安森美 (ON) 2005 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the ON Semiconductor Third Quarter Earnings Release Conference Call.

At this time, all participants are in a listen-only mode.

Later we will conduct a question and answer session and instructions will follow at that time. [OPERATOR INSTRUCTIONS] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Mr. Ken Rizvi.

Mr. Rizvi, you may begin.

Thanks Matt.

Good afternoon and thank you for joining ON Semiconductor’s Third Quarter 2005 Conference Call.

I am joined today by Keith Jackson, our CEO and Donald Colvin, our CFO.

This call is being webcast 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 third 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 posted on our website in the investor relations section.

Now I would like to highlight our upcoming conferences.

This quarter we will be presenting at the TWP Innovations and Power Conference on November 9th, the CSFB Technology Conference on November 29th, and the Lehman Brothers T4 Conference on December 9th.

During the quarter, we will also open up the stock-- the NASDAQ stock market on November 11th.

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 and other filings with the SEC.

The company assumes no financial or 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 third quarter.

Donald?

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

ON Semiconductor Corporation today announced that total revenues in the third quarter of 2005 were $315.6 million, an increase of approximately 4% from the second quarter of 2005.

Including the first quarter of 2005, the company reported net income of $23.5 million or approximately $.06 per share on a fully diluted basis, which included restructuring, asset impairment, and other charges of $.2 million.

During the second quarter of 2005, the company reported net income of $18.5 million or $.05 per share, which included restructuring, asset impairment and other charges of $2.8 million or $.01 per share.

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

The company’s gross margin in the third quarter was 33.2%, an increase of approximately 70 basis points compared to the second quarter of 2005.

EBITDA for the third quarter of 2005 was $65.4 million and included $.2 million in restructuring, asset impairment, and other charges.

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

During the third quarter, cash, cash equivalents and short-term investments increased by approximately $25.7 million from the end of the second quarter of 2005 to $272.3 million.

During the third quarter, the year days sales outstanding increased to approximately 47 days.

Inventory at distributors remained relatively flat in the third quarter at approximately 11 weeks.

While in panel inventories decreased on a days basis by approximately 2 days to 75 days.

Capital expenditures during the third quarter were $13 million, approximately flat from the second quarter of 2005.

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

Thanks Don.

During the third quarter of 2005, we saw sequential revenue growth in four of our five end markets, computing, consumer, industrial, networking, and wireless.

Automotive, which represented 18% of third quarter sales, was down slightly on a revenue basis and down from 19% of sales in the prior quarter, primarily due to seasonality.

Industrial and networking end markets both grew on a dollar basis, but were flat as a percentage of sales with the industrial representing approximately 14% of sales during the quarter and networking representing approximately 7% of sales.

As we mentioned during our second quarter conference call, we felt the growth for the back half of 2005 would be largely driven by three end markets, computing, consumer, and wireless.

These end markets represented over 60% of ON sales in the third quarter and grew approximately $9 million sequentially, with computing representing approximately 23% of sales and consumer and wireless each representing approximately 19% of sales.

We expect these end markets to continue to drive our growth into the fourth quarter.

During the quarter, sales to our largest OEM customer, Motorola, increased sequentially and represented approximately 10% of sales in the third quarter of 2005.

Our top five customers excluding distributors for the third quarter were Delphi, Delta, Flextronics, Motorola, and Siemens.

On a geographic basis, our contribution in this quarter from sales in Asia, excluding Japan, increased by 200 basis points to 56%, reflecting the strength we saw in computing, consumer, and wireless end markets.

Sales in the Americas remain flat at approximately 24% while sales in Europe and Japan fell slightly.

Sales in Europe represented approximately 15% of sales, down approximately 100 basis points from the prior quarter.

And sales in Japan represented approximately 5% of sales, down from 6% of sales in the prior quarter.

Looking across the channels, sales to distributors decreased by approximately 100 basis points to 47% of sales.

Direct sales to OEMs remained flat at approximately 42% of sales.

And the sales to the EMS channel increased by approximately 100 basis points to 11% of sales.

We also estimate that approximately 10% of sales through distribution channel were for third-party logistical services for the EMS channel.

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

We continue to make significant penetration into the portable consumer digital market with our power management protection devices.

Our recent design wins in next generation MP3 players provide future inroads for addition growth.

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

The top five mobile phone manufacturers continue to pursue designs using our filters, audio, and power amplifier products.

We are winning significant design opportunities with key gaming console manufacturers.

These designs include products across our entire portfolio of power management products that provide conversion, protection, and control to high volume applications.

These next generation game consoles are expected to ramp in the fourth quarter of 2005 and into 2006, providing an additional growth opportunity to ON.

Our recent announcement of the industry’s first open ATX reference design certified to meet 80+ performance requirements for computing applications demonstrates ON Semiconductor’s commitment to delivering leading edge power efficient solutions.

The design utilizes several of our advanced power management devices and draws from our leading discrete component portfolio to achieve breakthrough performance.

ON Semiconductor will continue to induce-- introduce additional green point power solutions to address the growing demand throughout the electronics industry for power efficiency in both active and standby modes.

There’s continuing emphasis from the industry on lead-free and RoHS and other emerging requirements like 80+ efficiency standards being developed.

We’ve completed our conversion to lead-free and RoHS compliance and are positioned to take advantage of the growing demand for these products.

Over 60% of our backlog entering the fourth quarter was lead-free and over 40% of our inventory in the channel is lead-free.

Our products continue to win awards and praise from the technical editors, our customers in the press.

One of our dual MOSFET drivers recently won the 2005 Top 10 DC/DC Award from Electronics Products China Magazine for its improved efficiency in applications such as ATX and high power switch mode power supplies or SMPS.

This is the third consecutive year that ON Semiconductor has won the top ten DC/DC Award from EPC.

We continue to be recognized by our customers and others for our exceptional service and support programs and our commitment to customer satisfaction.

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

Donald?

Thank you Keith.

Fourth quarter 2005 outlook, based upon booking trends, backlog levels, and estimated turns levels, we anticipate that total revenues will be up approximately 2 to 3% sequentially in the fourth quarter.

Backlog levels at the beginning of the fourth quarter were up from backlog levels at the beginning of the third quarter and represented over 85% of our anticipated fourth quarter revenues.

We expect that as the selling prices will decline by approximately 2% for the fourth quarter of 2005.

We also expect cost reductions to offset the decline in average selling prices and that gross margins will be up approximately 100 basis points in the fourth quarter of 2005.

For the fourth quarter of 2005, we expect cash capital expenditures of approximately $30 million.

We also expect during the fourth quarter total SG&A and R&D expenses are between 19 and 20% of revenue with SG&A expenses ranging from 11 to 12% and R&D expenses ranging from 7 to 8%.

We anticipate that net interest expense will be approximately $15 million for the fourth quarter of 2005.

During the third quarter, we had planned on making our final payment to the trustee to terminate the pension plan we inherited from Motorola, which was expected to cost approximately $21 million of cash.

We made a $1 million payment in the third quarter and anticipate that we will make the final payment in the fourth quarter of 2005, approximately $20 million.

We expect common shares outstanding to be approximately 257 million and that preferred shares may be convertible into approximately 49 million shares in the fourth quarter.

The FASB ruling on contingent convertibles results in an increased share account of approximately 27 million shares in the fourth quarter.

And the diluted share count should also add approximately 7 million 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 Q&A session.

Thank you. [OPERATOR INSTRUCTIONS] Our first question comes from Romit Shah from Lehman Brothers.

Thanks, a couple questions.

Could you just explain why the top line growth is decelerating in Q4?

You know your backlog’s higher.

ASPs are projected to decline less this quarter.

Could you give us some color into seasonality in maybe some of the end markets?

Oh yes, Romit, basically there we certainly expect from a traditional basis the fourth quarter to have less turns.

Basically it is a consumer-driven cycle with Christmas being the focus of that.

So certainly we want to be conservative as a sell-through based company in making sure that we’re capturing the products that are going to be of note during that period.

Net of that is we do expect the fourth quarter to be more normal from a turn perspective and 2 for 3-- 2 to 3% up is more normal pattern for us.

Okay, thanks.

And just I noticed based on your guidance that we should assume a pretty significant increase in incremental gross margin.

Can you just elaborate on some of the cost reductions that are, that are driving the improvement in incremental gross margin for Q4?

Well I think it’s just the normal things we’re working on Romit, increased efficiencies and yields in the factories, lower cost as we write off some of the older inventories that we’ve accumulated, bridge inventories from the quarter over EG facility.

No one big item.

We also had previously indicated in the, in the third quarter results that we in an 8-K that we had a warranty payment.

So we were not anticipating any warranty payments in the fourth quarter.

So are the, all these things together give us comfort that we can grow our gross margin.

Great.

Thank you very much.

Thank you.

Our next question comes from Michael Masdea from Credit Suisse.

Yes, hi this is Ed Ty for Michael.

Just a couple quick questions.

You know there’s been some speculation that the build started a little bit earlier this year and as a result, some concerns that it may stop a little earlier as well.

I was wondering if you saw any evidence of that from customers at all?

Yes, Keith Jackson again.

We haven’t seen specific evidence on that.

I think it is reflected in our projections that we’ve made however.

We do think there’s been some very aggressive builds in the marketplace through Q3.

And again the question there is how strong will the consumer season be during Q4?

So, I believe we’ve built all that into the models we’re presenting to you, but quite frankly have not yet seen any signs that inventory has been stacking up in the channel.

You think your cash balance went up pretty nicely this quarter.

Can you just talk about how you plan on allocating that cash, whether you plan on buying back some more stock or paying back, paying down some debt?

This is Donald, you might expect.

We have never been keen on buying back stock.

I think you’ve seen over the last few years we’ve had an aggressive defining of the balance sheet in taking down high interest cost debt.

That remains a very active priority for management.

We are-- got quite a few things, irons in the fire.

And we are certainly actively pursing that.

The cash balance at the end of the third quarter was I believe the highest in, on record since the company’s IPO.

That’s what?

I believe from my quick review.

So we were certainly be taking advantage of that and looking at how we can use the markets to reduce the amount of high-cost debt on our balance sheet.

So that’s something that we will actively pursue and communicate to the street when we have any more specific details of these actions.

Great.

And then just one last one.

How are you managing the risk with the Delphi bankruptcy and is that a risk going forward?

Excellent question.

We had, we obviously have, we constructed over time period reserves for these kinds of risks.

Additionally, Delphi, although an important customer, is under 3% of our revenue.

And if you noted the Chapter 11 for Delphi concerned North American subsidiaries.

We do ship a significant amount to overseas subsidiaries that are no longer, that are not covered by Chapter 11.

Delphi as a company also has I believe over $2 billion of cash and a $2 billion line of credit available.

So it has the liquidity to meet suppliers’ needs.

So taking all that into account, we will obviously have to follow it carefully but we don’t see that having any major impact on our ongoing business.

And we believe that we should, we have a reasonable assurance of this, of getting cash collection on just about all of our receivable.

Great.

Thanks so much.

Thank you.

Our next question comes from Chris Danely from JP Morgan Chase.

Thanks guys.

You know just a few quickies.

Can you talk about how business has gone so far in October?

Have you seen any-- was there any change in channel inventory from Q2 to Q3?

Our channel inventories were relatively flat.

I mean there may be a couple million dollars up, but on a, on a weeks’ basis, we’re still at 11 weeks, which is below our model of 12 to 13.

We typically do build small amounts of inventory at the beginning of each quarter and then drain that off toward the end of each quarter.

So that’s a normal pattern for us.

And what we see in Q4 so far looks quite normal.

Great and then nice job on getting the margins up in Q4.

Can you just talk about how you expect them to trend next year if we have, let’s just say some sort of normal seasonal year?

Yes, normal and seasonality for us would mean a much stronger second half of the year than first half.

We would expect to see those continue to accelerate reflecting increased utilization and a better mix of products as we get into next year.

So, again I guess I can’t give you specific numbers at this point, but would expect those margins to continue to expand most noticeably in Q, the second half.

Sure.

And Keith can you talk about what utilization rates are right now?

And is that the biggest reason margins are going up in Q4?

Not really.

Our utilization rates today on a blended average are mid 80’s and I expect it to be about the same in Q4.

So are really not looking for significant additional absorption.

It’s really more about cost reductions exceeding the ASP declines.

Great.

And then last question.

You know you guys are fairly broad-based, what’s your, what’s your feeling on end demand right now?

If you could just run through those-- the three or four main end markets?

Yes, I think if you go with the three that have been our growth engines.

You start with the wireless handsets.

We see continued expansion in that marketplace.

Certainly it is a seasonal business and Q1 is typically down, but from what we’re seeing there should be nice growth this year and the expectations from our customers is for nice growth next year.

In the computing side, we’re seeing good growth on the notebook piece of that business.

And certainly from a company perspective, we’ve started to increase our dollar content in that portion of the computing marketplace.

Not a significant amount of growth here in fourth quarter in the desktop side of that business, but certainly continued increased penetration for the company.

And then the consumer side, we’re seeing pretty good demand in the portable entertainment devices.

The MP3 players and the various derivatives that are out there and again do not see any signs that that is softening.

So we see that strengthening from that particular marketplace perspective.

Great.

Thanks a lot guys.

Thank you.

Our next question comes from Ramesh Misra from C.E. Unterberg.

Good afternoon guys.

Thanks.

In terms of the channeling entry, the levels, it seems that the reduction over there is leveling off.

I mean do you expect that to continue?

I mean pretty flat at this 11 week level or do you expect that to potentially increase?

Yes, our model has been 12 to 13 weeks.

And we’re now finding that we can operate down at 11. 11 is a little too skinny in some places.

I do know that we’re certainly on certain products and packages having to scramble to keep up with demand.

So it may go up a little bit from the 11, but frankly I think that 11 to 12 week range is now a more proper expectation for us.

Okay, any dramatic or meaningful changes on your blended lead times?

They moved up a bit.

They’re now 8 to 10 weeks on a blended basis, so they have moved out just a bit.

We have been putting in some significant capacity additions.

You heard our expectation to up our capital expenditures here in Q4.

So we’re hopeful we can catch that here in Q4 and start seeing declining lead times as we enter the first quarter.

Okay.

And then finally Keith, the second half spend this year was pretty much relatively mute, muted looking like something like 5% up versus first half.

Now does that say something about what you might expect for the first half weakness or would you care to--

Yes, the way, the way I would coach this year’s growth is it, it was a seasonal pattern as opposed to a cyclical pattern.

I think we pretty much saw the type of seasonal patterns this year than I would expect as opposed to any great semiconductor cycle.

We’re expecting next year to again show some of that seasonality, back half being stronger than the first half.

At least at this point, we are expecting growth however in the total market, which means that there may, may not be significant softening in the first half.

Okay, thanks very much and good job on the gross margins.

Thank you.

Thank you.

Our next question comes from Craig Berger from Wedbush Morgan.

Good afternoon.

Thanks for taking my question.

Can you just discuss the competitive situation out there in more of the standard and discrete products as some of your maybe U.S. competitors exit the market and perhaps some Asian competitors enter the market?

Okay.

Basically we have not really seen any new significant Asian entrants.

There have been Asian entrants out there for some time.

We’ve been competing against them successfully for some time and don’t really see a change in any trends there.

And on the North American basis, we have detected in some of the standard product families a lessening in the price competition.

But it’s nothing that is substantial or significant at this point, but it does seem to be letting up a bit in the standard analog part of the marketplace.

Pretty much still pretty fierce competition in MOSFETs.

And I’m not sure that that will correct itself any time soon so that’s where most of the price pressure’s coming.

But the balance of the products are starting to get a little bit more stable.

Excellent.

Thanks for the color.

And then with respect to the one last kind of higher interest rate, I think it’s $155 million subordinated note on the balance sheet is taking that to a lower rate a priority to you guys?

Donald here.

I think you have me on the second or third question.

Clearly that is a top priority especially since we have record cash.

And there are there are several other instruments that have high coupons attached to them.

So anything above what I see as market rates.

And the majority of our debt now is at LIBOR plus 300 basis points, which is roughly in the 7% range.

So anything that’s above that is clearly a rich opportunity target.

And you’re right, that is something that we are actively examining.

And that there’s some technicalities that are required to be passed before we can move ahead.

But we will communicate that whenever we have any news of anything more concrete.

Okay, thanks, thanks for the insight.

Thank you.

Our next question comes from Chris Caso from Friedman Billings.

Hi, thank you.

You mentioned that on the ASPs, most of the price pressure was coming on the MOSFET side.

If you could perhaps give some color on what’s going on in ASPs in general.

You had given your, I think you said down 2% for the quarter.

And then perhaps you could, you talk about what ASP, what direct applications for ASP outside the MOSFET range?

Yes, I guess I don’t have the specific blend right in front of me right now.

But in general I would expect that things like standard analog and standard logic to be down less than the blended average of 2% that we’re projecting for Q4.

That MOSFETs will probably be above 3, maybe to 4% type of a range.

And the other products are going to be in between those two extremes.

Okay and I guess with regard to what your, what your customers may have been telling you as you kind of go through the quarter.

And I know perhaps you have better visibility with your OEM customers that give you rolling forecasts.

You know with some of the macro concerns that we all read about naturally in newspapers, have you detected in any particular areas where your customers may have ticked down the rolling forecasts over the past couple of months in response to some of these macro issues?

Yes, we have not really seen any backing off in either backlog or order rates based on, based on the expectations.

So, right now I’d say customers are still doing what they told us they’d be doing as we entered Q3.

Just a little bit of color, obviously I’ve been asked the question -- it’s Donald here on Delphi -- so it’s a secret to no one that the U.S. auto industry is going through a difficult period and we have a couple of major auto customers.

And I think it’s important to understand that the adjustment in the build rate in the auto supply industry really started meaningfully impacting our business in the second quarter of this year.

So our numbers, guidance for this quarter and next quarter already include a very low level of build in a U.S. auto.

So there is not the exposure that one could imagine there as the numbers are already pretty low.

Okay, and just one more follow-up as, and I’m sure you don’t want to provide guidance for Q1 now.

But if you help us to think about it, I mean typically I guess what we’d expect is some of the seasonal markets like computing and handsets would be sequentially down when the seasonal period is over.

But I guess at that point, the non-seasonal markets such as industrial and automotive would need to take over.

What sort of visibility do you have now on those markets either strengthening or kind of holding their own as you go into Q1?

Yes our Q1 order rates are keeping pace with what we saw coming into Q3 at this point, which indicates that the markets as you, as you noted in Q1 normally industrial and automotive actually go up.

Certainly that’s reflected in what we’ve got.

We have not yet seen the impact or rolling off in the other markets quite bluntly.

And part of that may be just lead times and part of that may be they haven’t adjusted their plans yet.

But so far it looks like again a pretty normal Q1 to us.

Okay great.

Thank you.

Thank you.

Our next question comes from John Barton with Wachovia Securities.

Thank you.

Keith in your comments about your Q4 outlook by end markets, you focused on the computing, consumer, wireless and I guess Donald you touched on the fact that auto’s already at a low level.

But could you give us an insight for Q4 what your thoughts are sequentially with respect to auto, industrial and networking please?

From the industrial and networking piece, they surprisingly kind of kept pace with the growth in Q3.

And at this point, I don’t have any reason to believe that that will be different in Q4.

So they’ve actually been holding up fairly well and not, and not tailing off.

So, those I would say are going to be flat to marginally down on the automotive side ‘cause I do think there’s still some correction going on with North American automotive makers, but it’s not significant.

In your prepared statements, you talk about design wins success in game consoles and I think you alluded to some boost from that end market in Q4.

Could you attempt to quantify from a dollar perspective what you think that could be worth?

And what these product launches this late in the year, what’s your suspicion with respect to seasonality in Q1 for those end markets?

Yes, I think game console ramps are always a big challenge.

And there’s a myriad of, myriad of things that can hamper those growth rates.

Of course, they’re all scrambling to do their best.

We believe that content-wise, we have something like $5 of opportunity per game console.

Of course, we currently participate in the current game console.

That content’s probably closer to $3.

So there’s always some conversion that goes on.

But it’s around $5 per set.

And you alluded to hamperings, that would things such as shortage of other component that go in the box that would stop a ramp of production even if—

Yes.

The product.

Correct.

I mean there’s potentially shortage of some products.

There’s potentially startup issues in the various EMSs.

There’s any myriad of things that present challenges to those ramps.

Thanks Keith.

Thank you.

Our next question comes from Vernon Essi from Janney Montgomery.

Thank you.

Just a sort of follow-up on having the consumer side, you know last year your revenue in the third quarter was about the same as it is this year.

And it seems just on the surface that you have a lot more activity on the consumer digital space.

What in particular has not come back this time around this year to work against that trend?

Yes, I think what you’ll notice is our percentage of sales on consumer and the wireless handsets is up year on year in that comparison you just made.

What’s down is the automotive piece.

So, I think we’re gaining a lot of traction in the focused markets there and I do believe as we get into the second half of next year, you’ll see more of that.

But what’s really happened is the automotive piece of the marketplace has been much more difficult this year than last.

And I appreciate that.

I guess what I’m calculating is about a $60 million contribution in the third quarter this year versus about the same last year.

And I’m just trying to reconcile with all the other programs and it seems like there’s a lot of tail wind in the space right now, if anything worked against you last year, this year versus last year?

Yes, I’m not sure I know the answer.

I mean just from looking at the numbers, what I just described to you is fairly accurate.

Third quarter last year, wireless handsets were 17% of sales.

This year they’re 19.

And last year, our automotive was 19 and it’s now 18.

So I guess my point is, we’ve been getting a lot of traction in that portable consumer space and it has unfortunately been offset year on year with some weakness on the automotive side.

Okay and just a follow-up.

My typical question Donald, what is the product mix in the quarter, analog versus ECO and standard products?

I thought you would be asking that and surprisingly I know if it’s remarkably resilient.

Normally the ECO is basically the same as the previous quarters and we’re looking at something like in the 6, 7% range, the same as the last time.

And we’re looking at the-- roughly the same split as we had last quarter on that mix by different product groups.

And so we’re looking at something like compared to last quarter in our analog, we’re roughly just under 30% as I said the ECO is about 6 ½, which is exactly the same as it was last quarter and the standard component about 46% with our most power just under 20%.

So, I mean it’s very much, very surprisingly so, but it’s quite, quite the same mix.

Okay, great.

Thank you.

Thank you.

Our next question comes from Steve Smigie from Raymond James.

Great.

Thank you.

Your last analyst day you’d commented on focusing on some trench MOSFET products as part of your strategy to focus on a few products.

I was just hoping you could just give us an update on how that’s going?

Yes, I think the design wins continue to build there.

Revenues continue to build.

Not a significant contributor to us at this point, but our anticipation is that those design wins in the new models start ramping as we get into Q1 more significantly.

Okay.

Anything strategic that you’re doing with R&D in terms of trying to increase investment in analog?

I just, you guys had some nice gross margin improvement here.

And obviously did a good job in cost cutting, but how much further can that go if you don’t start to push more in the analog area?

Yes, no the majority is, in fact, the vast majority of our R&D is going into the analog side.

I’m expecting next year’s growth to be significantly contributed to by the R&D from the analog side of the business.

And we’ve got some pretty exciting wins we’re starting to talk about.

We’ve talked about the gaming consoles.

We’ve talked about some of the stuff going on in the handsets.

And I believe next year we’ll be giving you more, more color on the computing segment where we think we’re getting some real, real inroads and gains right now on the analog side.

Great.

And one last, it’s a housekeeping question, pro forma shares outstanding for the quarter?

I think we’re talking about something like, you know there’s a complex way to do this is a two-step method.

So I mean I don’t want to get into any complexity.

I just look to the comments we made.

I do a shortcut method where I just divide the earnings by 340.

But that’s not too precise, but if you want a shortcut method, I’d take the earnings after tax and divide by 340.

And you get to very, very close to the exact accounting way.

Okay, thank you.

Thank you.

I’m showing no further questions at this time.

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

This does conclude the program.

You may now all disconnect.

Have a great day.