安森美 (ON) 2005 Q2 法說會逐字稿

Welcome to the ON Semiconductor second quarter earnings conference call. [OPERATOR INSTRUCTIONS] I would now like to introduce your host, Mr. Ken Rizvi.

Sir, you may begin.

Thank you Matt.

Good afternoon, and thank you for joining ON Semiconductor’s second quarter 2005 conference call.

I’m joined today by Keith Jackson, our CEO; and Donald Colvin, our CFO.

This call is being web cast on the investor relations’ section of our website at www.onsemi.com, and will be available for approximately 30 days, along with our earnings release for the second quarter of 2005.

Our earnings release and this presentation include certain non-GAAP financial measures.

Reconciliations of these non-GAAP financial measures to the most directly comparable measures under GAAP are in our earnings release and are posted on our website in the investor relations’ section.

This quarter we will be presenting at the CitiGroup Technology Conference in September.

During the course of this conference call we will make projections or other forward-looking statements regarding future events or the future financial performance of the company. the words estimate, intend, expect, plan, or similar expressions are intended to identify forward-looking statements.

We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially.

Important factors relating to our business, including factors that could cause actual results to differ from our forward-looking statements, are described in our Form 10-K and other filings with the SEC.

The company assumes no obligation to update forward-looking statements to reflect actual results or changed assumptions, or other factors.

Now let’s hear from Donald Colvin, our CFO, who will provide an overview of the second quarter.

Thank you Ken, and thanks to everyone who is joining us today.

ON Semiconductor Corporation today announced that total revenues in the second quarter of 2005 were $302.8m, approximately flat with the first quarter of 2005.

During the second quarter of 2005 the company reported net income of $18.5m, approximately $0.05 per share, which included restructuring, asset impairment and other charges of $2.8m, or approximately $0.01 per share.

During the first quarter of 2005 the company reported net income of $14.8m, or $0.04 per share, which included restructuring, asset impairment, and other charges of $1.1m.

On a mix adjusted basis, average selling prices in the second quarter of 2005 were down approximately 3% from the first quarter of 2005.

The company’s gross margin in the second quarter was 32.5%, an increase of approximately 70 basis points compared to the first quarter of 2005.

EBITDA for the second quarter of 2005 was $59.5m, and included $2.8m in restructuring, asset impairment, and other charges.

EBITDA for the first quarter of 2005 was $55.4m, and included $1.1m in restructuring, asset impairment, and other charges.

During the second quarter, cash, cash equivalents, and short-term investments increased by approximately $42.5m from the end of the first quarter of 2005, to $246.6m. the improvement in cash is a result of improved working capital and cash flow from operations.

During the second quarter days sales outstanding decreased by approximately 4 days, to 42 days.

Through proactive management of our manufacturing capacity we were able to reduce total inventories for the third consecutive quarter. total inventories, which include both internal and external inventories at distributors, were reduced by approximately 5%, or $18m in the second quarter.

Over the last three quarters we have reduced total inventories by approximately $73m. distributor weeks of inventory fell by over one week, to a low on a week’s basis, at just under 11 weeks.

Capital expenditures during the second quarter were $13m, compared with approximately $9m in the first quarter of 2005.

During the second quarter of 2005 we completed the closure of our East Greenwich wafer fab.

For the third quarter of 2005 we expect to save approximately $2m to $3m of cash expense savings as compared to the second quarter, but we will only see a small P&L benefit until we work down the bridge inventory.

We expect to see the full P&L benefit during the first half of 2006.

Now I would like to turn it over to Keith Jackson for additional comments on the business environment.

Thanks Don.

During the second quarter of 2005 we saw strong growth in the wireless end market, with wireless revenues representing approximately 18% of sales during the quarter, up from 14% of sales in the prior quarter. the computing and networking end markets stayed relatively flat at 24% and 7% of sales respectively during the quarter.

Consumer end market fell by approximately 100 basis points to 18% of sales, but remained relatively flat on a dollar basis.

Automotive and industrial both fell as a percent of sales during the second quarter, with automotive representing 19% of sales, down from 21% of sales in the prior quarter, and industrial representing 14% of sales, down from 15% of sales in the prior quarter.

During the quarter, sales to our largest OEM customer, Motorola, increased slightly, and represented approximately 9% of sales in the second quarter of 2005. our top five customers, excluding distributors, for the second quarter were Delphi, Flextronics, Motorola, Siemens, and Visteon.

On a geographic basis, our contribution this quarter from sales in Asia, excluding Japan, increased by 500 basis points to 54%, reflecting the strength we saw in the wireless end market.

Sales in the Americas decreased by approximately 200 basis points to 24%, due to slower demand in the automotive and industrial end markets.

Sales in Europe represented approximately 16% of our total sales, down approximately 300 basis points from the prior quarter, and sales in Japan remain relatively flat at approximately 6% of sales.

Looking across the channels, sales to distributors, the EMS channel, and direct sales to OEMs remain consistent with the first quarter. the distribution channel remained at approximately 48% of sales; direct sales to OEMs remained at approximately 42% of sales, and the EMS channel remained approximately 10% of sales during the second quarter. we also estimate that approximately 10% of sales through the distribution channel were for third party logistical services or the EMS channel.

Now I’d like to provide you with some details on the progress we’ve made in some of our end markets.

We continue to see significant design activity in the wireless space throughout the second quarter across a broad selection of components.

Four of the top five cell phone manufacturers have adopted our filter products, as they offer both excellent performance and a better form factor.

The proliferation of MP3 audio functionality in the phones, and the continued improvement in camera capabilities are creating exciting opportunities for our products.

Our new Class D audio amplifiers and analog switches, which enable designers to process and distribute high quality audio signals around the phone, have also been selected for several designs at four of the five top cell phone manufacturers.

We have won significant business at two of the three major North American automakers for power supplies for digital satellite radio systems.

We have components, including power linear, rectifiers, and small signal products, designed into both commercially available platforms, with approximately $1.50 to $2.00 of content per unit.

During the quarter we completed qualification of all of our packages to meet the requirements of the EU directive on lead free products.

We are now compliant to both the specific lead free requirement, as well as the more comprehensive ROHAS requirement to eliminate all hazardous materials from our products.

We are now well positioned to meet the needs of our customers, both in terms of products and logistics, when the directive goes into force next year.

Our products continue to win awards from the technical editors and press.

Our new family of thermal track audio amplifiers was named to a list of ultimate products in the analog category by the editors of EE Times earlier this year.

Another new product developed for the power supply market, a power factored correction controller, was selected as best power management product by a leading Chinese electronics industry trade magazine, Electronics Design and Application World.

These parts are critical components of high efficiency power supplies for the applications, such as desktop PCs.

This is the second year Electronics Design and Application World has rewarded ON Semiconductor with best power management product.

Now I’d like to turn it back over to Donald for our forward-looking guidance.

Thank you, Keith.

Third quarter 2005 outlook.

Based upon booking trends, backlog levels and estimated turns levels, we anticipate that total revenues will be up approximately 2% to 5% sequentially in the third quarter. backlog levels at the beginning of the third quarter were up from backlog levels at the beginning of the second quarter, and represented over 80% of anticipated third quarter revenues.

We have also completed over half of our turns requirement already in July.

We expect the average selling prices will be down approximately 2% for the third quarter of 2005. we also expect cost reductions to offset the decline in average selling prices, and that gross margins will be flat to slightly up over the third quarter of 2005.

We expect to see a cash benefit from the closure of the East Greenwich wafer-fab of approximately $2m to $3m in the third quarter, but do not expect to see the full P&L benefits until the first half of 2006, when we expect to work down the bridge inventory.

For the third quarter of 2005 we expect cash, capital expenditures, of approximately $20m. we also expect, during the third quarter, total SG&A and R&D expenses up approximately 19% to 20% of sales; with SG&A expenses ranging from 11% to 12%, and R&D ranging from 7% to 8% of sales.

We anticipate that net interest expense will be approximately $15m for the third quarter of 2005. during the third quarter we are also planning on making our final payment to the trustee to terminate the pension plan we inherited from Motorola, which will cost approximately $21m of cash.

We have already accounted for the charge.

Even with expectations for neutral working capital, and slightly higher capital expenditures, we look to keep our cash position relatively flat as compared to the second quarter. we also expect common shares outstanding to be approximately 256m, and that preferred shares may be convertible into approximately 48m shares in the third quarter.

The FASB ruling on contingent convertibles, which became effective in the fourth quarter of 2004, results in an increased share count of approximately 27m shares in the third quarter, and the diluted share count could also add approximately 6m shares from options.

Further details on share count and EPS calculations are provided regularly in our 10-Qs and Ks.

With that, I would like to start the question and answer session.

Thank you sir. [OPERATOR INSTRUCTIONS] Our first question is from Michael Masdea, of Credit Suisse, First Boston.

Your question, sir?

Good job operationally guys, on the quarter.

The first question is really on the customer side.

There was some commentary on the supply chain, suggesting maybe the builds started a little bit earlier this year, and maybe that’s because inventories are lean.

Any comments around that or any color you get from your customers would be great.

Yes, Michael, Keith Jackson.

I’m not sure that there’s a tremendous amount of head start going on the inventory side.

It is fairly apparent that inventory levels are at the lower end of comfort for most our customers, and so certainly the order patterns did get laid in sooner than they were being laid in, in the first quarter of the year.

So, definitely, we’re getting a little longer lead notice on those orders.

But, it still looks like a fairly traditional build, going into the third quarter.

OK, and then a follow up question; you know, I guess you could say three of your competitors out there, more on the commodity side, are going through some sort of restructuring at this point.

Is that creating any sort of hiccups out there for them, any sort of opportunities for you guys that you seem to be capitalizing on?

Or, seeing any opportunities ahead of you that you can capitalize on?

We, frankly, have been focused on our new products, and getting those designed into the next systems.

And so, that type of activity really doesn’t have significant impact.

Certainly, it shows up in the distribution channel as a little pricing pressure.

And, you saw from our second quarter results there was a bit of that.

But, even that appears to be quite manageable for us.

Our next question is from John Barton, of Wachovia Securities.

Your question, please?

Thanks.

Keith, if you could talk about pricing trends, and you know, kind of been down 3% in the closed quarter, down 2% going into this next quarter?

I mean, what are you seeing out there as far as pressures?

How do you think it kind of continues as we go through the balance of the year, please?

Again, looking at the traditional patterns in the industry, after book-to-bills go above parity, which I think they pretty much have for the industry at this point, it takes a quarter or a two before the pricing power returns to the sellers.

So again, I think you’re seeing residual effects of a little weaker last half of last year, as the inventories were being taken down.

But again, it’s relatively moderate ASP pressure, as based on prior cycles.

And, so we would see them being certainly no more aggressive in a downward fashion, as we go forward, and probably a little less aggressive as we get towards the end of the year.

And, just to give a bit more color on that, John, this is Donald.

The way we calculate the price is consistent over the last five or six years.

But it doesn’t take into account actions that we proactively take to increase our gross margin dollars.

And, I think you’ve probably noticed that our gross margins were actually up 70 basis points sequentially.

So, it’s a bit of a pessimistic way that the calculation is done.

There’s no perfect way to do that because our mix does change.

But we have been proactively managing gross margin dollars.

And in some of our product lines, reducing our price to get higher gross margin dollars.

And, that’s not reflected in the naked price reduction calculation.

But what I can say is that this is under our control.

When I was reviewing that today with Bill George, our boss of operations, we are clearly agreeing that, compared to two years ago, we were controlling actions we’re taking on prices.

Two years ago, we were not; we did not have the same options.

So I think, again, our gross margin is a tribute to the success we have in managing our business.

As kind of a follow up to that, Donald, if I could, you know, the price change that you give is an apples-to-apples comparison, if I understand it correctly.

So it is mix-adjusted.

If you back away from that and you look at the design win activity that’s taking place, and one would think that most of those things being designed in are of a higher ASP value than the average component leaving the factory, I mean, how is overall ASPs for the company tracking?

How do they track in the closed quarter?

What do you think about it going forward, please?

This is Keith Jackson again.

It hasn’t changed dramatically.

As you can guess, when you’re shipping 6b to 7b units a quarter, some of those prices, even on the new products, don’t have an immediately noticeable impact.

We have not moved the aggregate ASP dramatically in any one direction yet.

We do expect, though, from a margin perspective independent of ASPs, that the new products are going to continue to positively contribute to the margin expansion.

Our next question is from Chris Danely, of J.P. Morgan.

Your question, please?

Yes, Hi.

This is Sameer [inaudible] for Chris Danely.

I have a question on utilization rates.

What were they this quarter, and how do we look at them, going forward?

They were up this quarter over last, approximately 80% utilization.

And, we would not expect dramatic changes in that, as we go into the third quarter, but certainly, some upward movement.

Great.

And a follow up on lead times, in terms of lead times, were there any changes from comparing the two quarters, the first quarter and the second quarter, and, your expectations for going forward?

Yeah, the lead times were up about a week, on an aggregate basis in Q2, over Q1.

Nothing dramatic, running seven to eight weeks-type of lead time at this point.

I’m not really expecting to see significant change in Q3, but certainly there could be some small amount of extension if the quarter remains strong.

Our next question is from Steve Smigie, of Raymond James.

Your question, please?

Thank you.

I was hoping you could comment a little bit on the reductions of inventory, particularly in the channel.

Was that an effort on your part to bring that down?

Or, was that, again, you mentioned the distributors were a little bit uncomfortable with the level, so it seems that must have been your efforts to bring that down.

We’ve actually been moving fairly aggressively to keep inventories lean in the channel, particularly as the industry starts going through the conversion to lead-free.

We want to be conservative, and make sure that what we have out there is just the freshest and have levels that I think are appropriate for the industry.

Our model for distribution inventories is 12 to 13 weeks.

We’re operating well under that, at this point.

But we believe that these are still good levels to allow us to have sales growth.

But certainly over time, we wouldn’t expect to keep them down under 11 weeks.

OK.

And, you gave a pretty nice guidance for sequential revenue growth.

If you could talk a little bit about some of the product cycles that are driving that.

I guess my understanding was that you have a number of new OEM products that you’ve got designed into, that will most likely roll out for the holiday season, if that’s what we’re looking at in the guidance?

Certainly, you should see expansion in the PC space, with a number of new products there; in the consumer side, with the gaming machines and the new releases that come out in that sector.

And continued progress in the wireless sectors.

So, those three should be the drivers as we go into the second half.

And, they’re all very consistent with the consumer push and cycles.

Our next question is from Tristan Gerra, of Baird.

Your question, please?

Good afternoon.

You mentioned that the backlog was up sequentially.

Was the increase steady over Q2?

Did you see an acceleration over recent weeks?

If you could just give us a little bit more granularity on the backlog trends.

This is Donald, Tristan.

No, I think the quarter started off pretty comfortable.

And, the backlog was building nicely throughout May and June.

There were some weeks, obviously, where we had some very good bookings, and others where we had less.

But the overall trend was one that made us confident that we were near the inflection point.

And, as Keith has mentioned, this is an important inflection point.

It’s the first quarter since last year that we’ve built backlog, and it’s the first quarter as well, where we’ve had a positive book-to-bill ratio, a comfortably positive book-to-bill ratio.

So, this has really teed us up very well for the second half.

And, we feel confident in our top revenue guidance.

OK, and then a quick follow up; the fact that there have been some European and US firms transitioning to Chinese or Taiwan-based ODMs.

Does that provide opportunities for you in terms of additional content?

Yes, I mean clearly, part of our strategy is to use our very strong Asian infrastructure, to continue to influence market share gains.

And we are much better positioned, as you can see from the numbers, in Asia than we are in Europe, for example.

But really, if you look at the business today, we’ve got to influence the OEMs on a continuing basis, wherever they are geographically, and the ODMs, wherever they are geographically, and that tends to be in Asia.

So, we’re well set up for that and we have our resources distributed to try and get gains from that movement.

But specifically on that, the IBM-Lenovo deal was one that has opened up an opportunity for us that did not exist before.

So, that’s one that we are quite excited about.

Lenovo is a customer.

We see some good opportunities there, which were not so obvious for us to reap.

BNQ [ph] is something, as well, that has some potential.

So, you are right.

It will take time, but they are something that we look forward to.

Our next question comes from Craig Ellis, of Smith Barney.

Your question, please?

Thank you, good afternoon guys.

It sounds like with the 3% to 5% revenue growth in, what I would guess would be characteristic strength in computing, consumer and wireless that, all around, it looks like a seasonally normal third quarter.

Is that a fair characterization?

I would characterize it that way.

I think it is going to be seasonally normal for us.

OK, and then with Capital Expenditures, how should we look at the full-year number, given the $20m in the third quarter?

I think we are penciling in something like a $65m number, Craig, for the full year.

As you can tell from our discussion on our cash balance, we manage that very tightly.

But we are seeing some interesting ROI opportunities in some of the micro-packaging and so, we may bring some of that in if the business opportunities are there.

Some of these more advanced packages obviously have a much higher ASP, and higher margin than the old traditional packages.

And so, that’s one thing that helps us drive our gross margin going forward.

So right now, the best number we have, as we reviewed that at lunchtime, with the operations guru, is about $65m.

But we may add a few more onto that if we have some high ROI opportunities.

Your next question comes from Vernon Essi, of JMS.

Your question please?

Thank you.

You had a nice growth sequentially in the wireless segment, and it looks to be probably about 50% faster than the handset market, at least at your best customer, can you sort of dig into that a little bit and let us know where you’re adding additional contents in the handsets?

And, what seems to be getting the most momentum, in the specific?

Sure.

We’re basically gaining momentum, and most probably, market share, based on the numbers that you’re reporting.

And the key components there are the ones I mentioned earlier; the filter business, growing at a very, very fast clip.

We’ve been expanding our footprint in that area with new products.

The analog switches and the audio products, along with the traditional products we’ve had, like LED drivers, etc., have really been about new designs, as opposed to run rate changes.

And is the LED side, is that becoming increasingly common in terms of your new programs?

Are you seeing more, I guess, cross-fertilization?

Yes, I mean, these products are used across the entire consumer segment, the brighter white LEDs, etc., showing up in more and more platforms.

So, certainly there’s a proliferation, even with the same number of end-units being sold, of some of the technologies that we’re providing.

Our next question is from Quinn Bolton, of Needham & Company.

Your question, please?

Hi, congratulations on the good quarter, by the way.

Just in regard to sort of the gross margin, can you address two issues?

One, you guys have done a great job of keeping gross margin flat to higher through a period where ASP is down kind of 2% to 3% per quarter, through cost reductions.

Can you remind us of what further cost reductions you have planned through sort of the remainder of calendar ’05?

And then a second question around the gross margin, you guys have done a great job of reducing inventory over the last three quarters.

I think you said it was down by $73m.

Usually, when you do that, you’re running your fabs at lower utilization rates, and so you have some under absorption charges.

As you get back to kind of a targeted inventory level, what kind of inventory-related boost to gross margins do you think we could get, when you’re, you know, backs are better aligned, running the fabs with the end market demand?

Well, this is Donald.

We did mention that we are writing off some of our higher cost inventory following the accounting rules.

We closed the East Greenwich facility.

And I mentioned specifically in the script, because I knew you’d be looking at that, that there is a charge of approximately $3m per quarter, as we write down that inventory in association with selling the product.

The replacement cost of that, because of the move to central Europe, will be much less.

That will enhance our margins starting in the first quarter of next year.

Plus, we’re writing down the inventory.

As a continued effort to find cost reductions, moving and improving our yields, reducing our scrap, etc., consolidating our manufacturing base, we announced a restructuring plan in June with the closure of a small fab in Asia.

That will kick in at the end of next year.

So, we have some other things we are looking at but there’s nothing major in the short-term pipeline, just the usual tucking and ducking that we have to do to manage our business.

You mentioned running the factories at less than full capacity, that’s a more complex subject because we have been aggressive in cutting back our costs.

We do not have the same amount of deprecation as some other companies have.

So when our operations did not require the factories at full capacity, we shut down the factories and saved in expenses, forced vacation, and reduced headcount where appropriate.

So we’ve already been running at a pretty optimal basis, so there’s not any low-hanging fruit that we can harvest in the short-term just by loading the factories.

So if inventories were roughly flat quarter-over-quarter, rather than I think it was an 18m reduction, your gross margins would have been roughly 32.5, not much change.

They could have been a little bit higher.

I think you could say that we could have added $1m to $1.5m in gross margin, approximately something like that.

But again, all that depends on the mix of inventories, whether it’s finished goods, whether it’s a die, and it’s a complex subject that doesn’t have a quick answer.

But what I can assure you is we have been running a very tight ship in reducing the costs in our factories as we’ve cut back on the capacity utilization.

The next question is from Ramesh Misra of C.E. Unterberg.

Good afternoon gentlemen, good job on the margins.

Just a follow on, on the margin question earlier.

With these consolidated factories, and all your cost reduction efforts, where do you see your longer term gross margin target to be at?

We really have set a series of models in place, we’ve been discussing those over time, and of course you always have to kind of pick the point on your growth curve for the revenues quarterly.

But certainly numbers like 400m a quarter, and 40% margins are achievable with the trajectory that we’re on.

OK.

Now clearly you guys are doing a lot better than some of your peers.

As a consequence of that, have you seen any heightened pricing pressures from some of them, especially in the latter part of the quarter?

I know your pricing guidance for the current quarter actually seems pretty nice, but are you seeing any evidence of more competition from your peers?

The answer is, there’s not been a change in behavior here the last little bit.

There’s always pressure, particularly in Asia, through distribution with that sell in model that you’re familiar with here in North America, they try and get the revenues back.

But in reality, most of our business is based on design wins that we’ve got.

There is a steady state business for that, and of course we have to be competitive without having to necessarily react to every perturbation [ph] that may get thrown by some of the competition.

I think the one point that I did mention there, Ramesh, and that is that really if you do compare our sales to previous cycles the strong pressures from some competitors are limited to a few product families, they’re not across the board.

A lot of product families that came under a lot of pricing pressure the last time, there’s a lot less market driven pricing pressure this time.

We are also reaping the benefits of the actions to reduce our costs in these families, and we are able to price aggressively to increase market share and increase gross margin dollars, and that was one of the major contributors in our slight upside, just under 33% in gross margin for the quarter.

The next question is from Romit Shah of Lehman Brothers.

Thank you.

If I look at R&D as a percentage of sales, it looks like it’s the highest it’s been maybe in the company’s history.

I just wanted to get a sense in terms of allocation, where are you focusing the R&D dollars by product?

Most of the R&D is spent at driving our power technologies, particularly in the integrated power space, so the analog control with the MOSFET drive, the processes behind that, the products behind that, etc., where most of the growth goes.

I think you’ve heard us talk about some of the products that come out of that in the power supply arena; single chip AC/DC conversion, DC/VC converters, the filter products, lighting products, audio products, etc.

Really it’s all about analog nature products and the power drive that is associated with that.

On an absolute dollar basis, I’ve got the numbers here.

The second quarter of last year we were actually $25m and this year we came in at $23m so we did go down, because we do manage every line of the P&L.

So it’s not a record, but we are certainly devoting resources to some high ROI R&D projects.

How should we think of product mix down the road, R&D if I’m right, is roughly 1/3 of sales.

How does the mix change by product?

What you will see over time is that all of these integrated products I just talked about a moment ago will be outgrowing the balance of our portfolio, that’s happening today.

You can’t really do it at the division level, because even our power division, which has many, many discreets, has also got these complex analog and drive products embedded with them.

But from an absolute product basis, certainly we should be outgrowing in the power control area the balance of the portfolio of discreets.

The next question is from Chris Caso of Friedman Billings Ramsey.

Hi guys, good afternoon.

I wondered if you could talk a little bit about the back end utilization rates.

I think you said the front end was about 80%, what are you running back end utilization and any potential for capacity constraints there that might raise lead times.

We actually said the blended utilization was around 80, the front ends are less than that, and the back ends are slightly higher than that.

We have plenty of head room as we head into Q3 and Q4 however, for growth.

So there’s really no risk of running out of total capacity.

We always have specific packages and/or products that tend to be a challenge to ramp fast enough, but in macro, really no constraints facing us over the next two quarters.

OK.

As a follow up, regarding the linearity that you guys are expecting for your third quarter, it sounds like much of the turns already booked for the quarter, the quarter looks like its fairly front end loaded.

Is that what you guys typically see in the third quarter?

Maybe you could tell us what you typically see for third quarter linearity.

It is interesting, we’ve had, typical has been changing the last couple of years.

We’re starting to see a pattern where many of our distributors in particularly place a lot of backlog in the first period of the quarter, and then lighten up as the quarter goes on.

The OEM side tends to be much more stable and steady, but the net effect is that this quarter is looking pretty similar to the last quarter, where the first period has been quite strong.

In fact, I think July will end up being stronger than April when we’re all done.

In general it’s pointing to greater strength overall and relatively stable linearity through the quarter, with the potential for the last period having a little less of the fill, but certainly no less of the activity.

A follow up question from Vernon Essi of JMS.

I just wanted to get into the actual breakout by product type.

Has it shifted much between analog standard and also how did your ECL business do in the quarter?

The ECL business came in at just over 6%, which is very similar to last quarter, and we see that kind of flat, it’s got a big combs [ph] exposure and test exposure, so we see it pretty flat.

It was slightly up on an absolute dollar basis, but roughly the same percent of sales, just over 6%.

The analog standard component mix is the same as it’s been for the last few quarters.

It seems to be a pretty fixed ratio there.

OK, thank you.

Ladies and gentlemen, thank you for participating in today’s conference.

This concludes the program, you may now disconnect.

Good day.