思佳訊 (SWKS) 2004 Q1 法說會逐字稿

Please stand by we are about to begin.

Good day everyone and welcome to today's Skyworks Solutions First Quarter Fiscal Year 2004 Earnings Conference.

At this time I will turn the call over to the Skyworks' Senior Director of Investor Relations, Thomas Schiller.

Mr. Schiller, please go ahead.

Thank you, Jamie.

Good afternoon everyone and welcome to Skyworks first quarter 2004 conference call.

With me today are Dave Aldrich, our President and Chief Executive Officer;

Allan Kline, our Chief Financial Officer;

Paul Vincent, our Vice President of Finance; and Liam Griffin, our Vice President of Sales and Marketing.

Dave will begin today's call with a review of our first quarter business highlights followed by Allan's financial overview and outlook.

We will then open the lines for your questions.

Please note that our comments today we will include statements relating to future results that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those projected as a result of certain risks and uncertainties including but not limited to those noted in our earnings release and those detailed from time-to-time in our SEC filings.

I would also like to remind everyone that the results we will discuss today are from our pro forma income statement before special items consistent with the format we have used in the past.

Please refer to our press release within the Investor Relations area of our company website for a complete GAAP presentation.

I will now turn the call over to Dave for his quarterly review.

Thank you, Tom, and welcome everybody.

Today we announced first quarter fiscal 2004 earnings.

And I am delighted to report that Skyworks achieved record top and bottom-line results.

Specifically, we achieved revenues of $175m up 17% sequentially, surpassing our guidance of 10% growth.

We expanded our gross margins by 300 basis points overall and to 41% within our wireless business.

We delivered earnings per share of 4 cents well ahead of First Call consensus estimates of 1 cent and in turn we generated more than $25m of cash flow from operations.

At the same time some key financial highlight, non-financial highlights include volume ramps of our power amplifier and RF subsystems at the World's Largest cellular handset supplier as they play strong demand for CDMA handsets at Verizon and internationally.

Power amplifier module market share gains with units that were up more than 25% sequentially.

We shipped over 10m direct conversion transceivers and the initial production ramp of our first to market single package radio.

We captured a systems design win and our 10th cellular licensee out of 10 total within China.

We now address the majority and we added NEC as a cellular systems customer.

From an operational prospective, we ramped our highly integrated transmit front-end module and achieve the yields of this new highly complex products of well over 80% in the very first quarter of production.

I'm must say that I'm extremely proud of our design, our operations, and quality teams for a highly successful launch and for maintaining overall fab and assembly yields of greater than 95%.

I feel quite confident that this is best in class.

Additionally, we drove our inventory turns to 7 times.

Now, as we have discussed in the past, we believe that our business is quite capable of progress to 10 times.

Inventory turns to 10 through cycle time reductions and operational efficiencies.

This is a priority for our people.

Inventory turns results from short-cycle times, which simply enables short lead times for our customers and this is one of our competitive weapons.

At a higher level our performance reflects the success of our core strategy and that is developing and delivering best in class modules in radio based solutions simplifying our customers design architectures and speeding their time to market while at the same time addressing an increasing amount of semiconductor and software content in the process.

All positioning us to grow significantly faster than our $10b addressable market today and realizing our vision of becoming the premier supplier of wireless semiconductor solution.

I would now like to review some key elements behind this quarter's performance.

First, within our front-end module business, we grew our portfolio of power amplifier modules to 400m cumulative shipments, with participation at all leading cellular handset suppliers and I'll provide some color here.

First at Motorola, Skyworks is within their MPX-200they triplets the B300, 500, and 600 across virtually all the iDEN handsets and for the very first time we are in on a CDMA basis with their T300 series.

At Samsung our largest customer, Skyworks is growing its footprint well beyond just the front-end.

We are supporting virtually all of their CDMA handsets with front-end modules.

We are providing an increasing number of GPRS system solutions and now we are penetrating with standalone power amplifier modules on GPRS and sampling DCRs with competitors' base bands.

Now this is a new event for Skyworks.

That is our RF products now being designed in with a competitor's base band.

At Sanyo, Skyworks is in the highly popular VM 5400, the 8100 and the 5300.

At Siemens, we are powering a number of their GPRS models including the ST55 camera phone and at Sony, Skyworks is across their family of phones including the P900 and the T610 handsets.

At LG we support more than a dozen platforms including the VX6000, the LX5400 CDMA phones, and their G5500, G7050, G7070 GPRS models.

And finally at Kyocera Skyworks is providing PA functionality with their KX1 and KX400 series.

These significant positions are in addition to our participation with the world's handset OEM as I discussed earlier.

As a direct result of our iPAC PA's, our new iPAC PA designs our front-end TX modules and complete radio products I am convinced that we are winning a disproportionate number of new sockets.

Turning now to our RF subsystem products.

Our GPRS single chip direct conversion transceivers were up more than 200% on a year-over-year basis and 30% sequentially.

As a high volume producer of PAs and VCRs, we are seeing increasing synergy in these product lines particularly as OEM's and ODM' demand bundled functionality, bundled radio functionality.

For example during this quarter we scored complete RF section design wins at BenQ, Chi Mei, Compal and Quanta.

Building on this success we are gaining design traction with our complete [quart band] RF subsystems for EDGE.

This highly integrated chip set includes a single chip direct conversion transceiver housed in an 8/8 package, our power amplifier module and our controller.

At the heart of this solution is our patent -- patent pending Polar Loop transmit architecture.

Quite simply this architecture minimizes the number of external components required to build a handset and it interfaces to virtually every E-GPRS basement.

Our single package radio solution is being quite well received today and you may recall this product we have described in the path it represents the fusion of Skyworks core capabilities, including our leadership components, our process technologies, our packaging know how, the single package radio, the SPR has moved from design to concepts to type approval to production, on schedule and with an increasing number of design wins today in the pipeline.

The bottom-line is that the EDGE Polo Luke DCR and the single package radio are specific examples of our unique ability to lower our customer’s bill material and lower their manufacturing cost while simultaneously capturing more semiconductor content to Skyworks a win-win for both parties.

Okay next within our cellular systems business we saw China, China’s handset inventory levels normalized in the quarter, leading to a resumption of growth across our base of second tier ODMs where we support today the majority of China’s leading domestic brands.

Further more I am just delighted to announce that we have scored a key design win at NEC, as they plan to offer some of the smallest and lightest handsets available on the market today with Skyworks basement, mixed signal, protocol stack, RF subsystem and front end module.

During the quarter we also scored a follow on complete system design win at the world’s largest contract manufacturer and secured a Chinese ODM design win at our 10th cellular licensee, the 10th cellular licensee within China, out of a total of 18.

There are 18 licensees who are authorized to sell and distribute handsets within China and we are in 10.

Finally within our cellular infrastructure and wireless data business, our base station component product area is looking brighter in '04 following quite frankly a 2 year down turn as wireless carriers restart network deployments to provide broader and enhanced 2.5G coverage.

Addressed wireless local loop opportunities in China, India and developing nations and prepare for edge in 3G service rollouts.

With an infrastructure customer base expand Alcatel, Ericsson, Lucent, Motorola, Nokia, Nortel we are encouraged today by increasing visibility in this segment and we are well positioned as our market characterized by the way by long product life cycles high contribution margin as this market recovers.

At the same time we continue to expand our footprint on the wireless LAN front-end.

During the quarter we doubled our wireless LAN shipment unit volumes sequentially to nearly 25m units and we scored initial wins with our family of complete front-end modules.

Leveraging us are cellular handset hour of expertise, we are now offering the industry's most highly integrated wireless LAN front end solutions addressing virtually all combinations of data 211.

This forward integration approach allows our customers to eliminate between 20 and 40 components while we enter in quadruple our address for semiconductor content.

Utilizing our power amplifiers, our switches, our discreet semiconductors, and our overall our systems know how as well as our vertically integrated manufacturing platform we provide the same cost and simplification benefits to our wireless LAN customers as we do to our handset customers.

It's the very same strategy.

Okay let me recap.

During the quarter we delivered record revenues and operating income ahead of guidance and consensus.

We expanded our margins and generated significant free cash flow.

Our front-end products with a strong and expanding presence at virtually every key account, we delivered over 10m direct conversion transceivers.

We added NEC to our roster of cellular systems customers and saw improved visibility in order flow within our infrastructure product line.

Finally, we are gaining traction with BEA World's most highly integrated wireless front-end module.

And looking forward, our power amplifiers, our front-end module and direct conversion transceiver market share gains are driving healthy backlog today and improving visibility setting the stage for a very strong second quarter and 2004.

I'll now turn the call over to Allan for his review.

Allan.

Thanks, Dave.

Revenues for the first quarter were record $175.1m - up 17% sequentially and that was driven by strong power amplifier shipments, the launch of our front-end module portfolio, record direct conversion transceiver unit volume and resumed growth within the Chinese ODM segment with our cellular systems solution.

Meanwhile, revenues from assembly and test services activity were flat sequentially at $11m - inline with our expectations.

Gross margin for the quarter was 41% excluding Mexicali, assembly and test activity.

On an aggregate basis, gross margin was $66.7m or 38.1% of 300 basis sequential margin expansion driven by higher factory utilization in a regular 13-week quarterly cycle.

R&D decreased slightly from $37.9m to $36.7m sequentially as the previous quarter's level was abnormally high because of the extra week of expense.

Likewise, SG&A expenses declined from $19.5m to 18.9m yielding record operating income of $11.1m versus our guidance of 6.6m.

This performance compares to an operating loss of $4.8m during the prior quarter and $3.7m of operating income in the same period last year representing a 200% year-over-year improvement.

Interest expense for the quarter was $5.4m offset by interest and other income of 450,000.

And our provision for taxes on a pro forma basis - 800,000 related to foreign income and I'll expand on that in a second.

So, net income was 5.4m or 4 cents a share - ahead of our guidance in consensus estimates of a penny.

And I think I need to just expand a little bit on the taxes to help you for the quarter and going forward.

You'll note that we classified $480,000 as a pro forma adjustment and this portion of the taxes represents a charge that was driven by our utilization of pre-merger deferred tax assets.

The important thing to keep in mind is that -- it's merger accounting; it relates to a reduction in goodwill on the balance sheet, which causes a non-cash charge in the income statement, and this charge in future quarters will vary depending on the level of our income and how the timing differences turn.

But to simply it we have net operating loss carry forwards.

We won't be paying any cash U.S. taxes in the near term and will continue to split-up for you our foreign taxes and this non-cash charge, which is going to goodwill.

But we expect the cash foreign taxes to be in this $0.8-1m range next quarter.

I want to comment on our balance sheet which improved during the quarter.

Cash and cash equivalents increased to a $182m - up $11m from the prior quarter.

We achieved a 10-day improvement in our DSOs and those run about a $1.5-2m a day impact on working capital.

Inventory turns improved to 7 times.

And we have targets -- internal targets for continuous improvement of these metrics and Dave shared one of them with you.

Cash flow from operations was $25m, our capital expenditures $14m for next generation assembly tools to ramp out front end modules and single package radio solutions and depreciation and amortization was $10m for the quarter.

Now I'd like to comment on our fiscal second quarter financial outlook.

Despite traditional seasonality, we expect to maintain revenues at last quarter's record level driven by new platform ramps and market share gains.

Operationally, we plan to deliver gross margins of approximately 41% within the wireless business - 38% on an aggregate basis.

And we are forecasting that operating expenses will remain flat sequentially.

Accordingly, we expect to achieve performance consistent with our seasonally strong first quarter results.

That completes our prepared remarks.

Jamie if you want to open up the lines for questions, we'd be happy to respond.

Thank you sir, today's question-and-answer session will be conducted electronically.

To ask a question please signal by pressing "*" key followed by the digit "1" on your touchtone telephone.

If you are using a speakerphone please turn off your mute function to ensure that your signal reaches our equipment.

In the interest of time, please limit yourself to one question and one follow-up question.

Again please press "*" "1" to ask a question at this time.

We will pause for just a moment to allow everyone a chance to signal.

And we will take our first question from Blaine Carroll with Adams Harkness & Hill.

Yes thank you.

Geez, great quarter everybody.

Thanks.

Paul you are setting the bar pretty high for Allan aren’t you?

And he stepped right into it and he has taken a great lead.

Good to have him on board.

That’s wonderful.

I guess have a number of questions but I will limit it two, Dave could you, as we look at the phones that shift during the December quarter and if we were to classify new phones as let's say color screen, camera phones, maybe some 2.5, 3G type of phones, what percent of your shipments would you say went into those type of phones as opposed to maybe monochrome voice only phones?

That’s a hard one to answer Blaine with any specificity.

I will say that it's got to be the vast majority.

We see camera phones, color screens, exactly what you describe just been received extremely positively across all the network operators we talked to and our OEM customers.

So it just got to be the majority.

You know the monochrome screens, the black and white screens they have just pass [inaudible] and they are not selling, they do sell in some entry-level markets in the low-end but I look at our new design traction and the new products, it's just got be high volume, we got high volume in those new products and of course the upgrade cycle right now is increasing and that’s where the demand is for these new phones.

Okay and then I guess as a follow on can you give us breakdown on the revenue by [year] interface and naturally people are most concerned about the TDMA?

Yeah Blaine, hi this is Liam.

This quarter we -- our GSM revenue is actually are up a little bit and we’re modeling more of a 70% break out in GSM in the last quarter and the balance would be CDMA probably in the high 20s but just a little bit of TDMA there.

So GSM 70, 30% CDMA and others.

And we’ll take our next question from Max Schuetz with Credit Suisse First Boston.

Hi guys.

I was wondering if you could talk about or give us a little bit more color on the NEC win.

When you expected the ramp and what geography those fronts would be targeting?

Yeah Max, this is Liam again.

First of all we’re quite pleased to add NEC to our customer list in cellular systems, we’re very happy about it.

The product that they have released is a very innovative unique phone for the Asian market, for China specifically, one that we would classify as a fashion phone, actually believe it or not has a mirror on the cover, and a high resolution screen and a camera.

This customer is very new for us right now.

We’re continuing to cultivate new models and our team, our sales effort here has been outstanding.

We expect further gains.

Fantastic.

And on the radio products for CDMA, I think that’s been a growth driver for you for the last two quarters, was wondering if that’s still an area where you are seeing increasing penetration and what you thought the head room was there going forward?

Well we are, its -- we are in about 60% of the CDMA phones with our power amplifiers and we’ve rounded that portfolio out to include RFICs so it’s a natural extension of the product line, and we consider CDMA in general and these you know these bundled solutions, if you will, to be a growth driver for the company.

That’s true.

We will take next question from Kalpesh Kapadia with C.E.

Unterberg Towbin.

Hi, good afternoon.

Welcome aboard Allan.

Thank you very much.

And good quarter, Dave.

Question related to point you made in the prepared remarks Dave about getting into your largest customer with power amplifier another vendors base band.

Was that just power amplifier or was it power amplifier and transceiver as well?

Kalpesh, hi this Liam.

Our opposition there and the customer that was mentioned is really expanding our GSM PA efforts have been tremendously strong and we look to be gaining share in that segment.

Certainly, we are trying to increase the penetration by adding direct conversion radio.

We think that’s a logical step.

This customer we’re also selling complete systems solutions too.

So we feel that, it's a logical step for us to go in that direction.

And quite frankly, if I look at the design tracking in the last quarter, I feel comfortable that we are gaining the majority of SKUs in those phones where we have competitor base band.

And this is a follow-up on that.

You mentioned that the Chinese inventory is normalized and you have seen order come back for full system solution and you added NEC as a customer there as well.

Where is the status with your largest customers who buys the full system solution?

When [would be taxing] RAM for GPRS phone?

We -- it is you, are right Kalpesh that we had protected the inventory levels within China would normalize and I believe for practical purposes they have what's called in the 10-week range and that’s what we were hoping to see.

So where as, in the September quarter that was declined of the overall weeks of inventory.

It seems to have dropped down to what I considered to be a normalized level and resumption in growth in China, resumed in the quarter -- growth in China resumed in the quarter.

With respect to our top customer, we are supporting a little over a dozen SKUs today and of course as you know, our success of the function of the pricing and the marketing [lies] that they put behind this new set of phones.

So, today we have launched several new phones with one GPRS base, we have GSM only phones, we launched a few in the quarter.

There are now few more -- several more staged that are based on the C100 platform and we also, I am quite happy to say that there is a brand new platform that I think is exciting and is attacking some exciting markets for its customers and it is using our brand new base band solution.

And we will take our next question from Cody Acree with Legg Mason.

Thanks.

May be we can expand on that just a little bit, and first of all my congratulations.

Well, the -- obviously, a great quarter, how much of this growth can be attributed back to the recovery of that systems business?

How much of that do you think you have ahead of you coming into the March quarter?

And is it primarily with the customers you are shipping to today or in the March, when we start to see those from NEC and you mentioned, I think, a large contract manufacturer as well.

Cody, we are not going to get into specific product line dynamics here, but you know, we did say during the quarter that we would expect to see several weeks of inventory burned within China so it was still -- it did reduced in the quarter from 10 to 15, so we have that dynamic.

There was some reduction or some burning going on within the quarter and I believe by the end of the quarter, it was normalized.

So we are still there in the quarter but it wasn't clearly wasn't the impact that happened in September and I think now as of the end of December, it is behind us and by the way in general our business in iPAC is very strong and the ODM business, these new designs are iPAC PA, DSR, our cellular systems products in China specifically in Taiwan, Quanta, BenQ.

Those new designs in the bundling now more-and-more bundling of the RF and PA is really driving a big increase we think in our iPAC business.

It happened this quarter and I think we are going to sustain that growth.

It is share and it is a general dynamic among the ODM.

Great and then if I can follow-up on the gross margin side, you mentioned how your utilization definition is where utilization runs today and what it had been last quarter and as we move into a greater ramp of kind of a broader base of products where do you think the gross margins -- what can we look for as far as real peak target margins in a reasonable timeframe?

Paul.

Yeah, Cody the utilization on average for the last quarter was somewhere around 70 and I think it has moved to more to the middle range of that about 75% as we utilize.

Now, we utilize different factories in some cases more than others, but on an average I would say it is about 75%.

I would think that as we continue to expand in terms of revenue that we could move towards our target goal of 45% gross profit margin are leveraging as we've said a number of times.

We consistently have high contribution margin and that's key in the rate of which we are putting on fixed cost that tend to go at a slower rate, so we would see overtime that as the revenue continues to expand that moves towards 45%.

And we’ll go next to Pierre Maccagno with Needham & Co.

Congratulations on the quarter.

Thank you Pierre.

Could you talk a little bit about the ODMs what percentage of sales was that -- how does it grow compared to last quarter?

Yeah, Peter hi, this is Liam.

We had a very good quarter within the ODM space and right now we would model that to be about 20% in getting higher. 20% of our revenues, our wireless revenues.

And last quarter what was it?

Last quarter it was more like 15ish.

Okay, so that was a nice -- a nice ramp.

Yeah, absolutely.

And we’ll take our next question from Sandy Harrison with Pacific Growth Equities.

Hey, congratulations guys and welcome Allan.

Thanks Sandy.

Quick question you know we are hearing more and more on the introduction of camera phones and you guys highlighted the point that even on this recent thought from [NSE] which has a mirror on it has a camera on it.

Could you talk a little bit about you know is this playing into your strategy and what sort of dynamics are these phones with cameras and other technologies, you know doing to drive the fundamentals of the wireless business?

Yeah that’s a great question.

Actually it plays very well into our strengths and what we are seeing is an increasing demand for cameras number one.

But also a raising of the complexity within the camera phone.

You are starting to see people look for one mega pixel, two mega pixel cameras.

Size is an issue, people want mp3 players all of that requires much smaller footprint, much fast available speaking to the RF content, for the semi conductor content.

So when you look at Skyworks, you look at the integrated solution, the small footprint to reduce [inaudible] it’s absolutely in our [strike count].

So -- that’s the trend we enjoy we are going to capitalize on.

And as you look at sort of the some of the highlights on your prepared remarks and one of the things we are seeing from a lot of a carriers of the end customers, the picking up of the EDGE market and how that’s going?

And where do you see the EDGE market or where do you see the concentration of phones that are been shipped or on the dock to be shipped, you know, exiting '04 -- is it going to be 20%,30%, 10%, and how does that play into the products that you are introducing today?

Relative to EDGE specifically, I think you are in the ballpark.

You know, we are certainly going to be betting on all horses with respect to Air Interface.

So I don't feel we'll be impacted if that mix shifts in anyway.

But our new power amplifier powered by EDGE module introduced last year is getting strong traction and this Polar Loop architecture is a pretty sexy approach and our customers seems to derive benefit from it.

So that lineup is pretty powerful, and we are gaining a lot of traction.

It's a not a ton of volume today but it's going to grow late in '04-'05.

And we will go next to Dale Pfau with CIBC World Markets.

Yes congratulations gentlemen.

Thank you.

Couple of real specific questions here.

First of all could you give us your rough breakout of front-end RF subsystems, cellular systems like you had in the past for us?

It is about -- it's 45% - the RF products, Dale.

The RF subsystems and the complete cellular systems topped 40 this time, a bit over 40%; and 15% wireless LAN and cellular infrastructure.

And as we -- the next question is specifically to your top customers -- it deals with your top customers, do you have any other customers that are over 10% right now?

Dale we have two that are over 10% this quarter - same two that we had last year.

And we will take our next question from Satya Chillara with WR Hambrecht.

Good afternoon guys.

Specifically on the top customers Dave can you tell us how big it is Samsung and Motorola as percentage of your business?

Well Samsung, as Allan mentioned, we don't comment quarter-over-quarter as to what each customer is, but Samsung and Motorola are both over 10%.

But we also have Nokia, LG, Sony Ericsson that are -- and Siemens that are not quite at 10% but high single digits and narrowing that gap quickly.

So that's the line up.

Okay, great.

In terms of your system level designs in terms of pure units compared to 2002 and 2003 on a calendar basis, how many systems have you shipped so far?

We are not going to comment specifically; they are sequentially higher, but we are not going to get into the specifics.

I am sorry.

And we’ll go next to Joseph To with Lehman Brothers.

Hi guys, nice quarter.

Thank you Joe.

Can you comment on in terms of the margin on your businesses that are ramping in the first quarter, is that higher than corporate average or in line with the -- or I am sorry, is it in line with the wireless average or higher than this wireless average?

Could you say again which quarter you are referring to -- the quarter we just ended or the quarter where --

The quarter you are entering -- the March quarter where you say you guys are ramping up some new wireless products which are helping offset some of the seasonality?

I understand, thank you.

Well our company average is still not the 60% it's been surprisingly very constant, and the beauty is that as we look at these new products the high contribution margin exists across our entire suite of products or our product family.

And these higher level products are based upon our vertically integrated platform in Mexicali.

And we talked a little bit about it in the prepared script -- we’re running high 90's -- high 90 yields in both our semiconductor fab operations and our assembly and testing.

I don't think anybody on the planet is where we are today.

I am just so proud of these folks that have been able to drive it this way.

So with the high contribution, high yield and predictability, we can move up that dollar content for phone, increasing content.

And it allows us to have a sequentially higher ASP, even though the point products like PA for example, a single function PA, the price competition there is quite strong.

So I don't expect the March quarter to be materially different in terms of contribution margin than the December quarter.

Okay and then if I can ask another question.

In terms of the sort of existing core wireless business, is the stuff that is seeing seasonality, how would you characterize that -- just normal seasonality, may be the less than normal, more than normal?

I would call it if anything it's a little bit less than normal, but it's there.

I think the base business that is very broadly diversified -- our broad switch business, our CDMS power amplifiers, GSM PAs, some other components.

I would say it is normal seasonality; if anything it's a bit less because I think the supply chain is pretty tight right now.

There aren't a lot of components in the supply chain.

And we'll take our next question from James Faucette with Pacific Crest.

Hi.

I guess just to elaborate a little bit on that or get a better handle is that you mentioned that your components for wireless LAN doubled in the quarter.

I know in the past that trying to get that business to grow revenues has been tough just because of the decline in the unit pricing for wireless LAN components.

So on a dollar basis, how -- I guess try to figure out how much wireless LAN may have gone for you in the December quarter?

And then also speaking of infrastructure and so on, just more generally how important is that in your plans going forward into the March quarter and what do your bookings look like versus your guidance?

Thank you.

On the wireless LAN front, these switches, it's a kind of a complex story, but the switches that went -- doubled in the quarter.

These don't have a very high ASP as you can imagine, but they are ubiquitous.

They are -- the vast majority of 802.11 systems use our switch on the front-end, but the beauty is that we are now migrating those customers to a front-end module and if you look at the wireless LAN implementation today, you see a radio, you see a base band solution, and you see a whole bunch of filters and components and discrete, and switches and diodes, we have been able to take all of that stuff and integrate it in our multilayer laminate produced in our Mexicali facility.

It's in the sweet spot of what we do in that operation for our handset customers, buy the millions and millions.

Now we have been able to take that functionality and combine it in a very similar implementation to the handset.

So when you go multimode 802.11 ABG customers really value this because it lowers their power account, their manufacturing costs, their bomb, and we move from, you know, 10s of cents to 4-5 times the average content per 802.11 system and that's just beginning really this quarter as a ramping production product line, but it has been introduced as you probably remember in the last couple of quarters.

And then just as a question related to that, trying to figure out what was going on with the infrastructure and then your bookings relative to guidance?

Yeah James, this is Liam.

The infrastructure market is showing some real signs of improvement here and we observed some of that in the December and I think that will continue.

It is still a smaller percentage of our revenue stream.

We talked about our breakout, but we are seeing some pick up names like Lucent, Nortel, Motorola, Ericsson, our core accounts.

And we will go next to Ambrish Srivastav with Harris Nesbitt Gerard.

Hi guys this is actually Patrick Rao (ph.) calling for Ambrish.

Most of my questions have been answered.

I wonder if you could may be comment a little bit about what your CAPEX plans are for the year particularly considering that your unit shipments were up the last quarter, looks like there are going to be seasonally better this next quarter as well?

You know Pat, we are really guiding the comparable CAPEX this quarter.

For the first quarter it will be in the $12-15m range we expect.

Okay and just real quick on the balance sheet.

Are you still carrying any restricted cash there or is that all gone away?

No, we still have 5m of restricted cash Wachovia, but that's just the part of the financing agreement, as you know that it is 40 basis points over LIBOR, plus insurance that's pretty good financing.

And we will go next to Julia Holland with D.A.

Davidson & Co. Ms. Holland please go ahead with your question, your phone line is open.

Hi, good quarter guys.

I was just wondering if you could give me an idea of how much of Q2’s revenue has been booked?

Julia, we don't detail revenues, but the bookings are giving us pretty good visibility which is why in spite of the seasonality we think we can maintain revenues at a $175m level for Q2.

Okay great.

Thank you.

And once again if you like to ask a question, it is "*" "1" on your touchtone telephone at this time.

We will go next to Karl Motey with Wachovia Securities.

Thank you.

What was the turns business last quarter?

Turns business for us has typically been in the 10% range and as we enter the March quarter, the visibility is quite good -- is quite good for us relatively speaking and so you think of our turns business has been around 10% for the last period of time.

So less than 10% reflected this quarter?

Yes, the visibility is of the backlog.

The order flows has been quite strong, the visibility is good.

Okay and could you comment on the competitive environment and DCRs specifically the pricing environment?

Well I mean Liam can help you with this as well.

The DCR environment it’s an interesting phenomenon because it’s a relatively new product line.

When we introduced it June of last year we shipped around 0.5m or 5,000 units, we shipped 10m units this last quarter and if you look at the production there, you know it’s not that unlike -- the handset front end module business has become.

They really are three companies today that are benefiting the most from that massive transition from discreet and superhead radio deigns.

I think you know who they are and we are right up there - in front of the pack.

So the transition is very fast, the growth is very strong.

It is simply a -- it’s an elegant in it's simplicity and it is low cost, it is inexpensive to manufacture, and it works just great and our newer product offerings in the DCR space when bundled with our PA, we think it’s just a really compelling line up and that’s where we are taking share in places like Taiwan today, right now.

And that does conclude our question-and-answer session.

At this I will turn the call back over to Mr. Aldrich for any closing remarks.

Thank you very much.

This concludes our conference call today and on behalf of the entire Skyworks team, thank you very much for your participation and we look forward to updating you on our performance next quarter.

Thank you.

That does conclude today’s conference.

You may disconnect at this time.