the results of the stimulus package the Chinese government has put in place so it's been significant.

And we've seen some improvements clearly in base sessions where we've had to expediate deliveries to be able to support our customers and grow our participation in that market. But clearly the inventories have been under a great deal of pressure in MMS area, although as we said in our call, some of the recent order increase activity that we've seen towards the end of March we think could be a supply chain replenishment. We don't really see any fundamental signs of true demand increase outside of the items that I talked about in China.

In our Home business clearly a portion of that has to do with design wins. Inventory levels appear to be well under control in that business. Some of the major OEMs have just talked about their Q1 projections associated with digital TV and while they're down from Q4 levels, they're actually beginning to be more stable.

So I guess in general we would tell you that the demand environment clearly continues to be very uncertain. Very difficult to point to any true signs of uptick in demand and thus the slight uptick we saw in orders we would attribute more to supply chain replenishment than any true demand improvement.

Okay.

Okay, next question, Operator.

David Fitz from Citi.

Hi, thanks for taking my question. I'm trying to work through what capacity utilization might look like based upon some of your forecasts and the closing of the Fishkill facility and I'm coming up with something in the mid to high 40s. Does that sound something reasonable?

To better answering your questions I need to understand what sales volume you have for that?

I'm using your guidance range of plus 10 to 25%.

And then we have to be very -- it's hard because it's depending on what. Because some of the product that we shipped or sourced, the [agost semose] products and I don't want to commit myself to any utilization number but with the uptick that we see on the 10% to 25%, obviously since more of our product lines until they produce would increase utilization. If it's going to be 40 or another number, I don't want to be held accountable for.

I think it's important to point out that there's a number of factors that enter into utilization. For example, SS&C, that participation with trade customers from representing through the TSMC ownership associated with that as well as our participation.

Clearly, the adjustments that we've been taking associated with our redesign activities will reduce our capacity and have a tendency to begin to influence our capacity utilization so all of those coming in to factor and are then obviously overshadowed by the total impact of the sales improvement and so I think it's hard to really pinpoint a specific projection associated with that but we'll continue to report it on an actual basis to give you such insight as we can.

And I guess I'm trying -- if we look through the quarter, do you think the [props] you have on gross profit remain somewhere around 40% to 50%.

We that that's kind of the normal basis for the semiconductor industry so we would anticipate that that would be fairly reasonable.

Okay, I'll get jump back in the queue, thanks.

Arun Seshadri from Credit Suisse.

Hello, gentlemen. Thank you for taking my question. I just wanted to get a sense of working capital this quarter was a burn of approximately 170 million. I noticed that both DSOs and inventories were higher as well. Could you just a little bit about what caused that spike and what your outlook is and basically what actions you're planning to take for the rest of the year?

So we managed to reduce inventories for the fourth consecutive quarter. We went from the 6 billion down to the 592. You get to a certain limit of how much you can reduce when you have a sale reduction of the 29% on a comparable basis, 29.4%. So I think the guys have worked very, very hard. At the same time we might get a little bit punished (inaudible) on the inventory we do product transfers.

We've an implication because we are moving, when we are closing down certain production facilities and we've mentioned that the FishKill and the count that it's first in the line and also the ICN5 that we announced. So on that side I think we come to the limit.

When it looks up on the payables, they went by 31%, it's important to remember that payables went down here a little bit extra because at the end of January we ended interim service that we provided to the ST Ericsson joint venture and that had a one-time effect on the payable situation of about 35 million.

And then if you take the other big ticket item which is accounts receivable as both things were extremely low in January and continued in February on very low levels and the uptick came in in March which means that most of the receivables ended up in the uncollected which means that the receivables were only down by some 8% compared to the year-end. So we had no problems with overdue receivables, customers are paying, and I think these are the main.

So the focus on working capital remains. I don't want to give any comments as to the big step changes that we have from so to say end of June. Last year to the end of the year we continue. We're taking out most of that and obviously we would have a little bit built up going into the -- with the uptick in Q2 with the estimated space increase of sub 10% to sub 25%.

Yeah, if I could just add I think the organization's done a really good job of inventory control and really taken some significant measures to drive inventory levels down. I think with the environment we see as we talked about was a slight uptick in orders we'll need to be diligent in being sure that we keep our inventory position to ensure that we could take advantage of any opportunities that exist.

So I think we will not see the same kind of opportunities for further inventory reduction from where we are and in fact we'll begin to see some pressure on billing inventories to ensure that we have sufficient supply in place to meet our customer requirements as we see any uptick.

I appreciate that. And I could follow-up one quick question. On the taxes payable on all your wireless proceeds, your first $1.5 billion as well as the recent $92 million, what is the updated amount of total cash taxes payable? And also if you could talk a little bit about the dividends to minority shareholders that you paid in this quarter of 29 million? How was that decided? That's it. Thank you.

Okay, I think some of the taxes that is not including yet that hasn't been paid is some of the taxes of some of the jurisdictions and they will continue. Do we have a [vetted] number of that one?

Yes, we still have to pay for the continue of this year of the $400 million that he had mentioned is around $75 million and then on longer basis we had indicated between 200 to 250 but that's maybe on a longer term basis.

When it comes to in minorities that was a press release who went out in late March and that has to do with the dividend coming out of SSMC of which we control about 60% of the company and around 40% is actually going to TSMC and I think that explains that action for you, sir.

I think it's interesting that we actually received cash for our 60% ownership of SSMC but it actually reduces the net cash on our balance sheet because we end up with 40% of that cash that's distributed to the other participant in the joint venture. So effective the dividend while it gives us more cash that we have access to and control of actually reduces our total cash in that process.

Did that make sense for you, sir?

Yes, that makes sense. Thank you.

Jean-Yves Guibert from BNP Paribas.

Good afternoon, gentlemen. Thank you very much for taking my question. Two follow-up questions if I may. The first one actually on your cash position of the $1.7 billion. As for the cash is still [respect you] as of March '09? Second question is in respect of your [indicate] account payables in 2009. Have you suffered from any shortening of your supplier payment terms during the first quarter '09 versus Q4 '08? And can you remind me what are the account terms in terms of supplier, payment to suppliers? And very short question in respect to the $35 million which might have to be paid in respect to the Conexant acquisition, but which was I think related to a second performance and wondering whether or not this is still due? Thank you very much.

The first question is that cash which is basically sitting in subsidiaries such as SSMC is around $147 million. The payables I think I also in the previous, payables went down by 191. And there are a few things happening here and that would answer your third question as well because first of all I said that $35 million of the payables were leaving because we did not perform the interim service model that we have until end of January with the wireless JV with ST. We were collecting and paying for that business until the end of January, that was around 35.

The other thing that is general we have DSO or payment terms of around 40 to 45 days and our payable days are somewhere depending on the mix of suppliers, somewhere between 72 and 78 days which means that when we go into a first quarter after the peak quarter which is usually Q4 and now we were down 29%, we collect the lower amount while we pay for the deliveries in Q4.

Okay, thank you very much.

And when it comes to Conexant, that is part of the performance and right now the performance is to the market circumstances is that we are still evaluating how much that might be for the earn-out.

Okay, so it's not sure whether or not you will have to pay for them all. Okay, thank you very much.

(Operator Instructions) Jake Kearney from Morgan Stanley.

Hi. Can you refresh us on what the long-term goals are for operating expenses of a percentage of revenue? In the past you provide that and I was wondering as the restructuring goes forward if you could help us think about when the restructuring's done what you want that ideally to look like?

I think we have previously talked and I know still along that long, the only thing I remember that when I said historically is that over a longer period we should go try to achieve a EBIT margin of 15% and there given that and the margin that Rick mentioned before gets you to a targeted OpEx level.

However I think being during the redesign and the very, very uncertain level of near term space, I think it's something that I would rather talk on when I see a more continuously higher level of sales because right now it's very, very hard to talk about that.

Yes, I think that we're in a period of resizing, reevaluation as we go through the redesign program. While we have those targets in place I think the key for us is to be sure that we get back to more of an industry norm and those are pretty well-accepted and clearly as we move forward our intent would be to operate at more of an industry norm on OpEx percent.

[Jeff Harrod.]

Yes, back on the restructuring I'm going to attempt to drill down a little bit. Initially you were looking for 550 million of savings, 200 of that was OpEx which you start with largely be in place by mid to late 2009, the 350 million manufacturing was more into 2010. Now it looks like you're saying it's going to be higher than the process fee and you're saying it's going to be accelerated. Just wondering if you can give us some ballpark on where those savings have moved and how high they might be and also where you were in Q1 in terms of your life savings?

So it's in the report, if you read the report, we actually state the difference so in Q1 on OpEx we are some 60 million lower compared to the same period last year excluding the wireless business. However you always have to remember that OpEx went up between Q1 and Q2 so I would say that we are slightly ahead in one quarter of reaching the target you mentioned on OpEx.

[Corks] we are aligned and slightly ahead but it's a little bit harder to see since volumes are a lot lower than anticipated when we did the redesign but we are ahead. I think you can read the report and you will come to about 60 in lower OpEx.

Okay, but that 60 then annualized 240, that's close to what you're targeted? In other words you're pretty much close to done of the OpEx?

Yes but then OpEx went up in between Q1 and Q2 which means that and so I would say that we are slightly ahead of OpEx targets because we still have to go because we actually did not say that clear that you say. We think the majority was due during the OpEx in 2009. We are very close on Q1 run rate to the original target.

Okay, and what about on manufacturing? On the 350 million now that you've accelerated FishKill? Where do you see that getting to that run rate and where do you expect to be in late '09?

Well, sir, I think the key there is the 350 million is important and I think we'll be able to at least accelerate some of that and FishKill will be roughly a six week acceleration so that gives you some indication relative to that but the biggest factor associated with operations is going to be the loading and so while we are able to take the cost out, an overwhelming factor is what's the capacity utilization is and how much impact that has on the bottom line associated with those because obviously the fixed variable cost relationship makes that very significant. So that's probably a more overarching factor that actually the savings themselves.

And remember when we launched the redesign program we had no growth and the sales was basically an equivalent of the $4.8 billion in sales.

Okay. And then on the cash costs of the remaining, I should say of the full 700 million, how much of that runs over into 2010?

About the same percentage as we had in the regional. Just as you apply that to the remaining high 40.

All right, so close to 100?

Yes. Okay, next one please.

[John Chin] from BlueMountain Capital.

Good morning. Thanks for taking my question. Just a quick one. Can you remind us New York cash flow statements what's in the line item increase decrease and provision and other items, these in that quarter adds up to about $260 million of cash transfusion?

A translation of FX rates, translation effects of the bond. Translation effect of the dollar bond.

This is a non-cash item in the P&L you have to correct because you start -- I think you have to correct that in your cash flow statements back to (inaudible) 100 million to 106. That's almost all of it.

[Jeff Kurt] from [Odel].

Thank you. Just a follow-up question on the working capital and specifically on the payables. If the receivables didn't decrease much, if the receivables decrease was proportional to sales because there was an uptick at the end of the quarter, I guess I'm curious why there also wasn't an uptick in the payables at the end of the quarter to correspond with that?

And kind of a related question is if I look at -- you mentioned that the vis a vis decline in the first quarter, if I look at, just went and looked at last year's first quarter decline in payables and it was 125 million and that's on sales that were roughly half what this quarter's sales were and I'm just wondering if the sales in the fourth quarter of '07, first quarter '08 were roughly double what the sales were in the fourth quarter '08, first quarter '09, why account payable went up by 150 some million even after adjusting for that $35 million one-time item compared to 125 million the prior year?

Part of explanation is we've been doing stock reductions.

But then would that say that in your inventory which really aren't down?

They are down. And then is activity level is down because we were almost having, we had extended Christmas holidays and close-downs on the factories in the early part of January.

Okay. Maybe we can follow-up on it but inventory looks to me to be down 42 million in the quarter.

Yes, and that is a fairly big sales value in that.

Okay.

Okay, next one, please?

We have a follow-up question from Michael Boam.

Hi. I just wanted to check what the EBITDA [rest of] receivables for the basically for the fourth quarter and for the first quarter please.

For the first quarter it was five. And for the fourth quarter it was -- can I check on that? I think it was 30 something. I don't remember. But it was -- we come back to you on that, Michael.

Okay. Thank you.

We have a follow-up question from David Fitz.

Hi, I'd like to drill down a little bit more on some of the OpEx expenses. And when we look through the progression of the year, is that something that we should start to see some benefit from more in the back-end? But if we have some one-time things because you were shutting down factories and accelerating some of the reductions programs or have any translation of currency gains or losses versus expenses during the first quarter?

So every exchange rate moves very little. I think it moved from 133 to 132 so that's very little. We have a very, very almost zero currency effect compared to Q4. And I said OpEx on equal for equal basis are down around 60 compared to Q4 which means that we are having substantial savings in OpEx in this quarter.

Okay, thank you.

We have a follow-up question from Arun Seshadri.

Hi, just a quick follow-up and that is are there any restrictions in your coming back to market with another exchange offer?

No, we don't believe there's any restrictions whatsoever.

Okay, and then in terms of other allowable super senior debt, should we be thinking about it just in terms of 250 in total euro capacity for that super senior debt?

That's the basket that we have available to us under the contractual requirements.

Okay. And one last thing, was there anything behind moving your mobile personals to the revenue historically revenue into more than market? Is it part of any strategic position?

Well, that was for the business was looped to with the transition, it was more of a natural fit associated with that business and where it fits. Karl, would you like to add?

Yes, so there are two main things. One is the sound solution which is speakers, the other one is [Oref] power which fits very much with our existing analog mix signaling and all this stuff we have in MMS because a lot of these components are the components that goes into base stations.

Okay, that makes sense. Thanks, guys.

Henry Nash from Walls Capital.

Hi, guys. Just one quick question here. Could you update us on the headcount numbers, what they were at the end of Q1 and what they were at the end of Q4 and where you expect to see that at the end of the year?

So headcount at the end of Q1 was 28,029. In Q4 it was 30,174.

And do you guys have a target for the end of 2009?

No, and I have to tell you why. We announced the redesign 4,500. But obviously when you flex up and down with direct labor, it becomes a little bit strange to have a target because if it's necessary we will flex down even further in the areas of labor and manufacturing, we can flex up if demand comes back.

And as we've said we've expanded our redesign somewhat but the real [feedy] parts is the flexibility relative to the manufacturing people as Karl talked about, specifically in Asia that we reduced or added based on the loading associated with the manufacturing facilities.

Okay, thanks, guys.

Robert Hopper from UBS.

Just one follow-up quickly on the SSMC EBITDA. Is that on the same basis as the negative 71 of adjusted EBITDA that you guys afforded?

Yes.

Okay, so that's fully comparable on that. And then I guess just getting back to the restructuring costs, I guess I'm just trying to understand the acceleration of the savings as well as the reduced cash costs for that. How much of that is actually related to actions that you have taken versus just the much more pronounced slowdown in the business and reduced revenue profile? And I'm just still trying to understand that.

Well, certainly the significant factor associated with this, we've continued to work through the redesign program and try to ensure that we have competitive world class processes and competitive cost structures. It drives us to continue to modify that and adjust that on an ongoing basis. So I think that's probably the most significant factor associated with it but clearly on a manufacturing operations basis we'll flex direct labor people down and up depending on loadings as Karl mentioned and you know frankly their work schedules as well.

Jake Kearney.

Hi, I was wondering if you could just update us on your view for generating positive free cash flow in the back half of the year? I believe that was a previous goal of the company with the restructuring. Can you update us on that? And what do you think your liquidity is going to look like by the end of 2009?

When that was mentioned by friend [Tom Alton] and that was in conjunction with Q3 last year it was basically based on a flat sales of 4.8. Obviously if we don't give any guidance so I don't want to comment but we don't really know about total sales for this year so I don't want to make any comments on that point more than that. But that was in a totally different circumstances.

Yes, I think you have to -- we've talked about our outlook for Q2. Clearly you can extrapolate from that any kind of indication that you want to relative to Q3 and it's clearly a different business level than what was anticipated at the time the redesign program was put in place originally.

All right. Are you comfortable with your current level of liquidity?

Well, we think that $1.7 billion of cash gives us adequate liquidity to be able to transition through the immediate near term.

Okay, I would like to make one clarification statement on the statement I made before about [Esso] being added for the wireless business. I said 75 but that is after April so that's the number I have. We include Esso then it's between 80 and 85. So for modeling purposes that's the number you should use.

Okay, being no further questions, I think that it's important to tell you that we are clearly in an environment that continues to be quite uncertain. As we've indicated we have seen some positive orders towards the end of the quarter which drives the outlook that we've reflected for the most recent period and we will continue to take our best efforts to try to improve the overall operations of the entity. I look forward to the opportunity to meet all of you in person. Thank you.

This concludes the NXP Semiconductor First Quarter 2009 Results Investors and Analysts Conference Call on Wednesday April 29, 2009. For further questions you may contact NXP's Investor Relations department, please visit their website, www.nxp.com/investor. Thank you for participating. You may now disconnect.