恩智浦 (NXPI) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen. And welcome to NXP Semiconductors fourth quarter 2010 earnings call. I'll be your coordinator for today. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. As a reminder, this call is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Mr. Jeff Palmer, Vice President of Investor Relations. Please proceed, sir.

Thank you, Kirsten. And good afternoon, everyone. Welcome to the NXP Semiconductor fourth quarter 2010 earnings call. With me on the call today is Rick Clemmer, NXP's President and CEO, and Karl Sundstroem, our CFO.

If you've not attained a copy of our fourth quarter 2010 earnings press release, it can be found at our Company Website under the Investor Relations section at www.nxp.com. This call is being recorded and will be available for replay from our corporate Website.

Please be reminded that this call will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations. The risks and uncertainties include but are not limited to statements regarding the macro economic impact on the specific end markets in which we operate, the impact of foreign exchange rates, the sale of new and existing products, and our expectations for financial results for the first quarter of fiscal 2011.

Please be reminded that NXP undertakes no obligation to revise or update publicly any forward-looking statements. For a full disclosure on forward-looking statements, please refer to our press release.

Additionally, during our call today, we will make reference to certain non-GAAP financial measures, which exclude the impact of purchase price accounting, restructuring, impairment, and other charges that are driven primarily by discrete events that management does not consider to be directly related to NXP's underlying core operating performance.

Throughout the call, we may make reference to comparable growth rates that reflect the relative changes in revenue growth between periods, adjusted for foreign currency exchange rates, mature acquisitions, and divestitures, as well as reclassified product lines. Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures with the most directly comparable GAAP measures in our fourth quarter 2010 earnings press release, which has been furnished to the SEC on Form 6-K and is available on NXP's Website in the Investor Relations section at www.nxp.com. Now I'd like to turn the call over to Rick.

Thank you, Jeff. And welcome, everyone, to our earnings call today. Before we start, let me just welcome Jeff, who joined us a few weeks ago from a very strong career at Marvell with other institutions before joining us as VP of Investor Relations and also thank Larry James, who's been working with us in Investor Relations since our IPO on an interim basis to help us through this transition. Looking at our 2010 full-year results, revenue was $4.4 billion, up about 25% from the year-ago period. For the full year, we delivered product revenue of $3.7 billion, up approximately 43% year on year.

As a reminder, product revenue is where we focus, as it represents the combination of our core high-performance mixed signal segment and our broad-based standard product segment, which is where all of our profits are generated. In addition, the difference between our total revenue and our product revenue is primarily manufacturing services for several of the entities, which we have divested in the past, where it is just a service at a breakeven with no profit impact.

From a profitability perspective, our execution on the redesign program has clearly paid off. Our full-year non-GAAP operating profit was 16%, which translates into nearly a 20 percentage point improvement versus 2009. We are pleased with these results, especially when judged against the challenging market dynamics we experienced within various markets within the latter part of the year.

Turning to our results of the fourth quarter, we delivered product revenue in line with our prior guidance target and delivered better-than-anticipated margin expansion. Product revenue for the fourth quarter was $938 million, essentially flat on a sequential basis, consistent with the guidance we provided on our last earnings call.

Total NXP revenue for the fourth quarter was nearly $1.1 billion, down about 4% sequentially, primarily due to lower-than-anticipated revenue in our manufacturing services segment, again with no profit impact as these services are provided at breakeven. During the fourth quarter, total NXP non-GAAP operating margin was just over 19%, and increase of 280 basis points sequentially and a strong 13.8 percentage point improvement from the year-ago period.

Moving onto the performance of our focused market segment, full-year revenue of our high-performance mixed signal segment was nearly $2.9 billion, a year-on-year increase of approximately 42% and represented 77% of total product revenue. For the full year, standard product revenue was $848 million, a year-on-year increase of nearly 50%. For the fourth quarter high-performance mixed signal revenue was $717 million, essentially flat sequentially and up 13% versus the same period a year ago. So the fourth quarter standard products revenue was $221 million, flat sequentially and up nearly 21% versus the same period a year ago.

Looking at the performance within our focused end markets during the fourth quarter, we experienced significant growth in our identification business, combined with better-than-normal seasonal trends in the automotive end market, which together helped to offset end market weakness we experienced in the computing, television, and in customer-specific part of the high-performance RF market.

We continue to be very encouraged by the underlying trends of our high-performance mixed signal segment, where we see strong design win momentum across all of our target end markets.

Within identification, we experienced very good revenue and shared growth across all addressable end markets during the quarter. We saw particular strength within e-government, mobile transactions, and UHF-based tagging at the item level in the retail sector, a specific target market for NXP.

We believe our success is due to NXP industry's leading RF radio technology, our smart MX, again, smart MX secure element micro-controller family, and our open Java-based protocol stack.

There's been a lot of excitement surrounding our position in NFC and the long-term potential impact on our business. In our opinion, we are at the early stages of a revolutionary transition towards the adoption of secure mobile payments, secure product authentication, and other mobile applications for NXP's leading-edge NFC radio. And smart MX technology will be the key building blocks.

The consumer trends we see are the convergence of location-aware marketing, the viral adoption of social networking, and consumers' increasing desire for convenient, secure, and interactive mobile transaction services.

To tap into this evolving dynamic, we see many industry stakeholders making significant commitments, either through joint ventures or partnerships to create the ecosystem and applications, which should lead to broad-based market adoption. These stakeholders include most of the major smart phone OEMs, software platform providers, many of the mobile network operators, and many leading financial institutions and banks.

We believe NXP is uniquely positioned to participate and take advantage of this true revolution. We are a recognized innovator and the co-inventor of NFC technology. We have been involved and nurtured many of the early commercial deployments. We're the emerging leader in the NFC-based mobility market as well as the recognized leader of electronic passport and identification systems. And we are the recognized leader in the reader and tagging infrastructure market.

As an example, our MIFARE, which is trademarked, based contactless transportation and access management systems have been deployed in over 650 cities worldwide. As a proof point of our leadership in developing secure mobile transaction solutions during the fourth quarter, Google and NXP jointly announced a strategic collaboration to support our open source NFC software stack within the Android Gingerbread operating system, coupled with the adoption of our NFC radio controller in the newly launched Nexus S smart phone.

Additionally, yesterday, we announced the au10tic trademarked family of secure ICs to be used as absolute authentication for counterfeit product protection. The family of products leverages are advanced security technology beyond those traditional use cases of identifying people and applications and like passports or banking cards.

Our solution will help address the critical problem of product counterfeiting, which has become a significant challenge for OEMs of consumer electronics, luxury goods, and even various types of food staples. A recent study indicated one out of every 10 IC products is counterfeit. Our products will help OEMs prevent revenue loss due to counterfeiting and help to ensure brand protection.

Other areas include content rights management and machine-to-machine authentication. We believe the emerging market for product authentication as another new platform for NXP could potentially be as large and broad based as the opportunity we see in NFC. We believe we are leading the industry with the deployment of RF-based products, including NFC, which will enable new mobile product models.

Innovating in the area of product authentication and security as well as continuing to the leader in electronic identification, we believe our evolving positions in these areas are but a few of the many potential growth driver platforms for NXP looking forward. Let me turn to automotive. We continue to be ranked number one in nearly all of our focused product areas, including auto access, in-car networking, and in-vehicle infotainment.

Additionally, during the quarter, we were awarded two very prestigious awards, Best Supplier Award by Hyundai Mobis, and Supplier of the Year Award by Visteon China. Beyond the recognition that these awards represent, they are important indicators of the strength of our long-term customer relationships and the values our customers place on NXP's differentiated products and fundamental value-added technology. These awards also reflect the diligent efforts we have taken to expand our footprint within the emerging and faster-growing automotive markets, which should translate into longer-term growth and access of the end market and our immediate peers.

During the quarter, we announced two industry-leading innovations in the area of in-car automotive entertainment. We announced the first multi-standard digital software-defined radio. With this product, OEMs can leverage one device across multiple platforms regardless of the end market the auto will be sold into, enabling the configuration of the radio standard at the end of the production line, depending on the target market.

The second product announcement we made was for the first single-chip digital radio for AM/FM terrestrial radio, integrating both the tuner and the base band. Both of these products enable our customers to achieve improved time to market advantages and lowers their in-house product development cost.

Looking forward, we see the growth of our automotive franchise being driven by the emerging trends of connective mobility, in-car access, and the rapid shift towards vehicles, which deliver improved efficiency and smaller CO2 footprints.

Additionally, we see our partners looking for global platform solutions to leverage across geographic regions and brands. NXP is well positioned to deliver these solutions. And we're seeing out customers make multi-generational program commitments to NXP technology.

In our remaining high-performance mixed signal segments of wireless infrastructure, lighting, and industrial, as well as our mobile consumer and computing segment, our revenue growth was directly impacted by in-market and customer-specific headwinds. The combination of well-documented weakness in the television end market translated into weak order rates for our silicon front-end tuners, small-signal RF, and interface logic devices.

The worsening seasonal trends in the PC end market throughout the second half of 2010 resulted in lower-than-anticipated demands for our green chip power supply products and interface logic devices. Lastly, we did experience customer-specific weakness in our high-performance RF business, as one customer began to work through an inventory issue, which will continue into first quarter. Taken together, this clearly impacted the more consumer-oriented portion of our high-performance mixed signal business.

Separately, we did receive supplier awards from two of the leading Chinese base station suppliers with NXP as the only semiconductor supplier being recognized at one of these key customers. However, while our quarterly performance in these areas was impacted by end market trends, we firmly believe we will directly benefit as these markets appear to be returning to more normal seasonal patterns.

Furthermore, we believe we are well positioned in the broader markets addressed by our wireless lighting and infrastructure in mobile, consumer, and computing segments. We see strong incremental design wins in these segments, which should help support further layers of growth over the intermediate term.

As just one example of another very exciting area, where NXP is taking a leadership position is the area of intelligent network and lighting control for emerging lighting standards, such as CFL and LED lighting. We are working with a number of OEMs on systems that will enable users to control and monitor lighting from anywhere in the world by an application on the smart phone or tablet.

These systems are based on our unique intelligent network-enabled lighting controllers, leveraging our industry-leading [Mosta] technology, our embedded processors, and low-power RF assets acquired in the recent Jennic acquisition. The trend of intelligent network lighting control has broad appeal not only to consumers but even more in commercial applications that can centralize the control in monitoring of facilities.

We believe lighting is but the first application in the evolution of a smart network home and building control. We envision this technology extending to include smart metering, remote environmental control, and remote security monitoring and access. This is emerging semiconductor market that could potentially grow at a compound rate of around 20% and be greater than $4 billion in 2014. We believe NXP is well positioned to be a prime beneficiary of these trends.

In summary, as we begin 2011, NXP is in very good shape. Customer interest and adoption of our products as measured by design wins is very strong. The restructuring efforts we have taken have clearly paid off with the expanding margin structure. And we continue to take measured but deliberate actions to improve our capital structure. We are not finished with these efforts. But as we begin 2011, we'd like to thank all of our stakeholders, but particularly the strong contribution from all of our worldwide employees for their support and hard work over the course of the last year. Now I'll pass the call over to [Kallie].

Thank you, Rick. And good day to everyone on the call. As in the past earnings call, I would like to focus on the highlights of our quarterly performance to allow more time for interactive question and answers. However, being it is the end of the year, I would like to start with a few comments on our full-year performance. Additionally, all figures mentioned in my prepared remarks are excluding out Sound Solution business, which is being treated as discontinued operations.

For the full-year 2010, total NXP revenue was $4.4 billion, up 25% year on year. Looking at our core product revenue performance, we clearly outperformed the broader semiconductor market as well as many of our immediate peers. Full-year product revenue came in at $3.7 billion, up just over 43% on a year-on-year basis. Since Rick provided a breakdown between the various segments, I will not repeat them in my prepared remarks. And they are also in our release as well.

However, our improved profitability is something I would like to highlight. On a full-year basis, total NXP non-GAAP growth profit was $1.9 billion, an increase of 67% year on year, resulting in a non-GAAP gross margin on nearly 43%, which translates to a 10.6 percentage point improvement. We were very successful in keeping operating expenses under control as the total operating expenses for the full year declined nearly 7%. This resulted in full-year total NXP non-GAAP operating profit of $685 million or nearly 16% non-GAAP operating margin. Putting this into context versus 2009, this is an $826 million positive improvement in operating profit.

Looking at our profitability in the fourth quarter, we see a similar improving trend, especially given the headwinds we faced in certain end markets. Fourth quarter total NXP non-GAAP gross profit was $508 million, a 4% sequential increase on lower total revenue. This resulted in a non-GAAP gross margin of 47%, a 350 basis point sequential improvement.

Turning to the profitability of our core product segments, we believe we made very good progress as well. Within our HPMS segment, non-GAAP gross profit was $413 million, roughly a 2% sequential improvement on essentially flat revenue. This translates into non-GAAP gross margin of nearly 58%, a 110 basis point improvement from prior quarter.

The improvement in HPMS gross profit was due to a combination of benefits of closing the ICN5 facility as well as a richer mix of products within the automotive and identification business, where we are continuing to experience significant success. Within our standard product segment, non-GAAP gross profit was $85 million, nearly an 8% improvement on flat revenue.

Non-GAAP gross margin for standard products was nearly 39%, a 280 basis point improvement sequentially. The improvement in standard product gross profit was primarily due to higher factory utilization, favorable pricing trends, and a direct benefit from our redesign efforts.

From an operating profit perspective, we kept a fairly steady hand on expenses during the fourth quarter, resulting in total NXP non-GAAP operating profit of $208 million, just over 12% increase sequentially. This translated into a non-GAAP operating margin of just over 19% or 280 basis point improvement sequentially.

Looking at the components, we experienced higher SG&A expenses, primarily due to higher expenses in support of marketing and selling programs, such as trade shows, and to year-end sales bonus accruals. This was offset by lower total R&D expenses due to reduced investment in MEMS due to the Sound Solution deal and lower material consumptions within R&D.

Moving to an update of our redesign program, during the fourth quarter, we realized $54 million of additional annualized savings, bringing the total savings since the inception to $794 million. During the fourth quarter, the savings realized were primarily due to the completion of the shutdown of our HPMS fab ICN5 in Nijmegen and to a lesser degree saving benefits associated with our standard product facility in Hamburg. We need to highlight that the benefit realized from the closure if ICN5 occurred sooner than we anticipated and a primary effect of our growth profit improvement during the fourth quarter.

We are still on track to achieve our targeted annualized cost savings of between $900 million and $950 million with the remaining savings to be evenly spread across the later portion of 2011. The remaining savings are estimated to impact costs of goods and operating expenses on a [64-gig] ratio.

In terms of functional area, about half of the remaining savings will come from rationalizing central support functions, such as IT, supply chain management, and corporate overhead. About a quarter should be related to fixed assets reduction, such as real estate and site closures. And about another quarter will come from further headcount rationalization.

Turning to the highlights of our improving balance sheet and cash position, cash at the end of the year was $898 million. Days of inventory increased about ten days to 79 days as we intentionally increased our on-hand inventory position to better serve our expanding customer base. Days payables increased to 91 days, while days receivable came in on an all-time low level of 33 days. Taken together, we improved our cash conversion cycle to 21 days, which is below our longer-term model.

Our net debt at the end of the fourth quarter was $3.65 billion, a decrease of $604 million year-on-year basis. We exited the year with an annualized adjusted EBITDA of $1.2 billion, an improvement of 100% versus the year-ago period. Our implied net debt-to-adjusted EBITDA ratio is approximately three times, which is also significant improvement.

Cash flow from operations was $150 million. And we invested $76 million in CapEx. During the fourth quarter, we announced a definitive agreement to divest our Sound Solution business to Knowles Electronics, a division of Dover, for $855 million. We continue to believe the deal will close by the end of the first quarter, pending regulatory approval outside the US. Our intention is to use the proceeds from the sale to further lower our debt and to further strengthen our capital structure.

Finally, we would like to provide you with our current expectations for the first quarter of 2011. We currently anticipate product revenue that will be relatively flat on a sequential basis. As a reminder, product revenue is the combination of revenue from our HPMS and standard product segment. However, we anticipate revenue from our manufacturing operations and other segments to decline by approximately $50 million sequentially, due to lower revenue from our breakeven manufacturing services business and to a lesser degree to the previously disclosed sale of [Newton] business.

Looking at the expected trends in the business during the first quarter, we anticipate identification up strongly. Micro-controller and logic will both increase modestly. We believe automotive and standard products to be flat sequentially. And we expect high-performance RF And green chip products to decline. We currently anticipate total NXP non-GAAP operating profit to be flat to slightly up sequentially.

To aid investors in the modeling effort, we would like to provide these additional inputs. We believe net interest expense should be in the range of $75 million to $80 million. We anticipate our cash taxes to be in the range of $11 million to $13 million. And we believe income from non-controlling interests will be an expense in the range of $13 million to $15 million -- let me be clear, a range of $13 million to $15 million.

Average share count should be approximately 255 million shares. The sequential increase in diluted share count is due to an employee equity incentive grown in the amount of 1.5 million shares as well as the impact of higher average share pricing in using in the treasury method or calculating diluted share count. Taken together, our guidance implies a non-GAAP EPS range of $0.40 to $0.44 per share at the midpoint in increase of about $0.05 sequentially.

Lastly, I would like to provide some insights on how to contemplate the impact of the sale of Sound Solutions for NXP. In our reported numbers today, the Sound Solution business is treated as discontinued operations. This ongoing business reduced our fourth quarter revenue by $99 million and lowered our non-GAAP operating profit by $19 million. Net of cash taxes, this is $0.04 per share impact. The comparable number in the third quarter was $0.10 per share. The $0.06 per share difference is due to the assumed liabilities within the Sound Solution business booked in the fourth quarter associated with the sale. Now we would like to turn to your questions. Jeff?

Thanks, Kallie. Operator and everyone on the call, we'd like to take questions now. To get as many questions as we can today, we'd like to ask you to ask one question and one follow up. Operator, we'll begin to take questions, please.

Thank you, sir.

(Operator Instructions)

Thank you. Our first question comes from James Covello of Goldman Sachs. Please go ahead with your question.

Great. Thanks very much for taking the question. I appreciate it. I guess first question would be relative to the product revenue, I understand you're guiding product revenue from continuing operations to be flat approximately in the first quarter. What would normal seasonality be? What's your best guess on what normal seasonality would be for your -- the product revenue from continuing operations?

So, Jim, that changes year by year, as we all know. But I would think on a historic basis it would be down something like 3% to 5% in Q1, kind of on a normal seasonal basis. The benefits we have this year with the strength of our ID business really growing through it is being a significant factor that provides us the ability to differentiate ourselves from our competition and peer group.

That's helpful. And then if I could ask a follow up for Kallie, Kallie, I understand you're guiding interest expense here for Q1 in the $75 million to $80 million range. There's going to be a lot of moving parts on the refinancing and debt pay down as we go throughout this year. Is there any kind of target that we could think about for interest expense as we go throughout this year, maybe in the latter part of the year as we start to recognize some of the savings from the interest expense?

I think since this is a very hot topic and I don't want to disclose what kind of debt I will go after when we start to retire debt, so I think for modeling purposes I will use 6.6%, 6.7%.

Which is our average interest cost across all of our bonds.

And then maybe if I could just sort of probe on that a little bit, I mean, how immediate do we think the timing of some debt reduction would be? In other words, how much might we see interest expense? Could we see it come down in Q2? Or are we going to really start to recognize the benefit of the interest savings in -- the interest expense savings in Q3 and Q4?

So, Jim, that partially depends on the transaction associated with Dover and Knowles on the Sound Solutions business, where we would anticipate closing that by the end of Q1. But there are regulatory approvals that are required that make that somewhat at risk to actually close in Q1. After that, then I'm sure Kallie will use that $855 million of proceeds effectively to ensure that we reduce our debt on a very timely fashion.

That's great. Thanks so much, guys. I appreciate it.

Thanks.

Operator, next caller, please?

(Operator Instructions)

Thank you. Our next question comes from Tim Luke of Barclays Capital. Please go ahead with your question.

Thank you so much. I was wondering, Kallie, with respect to your gross margin outlook if you could give us some color on the different puts and takes and what levers you think there may be as you move through this calendar year, given that you are already guiding flattish in this quarter. And as part of that, maybe you could address the extent to which you are now in a position to fulfill all of your orders or whether there's some element of capacity constraint still. Thank you.

We are -- as you see in the release, we had utilization on 97% in Q4. And there's gradually coming capacity on, which believes that -- we believe for the area where we are capacity constrained, which is in the C14 area, we will get capacity, additional capacity on in the second half or in around midyear. So we are gradually building up the capacity.

When it comes to gross margin, we continue to believe we're going to enter the range for HPMS of 58% to 63% in the fourth quarter, as I said before. However, I will come back after Q1 with a new targeted model or gross margin for the standard product because it obviously -- with the performance as we have seen in Q4, excluding Sound Solution, it is on a different level.

Thank you. And as my follow up if I may, it sounds like you're seeing some pretty strong first quarter growth in the ID business. Can you talk about some of the factors that are lifting that business and touch on NFC, for example?

Yes, so NFC was clearly a factor in our growth in Q4 timeframe as well as moving into Q1. But it's across the board. NFC is not the most dominant factor relative to the ID growth. In fact, it's probably -- I haven't looked at the specifics. But clearly, no more than a third or so of the absolutely year on -- quarter-on-quarter growth is associated with the ID business. So it's really strong growth across the board with the customer relationships we have and the technology platform that we're able to provide in meeting those requirements on a broad basis of technology and requirements.

We talked back a quarter or so ago about the Wal-Mart deployment on the tagging, the UHF tagging. And clearly, that's an area that we focused on. And also, today or yesterday, we actually announced our true authentication program that -- where we're really focused on trying to do what we can for companies to be able to buy counterfeit goods. And so that's clearly an opportunity that we'll continue to expand ID business going forward as well.

But it's really broad-based, Tim. And across all the individual segments, we basically are in a leadership position to be able to continue to drive that. And if I could, just let me add on the capacity side. So on the embedded flash, which is where our ID business is manufactured, as well as our 32-bit arm-based micro-controllers, we'll double our capacity from Q3 of last year to Q3 of 2011 with most of that ramp up coming in, a little bit of it in first quarter, but more of it in second quarter in the summer timeframe. So that's clearly a key factor for us.

And then the only areas that we'll have capacity limitations, the only other areas that we have capacity limitations on are some areas where we have proprietary unique packaging requirements that give our customers a performance advantage, where we do have some limitations on some individual package types as well, Tim.

Thank you for that.

Operator, we'll take the next question.

Thank you. Our next question comes from Aaron Seshadri from Credit Suisse. Please go ahead with your question.

Thanks for taking my question. I had a couple of really quick housekeeping questions. First, what are your expected tax considerations on the Sound Solutions proceeds?

So on the -- we're still working on it. But I believe that we will have no tax impact in Austria. We will have 10% to 12% tax on the deal that we are selling in China because it's basically one part in Austria and one part in China.

Okay. Do you have any color for us in terms of amount of tax that you expect, even very large sort of range?

I would say $8 million to $12 million.

Okay. Great. And then can you update us again on sort of, given the asset sales, what should we consider as discretionary cash on your balance sheet, meaning what do you need to run the business and sort of what we should believe is excess cash?

So I have previously said that I believe somewhere between $500 million and $800 million. And then people always ask me why do you have such a big range? As you can see in the release, we have $338 million sitting in SSMC, which is consolidated with us. But slightly below 14% belongs to TSMC. We are using some of that cash for the investment that Rick referred to in the investment. So that's the range I have. Depending on how much cash I'm having in SSMC, that's the range.

Okay. So it's not majorly different with the divestiture of the Sound Solution business.

It doesn't really change the cash requirements much at all.

Okay. Great. And then finally, what was the full-year 2010 EBITDA associated with SSMC?

Full-year -- hold on a minute -- EBITDA?

Yes, EBITDA.

We have the net income.

Yes, it's coming here.

Okay.

$172 million.

$172 million. Great. That's pretty much all I had. Thank you, guys.

Thanks a lot.

Thank you. Our final question comes from Jeff Harlib of Barclays Capital. Please go ahead, sir.

Hi, could you just update us on your plans for OpEx for 2011, assuming a normal growth year as you look at SG&A and R&D and then maybe also CapEx?

CapEx, we continue to guide 5% over sales, total Company sales. So it's -- and when it comes to OpEx, we are getting benefit from the redesign, as I mentioned in my redesign paragraph in the script. But we're also investing in certain area in R&D. I anticipate that we will stay relatively flat on OpEx for the full year, depending on how business performing.

Okay. And just follow up, do you have the EBITDA for Sound Solutions in Q4 and for the full year?

It's not part of the material. I can -- I don't have it.

Okay. I can follow up. Thanks.

Jeff, do you have a follow-up question.

That's it for me.

Okay. Great.

Thank you. We have a question from Sundar Varadarajan from Citadel Securities. Please go ahead with your question.

Yes, thank you very much. So you guys have been pretty busy selling some assets, which you view as non-core. How would you kind of -- how would -- do you have any comments on the mix of assets you have right now? And is it now turned to kind of turnaround and make some acquisitions? If so, what are the areas you are likely to focus on?

Yes, so yes, I think we feel very comfortable with our product portfolio where we are. The Sound Solutions business was a business that wasn't in the semiconductor space. We had the ability to leverage it. And with the transaction that we announced with Knowles, we actually will have a semiconductor supply agreement that will be beneficial to the Company moving forward as well.

So there was many factors associated with the Sound Solutions business and the reason it was better served in the hands of Knowles and Dover Corporation than NXP. And clearly, the ability to expand our semiconductor relationship with them is a key factor associated with that.

As we look at our business portfolio, clearly, our high-performance mixed signal business is where we're focused with the strength of the profitability as well as the growth opportunities from the design wins we have. Our standard products business, though, continues to perform very well, as you see, and represents a significant contributor on the cash flow as well as the EBITDA and gives us a good solid base for our manufacturing operations with the ability to drive I guess now over 70 million units in 2010, nearly -- sorry billion, nearly 71 billion units in 2010 actually manufactured, gives us ability through that standard products to have the scale to ensure that we have the lowest-cost back-end operations around, and then in combination with that makes us the second-largest semiconductor supplier through the distribution channel that makes us have a different share of buying with the important distribution channel, where basically 80% of our micro-controllers and half of our overall business goes through the channel.

So if you look at the areas where we're focused relative to acquisitions, it's more of tuck-in acquisitions from technology. We in the July timeframe executed the technology acquisition associated with Jennic, which is the 802.15 Zigbee technology that actually we demonstrated electronic and [CS] where you can without any other power source, any battery or direct power source, just the kinetic energy from the movement of the switch, you can transmit a signal associated with it, so very powerful opportunity in lighting automation, residential and industrial automation that positions us well to drive a total solution.

Beyond that acquisition that we made at this point in time, it'll be areas where we need that technology to be able to maintain our leadership position. One of those in high-performance RF is we -- out three or four years from now, we need to be in a position where we have gallium nitride capability and technology. And so we have to either develop a strong strategic relationship with the supplier or the ability to buy that fundamental core technology to be able to continue to maintain our leadership position in high-performance RF.In other areas like that that fill out our total solution that we can drive a unique position with customers is really where our area of focus will be.

Great. Thanks. Just one follow up, recently, you guys have received a lot of positive press on your NFC solutions as well as -- and especially as it relates to the smart phone market. Could you give us a sense for what -- how big that business is for you today? And what kind of opportunity do you see it in the 2011, 2012 kind of timeframe?

So we estimated the market view back when we had a call about the announcement of the Android platform back six weeks or --

Early December.

Early December. And we projected the market at 70 million units at that time for the total market. And clearly, we plan to be the leader in that segment. That'll ramp significantly throughout the year with different handsets and models by individual companies deploying that. And it's more dependent upon their ramp schedule and how much that gets pulled in or pushed out or individual models get ramped or not. So it's really hard to project very accurately that number today.

Through September, we'd announced that we'd only shipped 1 million cumulative units of NFC product or NFC handsets through the September quarter. That number for just the fourth quarter alone was up three or four X that level, so a significant increase. And we'll continue to expand in 2011 with the relationships that we've announced on a broad basis across multi-fronts.

And then as we talked about that, we said the market would double again in 2011 from that overall 70 million unit basis. And we plan to continue to have the most significant market share in that market, based on the combination of our strong NFC radio technology combined with our secure element bases that provide some bulletproof security that really helps facilitate that as well as our software stack to be able to provide that to users to rapidly implement the inherent technology and then build off of that with further software applications to establish more robust applications beyond that.

Great. Thank you very much.

Thanks.

Thank you. Mr. Clemmer, Mr. Sundstroem, there are no further questions. Please continue with any points you would like to raise.

In closing I'd like to reiterate what we believe are the key messages from today's call. We delivered revenue in line with our original guidance, even as we experienced some headwinds in a couple of key end markets. We delivered improved gross and operating profit as a result of successful redesign programs, delivering a cumulative $832 million improvement in our non-GAAP operating profit.

Our strategy to focus on more lucrative high-performance mixed signal market is beginning to pay off. We continue to experience very good design win traction within all of our key markets. We see new and unique platforms of businesses that we'll continue to take advantage of across our portfolio and drive future growth opportunities as we move forward.

We continue to make solid progress on improving our capital structure with a net debt down $604 million year over year and the proceeds from the sound solutions transaction that will further reduce that as we move forward. So thank you very much for your interest and your support.

Thank you, everyone. Have a very good day.

Thank you. This concludes the NXP Semiconductors fourth quarter 2010 earnings conference call on Tuesday, 15th of February 2011. For any further questions, you may contact NXP's Investor Relations Department. Please visit their Website, www.nxp.com/investor. Thanks for participating. You may now disconnect.