慧榮科技 (SIMO) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third quarter 2011 Silicon Motion Technology Corporation earnings call.

My name is Marianne and I will be your conference moderator for today.

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

Later, we will conduct a question-and-answer session.

(Operator Instructions)

Before we begin today's conference, I have been asked to read the following forward-looking statements.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 as amended.

Such forward-looking statements include, without limitation, statements regarding trends in the semiconductor industry and our future results of operations, financial conditions and business prospects.

Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them.

These statements involve risk and uncertainties and actual market trends and our results may differ materially from those expressed or implied in these forward-looking statements for a variety of reasons.

Potential risks and uncertainties include but are not limited to continued competitive pressure in the semiconductor industry and the effect of such pressure on prices, unpredictable changes and technology and consumer demand for multimedia consumer electronics.

The state of -- and any change in our relationship with our major customers and changes in political, economic, legal and social conditions in Taiwan.

For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time-to-time with the Securities and Exchange Commission.

We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.

I would now like to hand our presentation over to our host Mr.

Jason Tsai, Director of IR and Strategy.

Please proceed.

Thank you, Marianne, and good morning everyone.

Welcome to the Silicon Motion third quarter 2011 financial results conference call and webcast.

I'm the Director of IR & Strategy.

With me here is Wallace Kou, our President and CEO, and Riyadh Lai, our Chief Financial Officer.

The agenda for today is as follows.

Wallace will start with the review of some of our recent business highlights.

Riyadh will then discuss our third-quarter financial results and provide our outlook.

We will then conclude with Q&A.

Before we get started, I would like to remind you of our Safe Harbor policy, which was read at the start of this call.

For a comprehensive overview of the risks involved in investing in our securities, please refer to our filings with the US SEC.

For more details on our financial results, please refer to our press release, which is filed on Form 6K after the close of market yesterday.

This webcast will be available for replay on our website www.siliconmotion.com for a limited time.

To enhance investors' understanding of our ongoing economic performance, we will discuss non-GAAP information during this call.

We use non-GAAP financial measures internally to evaluate and manage our operations.

We have therefore chosen to provide this information to enable you to perform comparisons of our operating results in a manner similar to how we analyze our own operating results.

The reconciliation of GAAP to non-GAAP financial data can be found in our earnings release issued yesterday.

We ask that you review it in conjunction with this call.

With that, I would like to turn the call to Wallace.

Thank you, Jason.

And thanks to everyone for joining us on our third quarter earning call today.

I am excited to announce another outstanding quarter for Silicon Motion.

We grew revenue 25% sequentially, our seventh consecutive quarter of growth and delivered $33.2 million in revenue; it's the highest quarterly revenue in our Company history.

We also increased our operation margin to 26% and deliver earning per ADS of $0.40.

Riyadh will be discussing more about our financial results.

But first, let me talk more about our exceptional quarter, specifically how our business benefit strongly from substantially better than expected availability of NAND flash and accelerated build of 4G LTE smartphones by Samsung.

When we last spoke with you three months ago, we had expected overall NAND flash availability to be tight this quarter as new smartphone and tablets ramp up.

And furthermore, based on the visibility of our OEM customers, we expect a flat revenue growth.

Flat revenue expectation for the third quarter was in fact fairly accurate, as they relate to our OEM business.

During this quarter, our sale to flash makers that fuel fewer cards and USB flash drive were offset by Tier 1 OEM, such as Sony that builds substantially more solid devices.

We expect our OEM business to increase strongly in the fourth quarter.

And to increase more next year of new OEM project ramp.

Our strategy of focusing on OEM remained critically important as OEM best ensured long-term growth of our classic card and flash drive controllers.

Provide better visibility and on primary customer for our new eMMC and other SD plus embedded solution, very important growth driver for Silicon Motion.

Our module maker customer who are accounted for about half of our mobile storage sales benefit from expectedly strong tail wing of NAND flash supplier with these more NAND flash components into the market than we had expected.

In August, several NAND flash vendors internally increased availability of flash to the module makers in order to clean out legacy products.

With more NAND flash supply availability and stable flat pricing, module makers took advantage and increased their purchase of flash in all controllers.

Because of sudden better than expected availability of flash in the corresponding sell of our controller to module maker to support this incremental supply of flash.

Our overall mobile storage revenue growth was stronger than expected and increased 15% sequentially this quarter.

We remain optimistic about the long-term prospect of our mobile storage business.

We expect overall NAND flash industry supply to continue increasing rapidly over the next two to three years as production from the three new 12-inch NAND flash fabs, built this year in Korea, Japan and Singapore, run over the next few years.

Furthermore, we expect radically increasing NAND flash supply to continue robust demand of memory and controller of smartphone tablet and that will become more ubiquitous.

Most third party research analysts are expecting strong smartphone tablet and that will grow next year.

We believe we are well-positioned to benefit from the strong secular growth for several reasons.

First, we already one of the leading supply of controller content in memory card that are bundle and use in smartphone, specifically Android phones.

Second, we are significantly expanding our addressable market with the sale of an additional controller into the smartphone and tablet market with our eMMC controller.

Third, we are strong believers that NAND flash will quickly penetrate the ultrabook and mainstream notebook PC within.

And we are targeting this market with our controller for hybrid storage solution as well as pure SSDs.

Now, let me update you on the progress of our eMMC controller business.

As you know, we have been developing our eMMC controller for more than a year, and currently have our 12 design wins with several customers.

We are happy to announce that we're on track with these eMMC projects.

Three of our eMMC projects are moving from qualification to production in the fourth quarter.

Most of the rest design should move into production in the first quarter of next year.

In order to meet product delivery commitments we have already started eMMC controller wafer fabrication at our foundry partners.

Our eMMC solution will be embedding in the products of sale of Tier 1 handset OEMs primarily low cost smartphone and high end feature phones.

We are also excited to announce that based on the superior performance of our eMMC controllers.

We have a displaced, the eMMC control originally supplied by another vendor for leading Android tablet project.

And our eMMC controller for this project is already in pilot production.

For eMMC controllers, we are supplying to both NAND flash vendors and supply eMMC memory solution to Tier 1 handset OEMs, as well as specialized module maker targeting unique opportunities in China.

We are confident that the rent of our eMMC, mSATA, [SATA] embedded solution, our SD plus embedded group product who easily account for 25% of our revenue in a few years time.

Our SD plus embedded products are clearly very important growth driver for our Company over the next few years and also product that we expect we'll extend our technological leadership.

Already, we believe we have significant technological leadership with our classic card and the flash drive controllers have demonstrated by our growth and profitability compared to competitors.

With the embedded memory controller, we believe our technological leadership should further lengthen because this solution are very different and a lot of more sophisticating than that of the card and franchise.

Let me highlight some of key differences.

While ECC engine well-leveling algorithm are very important for all solid state storage devices.

The need for superior endurance, reliability and performance are paramount for embedded memory in smartphone, tablet or PC compared with less mission critical application such as card and flash drives.

These criteria are more difficult to meet for embedded memory in smartphone, tablet and PC, given the rending assets natural application and other system data compared with sequential assets data relating to photo, music and video files commonly found in cards and flash drives.

Also our controller also need to ensure data integrity in the event of a certain power loss, which unfortunately can be a common event for mobile devices.

And then [e-show] that is a lot more critical for embedded memory than external memory.

And then finally, in order to grow our embedded business, it's absolutely necessary that we implement our sophisticated embedded controller solution cost effectively, which we are obviously doing.

Until SSD plus embedded products start contributing more meaningful to growth next year, our card and USB flash drive controller business remains robust and fast growing.

These two products, with a primary driver of the 15% sequentially growth and 59% year-over-year growth of our mobile storage product line.

The rapid mobile storage revenue growth that we have delivered year-to-date is on the top of sellers, 70% growth that we delivered last year.

We strongly believe memory cards will continue to grow rapidly over the next few years of Android and other smartphones with card slot continue their rapid expansion.

Let me now talk about our mobile communication business.

I'm excited to report another phenomenal quarter with revenue increasing 58% sequentially.

We delivered over $20 million in revenue this quarter, a new record high for this product line.

This better than expected sequential increase was primarily due to the accelerate build and ramp of a new program by Samsung 4G LTE smartphones.

Samsung has been enjoying very short sales of LTE smartphone because its superior product performance, strong consumer demand for wireless broadband and Samsung smartphones and aggressive rollout of LTE services by US carriers.

For these Samsung LTE smartphone, we are providing two IC for each device; a 4G LTE transceiver as well as a multi-band CDMA, EV-DO transceivers for backlog compatibility.

In the third quarter, Samsung introduced our new LTE handset at Verizon, the Samsung Stratosphere, which also used both our LTE and CDMA EV-DO transceivers.

This new product alone with a continuing growth of Samsung to existing LTE devices at Verizon, the joy charge and the Galaxy Tab 10.1, drove very strong and that is an expected mobile communication growth this quarter.

We are excited with our design pipeline at Samsung, and believe LTE and pair CDMA EV-DO transceiver will continue to be important in 2012 growth driver.

Overall, we are very pleased by our strong performance in third quarter, and the meeting of important milestone that form the basis for future growth.

I will now turn the call over to Riyadh to discuss our financial results and guidance.

Thank you, Wallace.

First, I will outline our financial results for the third quarter and then I'll provide our fourth quarter guidance and updated full year 2011 guidance.

As Wallace had mentioned, this quarter we increased our revenue 25% sequentially and 85% compared to the same period a year ago and delivered $63.2 million in revenue, a record high for Silicon Motion.

In the third quarter mobile storage makes for 61% of sales down from 67% in the second quarter.

Our mobile communications business increased to account for 32% of our revenue mix in the third quarter compared to 25% in the second quarter.

Multimedia decreased slightly to 6% this quarter compared to 7% in the second quarter.

Let me recap the performance of our three key product lines for the benefit of our audience.

First mobile storage; mobile storage revenue increased 15% sequentially and 59% year-over-year; mobile storage shipments increased 23% sequentially.

ASPs decreased by 7% sequentially as we ship more lower price, lower cost controllers to module makers.

Let me note that although ASPs declined sequentially this quarter the sale of lower priced controllers had no impact on mobile storage gross margins.

Our ASPs this quarter were still 5% higher than the same quarter a year ago and is our seventh consecutive quarter of ASP improvements on a year-over-year basis.

Sales of our controller supporting the latest 2X nanometer MLC and TLC increased by over 35% sequentially in the third quarter.

Controller sales supporting the latest 2X nanometer flash now account for 50% to 55% of all controller sales, up from 40% to 45% in the previous quarter.

TLC controller revenue in the third quarter increased over 10% sequentially and accounted for over 35% of our controller sales in the quarter, the same proportion as the previous quarter.

OEM revenue was flat sequentially and accounted for 45% of our controller sales in the third quarter.

Bundled card controllers remained at above 50% unchanged sequentially.

Our card control revenue increased by 18% sequentially and our USB flash drive controller revenue increased by 17% sequentially.

Moving to mobile communications, our communications business increased by 58% sequentially primarily the result of accelerated build of 4G LTE smartphones by Samsung.

Our revenue for our multimedia SOCs, primarily our legacy graphics processor products increased 9% sequentially.

Our corporate gross margin increased 2.5% points to 49.4% from 46.9% in the previous quarter as we sold more high margin mobile communications products.

In the third quarter, operating expenses increased to $14.8 million from $13.1 million due to higher compensation expenses, partially the result of higher headcount.

Headcount at the end of this quarter was 618 employees; 8 more employees than at the end of the previous quarter.

Operating margin increased to 26.0% this quarter from 21.1% last quarter as we benefited from operating leverage.

Our operating profitability improved as we skilled our revenue with higher gross margin more than offsetting higher operating expenses.

We generated diluted earnings per ADS of $0.40 in the third-quarter up from $0.29 per ADS in the second-quarter.

Stock-based compensation in the third-quarter increased to $2.9 million from $2.4 million in the second-quarter.

Amortization and intangibles declined to 0 from $0.2 million as we reached the end of our amortization schedule relating to our 2007 FCI acquisition.

I will now move to our balance sheet and cash flow.

In the third-quarter, our balance sheet increased to -- our cash balance increased to $69.8 million from $55.1 million in the second-quarter.

Inventory days decreased to 92 days in the third-quarter from 102 days in the second-quarter.

DSO decreased to 49 days in the third-quarter compared to 54 days in the second-quarter.

Payable days decreased to 46 days compared to 60 days in the second-quarter.

In the third-quarter, our cash balance increased by $14.7 million.

In terms of primary source of cash, we generated net earnings of $13.6 million and the decrease in inventory generated $3.6 million.

In terms of primary uses of cash, an increase in accounts receivable consumed $6.1 million.

A decrease in accounts payable consumed $1.2 million and we invested $0.6 million for testing equipment software and design tools.

I will now move on to our guidance.

Although our third quarter revenue exceeded expectations due to much better than expected availability of NAND flash to module makers together with accelerated build of LTE smartphones, these two factors may soften in the fourth quarter.

We believe our sales to module makers could be affected if NAND flash price volatility were to worsen.

Module makers may delay purchases of flash and controllers if flash prices were to fall rapidly.

Similarly, flash makers may seek to delay their release of inventory to module makers if NAND flash prices were to fall rapidly.

Additionally, while we expect our LTE sales to continue growing strongly next year, we also expect orders in the fourth quarter to decline due to the procurement timing of Samsung.

We expect these two factors to be only partially offset by stronger OEM controller sales in the fourth quarter.

All-in-all, we are very happy with our performance year-to-date and believe we are very well positioned for further growth next year as our SSD plus embedded products, which include our eMMC controllers, start contributing meaningfully and our LTE transceiver solutions scale further as LTE availability becomes more widespread.

For our fourth quarter guidance.

We expect fourth-quarter revenue to be flat to down 10% sequentially.

We expect fourth quarter gross margin to be within the 47% to 49% range

We are targeting Operating expense to be in the range of $15 million to $17 million, a range higher than the third quarter due to higher R&D project expenses.

Stock based compensation expenses should be approximately $2.5 million to $3 million.

Our target model tax rate remains at 15%.

Now, our updated guidance for full year 2011.

We are increasing our full-year 2011 revenue growth rate, and now expect full year 2011 revenue to increase 61% to 66%.

We continue to expect full year 2011 gross margin to be within the 47% to 48% range.

We continue to target operating expense for full year 2011 to be in the range of $56 million to $58 million.

Stock based compensation expense should continue to be approximately $8.6 million to $9.1 million.

Our target model tax rate remains 15% for full year 2011.

We will now open the call for your questions.

(Operator Instructions) Daniel Amir, Lazard.

Thanks a lot and congratulations on a great quarter, and a great year here.

So, couple of questions here.

First of all, in the Samsung LTE business, can you give us kind of visibility maybe and how should we look at this business in 2012 in terms of pipeline there.

And do we expect that SIMO will also remain kind of a sole source for these products going forward in 2012?

Our visibility of Samsung LTE program are very good.

Samsung always give us three months rolling forecast.

As we move into year 2012, we are going to share [portion] of project with Qualcomm solution together.

But we believe Samsung, they will be launching much more project compared with 2011.

So, we strongly believe, we should have a positioning around 50%; 50% of Samsung all LTE program in 2012.

And we are working very closely with Samsung communication lab for total solution.

Not just Verizon for many other carrier too.

So, we believe LTE will be the major driver for 2012.

So, you still expect significant growth in that business in 2012?

That's correct.

Okay.

And then, second with -- related to the mobile communications, can you just give an update kind of where we are in the Mobile TV business that used to be kind of a big driver in the mobile card.

And obviously now its going second compared to the LTE business.

Where are we there right now?

We are Mobile TV solutions SoC and Mobile TV tuner in 2011, the growth momentum slowed down due to economy situation in Japan and Korea.

But however, for our percentage, we believe we will continue to grow Mobile TV business in 2012.

So, we will expand our percentage of share in Korea.

And we also will increase our market share in Brazil due to our 100% design win in Samsung LG mobile phone for Brazil market.

And we believe China CMMB will continue to grow in 2012.

So, we have a strong confident our Mobile TV solutions revenue will continue 2012.

Although the percentage now starts at LTE but we believe in Mobile TV solution will continue to grow in 2012.

Okay, great.

And last question and then I will get back into the queue.

On the SSD business, can you give us a bit kind of where we stand right now in terms of design activity and what type of growth rate should we see for that business next year?

So, we working heavily and close with several module marker, and some NAND flash marker to fill there solution provider to the ultrabook as well as some low cost, low end notebook and tablet.

And there is a two solution we focus on; one is the hybrid solution, Intel define chip reader.

We also have opportunity to being some hybrid drive; I cannot mention too much this moment.

We also focus on low call, lower density (inaudible) pure SSD for some tablet as well as ultrabook applications.

We believe we should see revenue contribution from Q1 next year and we will continue growth to the year end.

And so, can this be what, north of 10% of your revenues next year?

Daniel, I think, it's a bit early for us to quantify that.

Overall, we expect our SSD plus embedded product line to easily account for 25% of our total revenue in a few years time.

Let's put it that way.

Okay great.

All right, thanks a lot.

Anthony Stoss of Craig-Hallum.

Hi, guys.

Also my congrats, great quarter.

Your inventory was down sequentially; let me hear your thoughts on kind of where you stand there.

And also whatever more detail you can give us on your expected embedded ramp going forward.

And last question, the flooding in Thailand is creating some concerns that a lot of the other NAND flash guys are talking about a quicker move to NAND flash.

Are you hearing similar things from your customers?

Thanks

I will, Anthony, I'll start first with embedded and then I will pass the call over to Wallace for -- the inventory and the pass the call over to Wallace for the other topics.

On the inventory side, we built a little faster than revenue expectations first half of the year and with the rapid ramp of our revenue in Q3.

We were able to draw that down.

So, we're at a fairly healthy level right now in terms of how our inventory stands there.

We're quite happy how things are turning out.

So regarding our embedded design programs, we state we are on track about eMMC design in pipeline.

And some of the eMMC design with major flash maker for MCP.

We believe it will start production in Q1 sometime next year.

We have the confidence our eMMC solution will be one of the major product and revenue driver for our Company for 2012 and we believe we will have our visible market share in 2012.

Okay, then just your comments on the flooding in Thailand and reduction in hard disk drives, if you are hearing from your customers that they expect to likely speed up their move maybe in ultrabooks, whatever you could share, Wallace, it would be helpful?

Thank you.

I think the (inaudible ) ultrabook, especially for initial first model and while we are here and maybe it's steep pricing, we don't see there will be strong demand for the first initial designed ultrabook.

However, in the second generation or third generation I think, we believe they will become more sexy and then much more attractive.

And, for regarding NAND although a lot of rumor and talk about maybe a strong demand for SSD moving to ultrabook to replace chargeable hard drive, because the price cast here a big difference.

So, probably it won't happen very quickly.

We do not see short for NAND in first quarter.

Thank you.

Mike Crawford, B.

Riley & Co.

Thank you very much.

I would like to expand on two topics.

First, on the transceiver side.

So what are some of the differentiators that with your transceivers versus competitors that leads Samsung to you, and I guess ancillary to that is whether the prospects for leveraging that relationship to get in with some other tier-1 OEMs as well?

Well, I feel, I just simplify the question.

Particularly for LTE transceiver, the most key feature for us and different to others is lower power consumption and better sensitivity.

And I think the Verizon to Samsung ranking, the solution is the best at the moment.

Okay.

So, are you -- does that mean you are close to getting design wins with some other OEMs that recognize this as well?

Well, we can only say we are invited by Samsung.

The first solution and second solution are exclusive designed for Samsung LTE mobile phone.

And we are also looking for opportunity in China market for TV LTE because our LTE support both FTD and TBD.

So they can work either in US, Japan or China.

But however, China market is still very far away to have visible volume and we just working with some of the basement provider for future opportunity.

Okay, thank you.

And then turning back to SSDs as well as embedded controllers.

So, you've got some great traction with maybe Samsung or others, but who are your primary competitors right now chasing this market, you have, I think, Phison and some others that have been working about as long as you have on these solutions?

Regarding SSD, we don't have a SATA-3 solution at the moment.

For mainstream SSD design that require SATA-3s for all OEM.

However, for ultrabook for high brief solution, they only require SATA 2.

So, we are well positioning into the SATA 2 environment for hybrid as we as lower density SSD applications.

We are controller makers, so we sell that, we don't care about the density, we only care about the unit.

Because we're selling the controller, so we do not see a solution provider very old and we sell to the module maker as well as the flash maker.

Okay.

And then, with the SSDs that are going into consumer market?

Are you branding those any differently than your fairer SSDs that you've branded for industrial applications?

No.

So [Fair-eye] is a solution which integrate NAND flash, SSD controller is a pure component controller.

We've have different part in OEM.

Okay.

Thank you very much.

Raji Gill, Needham Company.

Thank you and I echo the congratulations.

Just a question on the eMMC controller business.

Obviously Apple does the flash controller as part of its application processor.

But maybe if you could talk about the current Android based phones, Smartphones that have embedded storage, NAND flash storage, who are they currently using?

Is it an internal solution relate to the flash suppliers?

And maybe if you could talk about the process of how you would be able to gain more traction in embedded NAND flash and smartphones as we experience increased penetration of NAND flash in smartphones going forward?

Well, I can only tell you that when NAND moved to 2x millimeter to 2y millimeter today, and moving to 1x millimeter next year.

All NAND require a controller to compensate for endurance and data retention.

So, I cannot comment because Apple have their own standard, I cannot speak for Apple.

I think, for all Android based smartphone or the future phone and they all require controller for embedded NAND.

So, this eMMC is today's standard.

Will that be other standard in the future I don't know, but eMMC is a default standard today.

It's well defined by the [Zeo Dac].

And, we see there will be maybe even double the demand for the eMMC in 2012 compared with 2011.

But who is doing the flash controller now for Android based Smartphones or even Nokia Smartphones or anyone else has?

The leading provider of the eMMC solution today there is Samsung, there is SanDisk and also Toshiba have some, I think Phison also provides some for their controller and solution.

Hynix just started to join to the eMMC business deal.

So, you are hoping it's kind of a similar thing that you are seeing in the USB type of market where the NAND flash makers decide to outsource the flash controller because of the higher endurance, higher reliability, data retention that your flash controller has in the smartphone side.

That's correct.

The eMMC business is naturally the much bigger than a lot of people thought.

Because, eMMC will be the one like a SSD business, you're going to have high end, you have a mainstream, also low end.

Low end could mean consumer side, not to even smartphone; it could be any mobile devices who need the NAND, require eMMC solution.

We started to see demand in DSLR, camcorder and other portable navigating devices well with eMMC.

And high end smartphone and without [design], performing endurance and rending assets, mainstream maybe SLC with the MLC all have a different requirement.

So, this is a very, very broad range.

We believe certainly eMMC will began to come on in the next few years.

But high-end will continue also grow if demand much higher performance, much newer architecture, to meet the smartphone maker demand.

And you talked about the, you saw the third quarter, good availability of NAND supply better then expected, but that could maybe offset a little bit in the fourth quarter as NAND flash pricing might come down and the module makers might wake to buy more NAND supply.

Maybe if you can characterize that and elaborate that a little more detail in the fourth quarter is kind of Apple's new products taking more NAND supply in the environment in the fourth quarter and maybe if you could elaborate that on how that would impact the module maker business or could you may be offset that by having higher OEM business in the fourth quarter?

And then you talked about also, ancillary to that point, NAND availability being pretty supple over the next two to three years.

Maybe, if you can describe that in more detail what makes you confident on that availability of NAND supply in the next two to three years?

I cannot comment with Apple's demand for NAND because we don't know Apple and we cannot speak with Apple too.

All that we know is for our OEM side, we see their demand and their's is a very stable and very strong fourth quarter.

That's why we have much better visibility in fourth quarter regarding our mobile storage business.

For module makers, because the NAND price, it continue to decline slightly, so sometimes they wait in the sideline and negotiate the price with the flash maker.

And so that portion although we do have some forecast, but we have the way for end of the week or even end of the month to finalize the total revenue and shipment.

But overall because the strong demand on OEM side, so we have pretty much visibility in [computing] our first quarter mobile storage business.

Very good.

Last question in terms of Q1.

Is Q1 normally seasonally down, and if it is, would you maybe see different seasonal pattern in Q1 given some of the LTE ramps and embedded ramps that you are seeing potentially offsetting some of the normal NAND seasonality in Q1?

It's a little too early to comment on Q1, but we believe LTE Q1 could be the same if not better than Q4.

Mobile storage should be -- too early to speak for mobile storage right now.

We hope we can do better than in the past, definitely we expect to have a better Q1 maybe in 2012.

All right, very good, thank you.

(Operator Instructions) Tom Sepenzis of Northland Securities, Inc.

Good morning and congratulations on a great quarter.

I was wondering if there is any opportunity if Windows phone is able to take some share in 2012, what the landscape looks like for you there, if you could talk about that?

I cannot comment on the product we are -- not in the market today.

Okay.

And Windows phone also require eMMC, window phone also require MicroSD card.

So, we definitely have opportunity to design our sales with OEM customer.

It's more difficult for us to provide you with color on the broader Windows phone environment, especially how quickly is they going to ramp, how big is it going to be?

What we can talk about are the elements that relate specifically to us which are, the cards that are going into the Window phones for their card slots as well as the eMMC solutions for their embedded memory.

So, you are not presently working with anybody in eMMC?

We have various projects that are in our design station.

So, they involve a wide variety of operating systems.

Okay.

And I guess most of the questions have been answered here.

But you don't have any -- you don't want to take a stab at 2012 guidance?

I will check, we will be providing that in about three months time.

Great okay.

Thank you very much.

(Operator Instructions).

And, there are no other questions at this time.

I would like to thank all of you for joining us today and your continuing interest in Silicon Motion.

In November, we'll be presenting in the DBS Tier 1 conference in Taipen.

The CRSA conference in San Francisco, and the UBS conference in New York.

Thank you and goodbye for now.

Thank you for participating in today's conference, you may now disconnect.