Synaptics Inc (SYNA) 2004 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Synaptics third quarter conference call. At this time, all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question-and-answer session. If anyone needs assistance at any time during the conference, please press the "*" followed by the "0". As a reminder, this conference is being recorded today, Thursday April 22, 2004. I would now like to turn the conference to Mr. Alex Wellins with Blueshirt Group. Please go ahead sir.

Good afternoon and thank you for joining us on Synaptics third quarter conference call. This call is also being broadcast live over the web and can be accessed from the Investor Relation section of the Company's website at synaptics.com. With me on today's call are Francis Lee, Synaptics' President and CEO and Russ Knittel, the Company's Chief Financial Officer. We'd like to remind you that during the course of this conference call, Synaptics management will make forward-looking statements including predictions and estimates that involve a number of risks and uncertainties. Actual results may differ materially from any future performance suggested in the Company's forward-looking statements. We refer you to the Company's Form 10-K for the fiscal year ended June 30, 2003, on file with the SEC for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. We expressly disclaim any obligation to update this forward-looking information.

And now, I'd like to turn the call over to Francis Lee. Francis?

Thanks, Alex, and thanks to everyone for joining us on the call today. We are very pleased with our third quarter performance where revenues was in line with our expectations despite a widely reported higher than expected inventory levels for our notebook sector during the period.

I am going to start off by giving you some highlights of our results. We essentially matched last quarter’s record revenues of $34.3 million representing a 31% increase over the comparable period last year. GAAP net income for the quarter was $3.5 million or 13 cents per diluted share, which equaled last quarter's record profitability level and represents 69% improvement over the same period last year. This result reflect the impact of lower than expected notebook shipments which trended closer to normal seasonality pattern, offset by a richer mix of dual pointing products and continued growth in our non-notebook revenues.

While the businesses resurface cyclical, this quarter underscored the fact that our strategy of maintaining leadership in our notebook sector combined it with revenue diversification is working. And we are very pleased with our execution in managing through the market [propagation]. Revenue from our non-notebook applications hit our highest level to-date, growing more than 15% sequentially and representing approximately 19% of total revenue during the quarter. This was again primarily a result of strong shipments in a portable digital entertainment market. We ended March with a backlog of $15.4 million, down from $17.7 million in December, which we believe reflects continued caution associated with a reported inventory corrections during the quarter.

As we look at general trends in the PC market, some analysts have come with the initial optimism regarding increased corporate IT spending in 2004. We did, however, experience a positive shift in our product mix during the quarter with dual pointing revenues increasing at 30% of total revenue.

We are encouraged by this development and our success in selling into the portable digital entertainment sector. We continue to see positive design activities in this segment and in other new market areas. And I believe we are well positioned to continue to expand our business outside of the PC market.

I would also like to update you on expansion in the Greater China area. Over the past two quarters, we have talked about our acquisition NSM in Hong Kong and the development of our Hong Kong office to provide local service and support to our customers in Asia. I am pleased to tell you that we have further strengthened our Greater China area initiative by establishing our Synaptic Shanghai office. While we are in a process of hiring local employees, we are also rotating our Taiwan and Hong Kong staff through the Shanghai office to provide real-time support to our customers in that area.

Now, I would like to make a few comments about specific progress made during the past three months. First, in the portable digital entertainment segment, Synaptics has won another design with a traditional MP3 OEM, which we expect to ship during the next 6-9 months. Additionally, we continue to expect to see growth from our solution for Apple iPod product line, which has established its position as a prominent portable digital entertainment device. Apple's momentums in this area continues to be strong as they announced shipments of over 800,000 of the iPod during the March quarter.

While the success of the mini-iPod has resulted in Apple delaying its release outside of the US until July, we'll continue to closely support them and expect the benefit from the penetration of the mini-iPod in a new geographic region as well as through the Apple-HP alliance. Second, last quarter I reported that we had secured design win for PDA device. We remain on track with this product development and expect to being shipping within the next 3-6 months.

Third, we continue our development work with multiple major OEMs to utilize our technology in next-generation cell phones. We attended the GSM World Congress event in February and we are pleased with the response and interest our technology received with mobile phone developers and operators. In addition, Synaptics also joined at the Mobile Industry Processor Interface Alliance and we are excited by the opportunity to participate in defining and promoting open standards for mobile devices.

Finally, we are exited about an opportunity we are exploring for our [capacity] technology in the desktop PC market. While this project is still in every development, it provides further potential to expand our product revenue base in the PC market beyond notebooks and we look forward to keeping posted on our progress.

In summary, Q3 was another solid quarter for Synaptics. We are proud of our performance in light of the challenges affecting the notebook market during the period and believe this further demonstrates that our strategy is working. Russ will talk about our outlook in a few minutes, but in general, as we move into the last quarter of fiscal 2004, we expect to conclude a very successful year.

In the first nine months, our total revenues are up 35% over the same period last year reflecting a 19% increase in the notebook segment and more than five fold increase in business from new markets. This again reflects our dominant position in our notebook market as well as our initial success in taking first major step to diversify our product revenue.

In addition, the scalability of our business model is evident in approximately 81% increase in our net income during the same period. Going forward, we believe that we are well positioned to continue on our path of long-term growth through continued product innovation, sustainable revenue growth in the portable digital entertainment area and success in penetrating additional new markets as our investments in development begin to pay off.

With that, I will now turn the call over to Russ, who will review our detailed financial results for the third quarter and provide some guidance on our business outlook.

Thanks Francis. Unless I specifically note otherwise, all numbers I discuss regarding our quarterly results will be on a GAAP basis. Revenue for our third quarter fiscal quarter was $34.3 million, essentially unchanged from the prior quarter. Although our unit shipments into the notebook market were seasonally down more than we originally anticipated, the impact was mostly offset by increased corporate demand as our revenue from higher priced duel pointing applications increased to approximately 30% of total revenue, up from approximately 25% in the preceding quarter.

Revenue growth from non-notebook applications are more than 15% was slightly ahead of our original expectations for the quarter. Compared to revenue of $26.1 million in the comparable quarter last year, our revenue was up approximately 31% reflecting the combination of strength and demand in the notebook market where our unit shipments increased more than 28% year-over-year and a 9 old increase in revenue from non-notebook application applications primarily reflecting the rapid growth of our products solutions for the portable music player market. While we are encouraged by last quarters increase in corporate notebook demand, evidenced by our higher revenue mix of dual pointing applications, we are cautious regarding the sustainability given that our backlog suggests dual pointing will be in the mid-20% range in the June quarter and there continues to be mixed views on the magnitude and timing of corporate spending in 2004.

With the continued growing demand in the portable music player market, we made further progress towards diversifying our revenues during our third fiscal quarter as non-notebook revenue represented approximately 19% of total revenue compared to approximately 16% in the prior quarter and roughly 3% in the third quarter fiscal quarter of last year. Gross margins of 42.5% for the March quarter were in the middle of our target range of 40% to 45% when compared to 41.3% in the preceding quarter and 41.1% in the same quarter last year. Sequential improvement in gross margin was primarily attributable to our richer product mix resulting from increase dual pointing applications. The year-over-year margin improvements reflect a richer product mix overall and the impact of our cost improvement programs.

Total operating expenses for the quarter increased 7.5% to 9.2 million compared to 8.6 million in the preceding quarter. As we discussed on last quarter's call, this primarily reflects planned increases related to headcount additions, higher payroll taxes as we entered a new calendar year, and higher project related expenses. The total increase, however, was less than forecast primarily due to the timing of our recruiting efforts and expenses on certain engineering projects.

R&D costs of 5.6 million were up from 5.1 million in the prior quarter, representing higher compensation expenses related to headcount additions, higher payroll taxes, and project-related expenses. SG&A costs was 3.5 million compared to 3.3 million in the prior quarter, reflecting increased staffing, higher payroll taxes and project costs related to corporate compliance and planning activities.

Total headcount at the end of the quarter was 191 up from 185 in the December quarter. As I mentioned previously this was below what we expected to be and we continue to actively recruit people to staff internal programs aimed at cost improvements and design efficiencies to address our new market initiatives and to meet the demands of our increased business levels.

Non-cash charges related to the amortization of deferred stock compensation for the March quarter totaled 128,000, slightly less than the 132,000 in the prior quarter. Net interest income, which comes primarily from investments and tax-exempt issues, was approximately 214,000, up slightly from 195,000 in the prior quarter. Our effective tax rate for the quarter was 37.2%, which has the effect of normalizing our fiscal year 2004 effective tax rate to 38% to low end of the 38-39% we discussed last quarter.

GAAP net income for the quarter was 3.5 million or 13 cents per diluted share, essentially unchanged from the immediately preceding quarter but up approximately 69% from the 2.1 million or 8 cents per diluted share for the comparable quarter last fiscal year. Pro forma net income for the quarter was approximately $3.6 million or 13 cents per diluted share compared to $3.6 million or 14 cents per diluted share in the prior quarter and $2.2 million or 9 cents per diluted share for the comparable quarter last fiscal year.

Now I'd like to touch on a few items related to our balance sheet. We ended the quarter with total cash and short-term investments of $91 million, up from $84.3 million at the end of the preceding quarter. Cash flow from operation was approximately 4.4 million while stock option exercises and employee stock purchase plan contributed approximately 2.8 million. Capital expenditures for the quarter were approximately $442,000, capital depreciation was 221,000 in the quarter. Receivables at the end of third quarter were 18.8 million compared to 17.7 million last quarter. DSOs at the end of quarter were 49 days compared to 47 at the end of the December quarter, primarily reflecting a slight back-end loading as customers were cautious on delivery schedules. Inventory totaled 5.5 million at the end of the quarter compared to 5.1 million in the prior quarter, inventory turns for the quarter were 14 times compared to 16 last quarter, primarily reflecting the increased inventory levels.

Now I would like to make a few comments regarding our near-term business outlook. As Francis mentioned earlier, our backlog entering the June quarter are 15.4 million was down sequentially as our customers adjusted their order patterns to address the reported excess inventory levels. However, current business conditions appear to be favorable for our target markets and our outlook for the June quarter calls for a sequential revenue increase of up to 3%. As we look out into the September quarter, our current visibility points to continued sequential revenue growth. We expect to be able to maintain our gross margins within our target range of 40-45%, but based on our backlog we expect gross margins to be at the low-end of the range.

Based on our recruiting plan, we expect the operating expenses to increase again in the June quarter but to a lesser extant then the March quarter. GAAP net income for diluted share for the June quarter is expected to be 12 cents. Non-cash expenses related to the amortization of deferred stock compensation are estimated to be approximately 120,000.

In closing, we are pleased with the way our business is tracking today and believe we are making solid progress in our efforts to accelerate our growth by continuing to broaden both our revenue and customer base. We are continuing to make selected investments that will allow us to address internal initiatives and in improving design and operating efficiencies. Design activities remain healthy across all of our focus areas and we are optimistic about breaking into additional new markets. We expect a strong finish to fiscal 2004 and look forward to capitalizing on new opportunities in fiscal 2005 and beyond. That concludes our formal remarks and I will now turn the call over to the operator to start the Q &A session.

Thank you sir. Ladies and gentlemen at this tine we will begin the question and answer session. If you have a question please press the “*” followed by the “1” on your pushbutton phone. If you would like to decline from the polling process you may press “*” followed by the “2”. You will here a three-tone prompt acknowledging your selection and your questions will be polled in the orders that they received. If you are using speaker equipment please lift the handset before pressing the numbers. Our first question today comes from Andrew Neff with Bear Sterns please go ahead sir, thank you.

Thank you. Nice results, couple of questions one, could you talk about in the notebook market any change in the competitive dynamics you talked about the dual pointing issue but any new entrants, anything along those lines? Two, in terms of the just the non-notebook business, can you give us a sense about how much visibility you have the [IPAR] has been doing tremendous, but how much visibility do you have into that demand? And third just a sense of tax rate for next year, what it could be like.

Sure, Andy. In terms of the notebook competitive landscape, fundamentally besides what Russ had highlighted in terms of the richer product mix, in terms of new entrants, is basically is a same kind of a landscape as we have talked to you guys before. Our main competitor remains to be Alps. There always are noises in background in terms of other parties, but so far they really have nothing significant players in the market. In the non-notebook market, it really follows the same kind of visibility, the way that we normally do, which is in general we get a 6 months forecast from both OEMs and as wells ODMs and we try to triangulate between those two forecasters. They come up with our reason in terms of how the respective markets are doing, its really not any different. The main difference Andy is obviously by definition emerging markets, so that couples with all the new ones as being a new market in both good as well as bad by the way, Andy. I will turn over to Russ to talk about the tax rate, Andy.

At this point, Andy, we believe that the effective tax rate for fiscal year will be 38%.

And for next year as well?

Haven't put together for '05 and don’t have any guidance for you on that.

And, in fact, they could drive it up given the nature of the business, or –

Well, again, at this point, the major offset that we have to just the statutory rates are R&D tax credits that we can have in various local jurisdictions, but other than that it will trend with our revenue and our profitability.

Okay. Thanks.

Thanks. Andy.

Our next question comes from Rob Stone with SG Cowen. Please go ahead.

Two questions, Francis, one, if you could, any more color to the kinds of features or implementations you are discussion with the various handset OEMs, I recall in the past there have been some talks about using your touch technology for short messaging or -- in markets that are not well supported by the normal character set on a telephone keypad? And the second question is if you could just review for us the activity regarding new product types such as the integrated touchpad and speaker touchpad under plastic illuminator etc.?

Sure. Okay. On the handset OEMs, okay, I think there is really two main implementation solution we are addressing, one of them, Rob, you are absolutely right. You know, in today's handset, especially with operators trying to get incremental revenues from trying to induce people like yourself and consumers like myself to use more of the data write-through like text entry, we have a unique way of doing what we call a PAX, you know, we have got a mobile PAX solutions into that part of it. The other part of it, Rob, is with the lot of the cell phones today is way beyond voice, okay, and with incremental complexity and function whatever they are, Rob, it requires a good pointing devices, much like, you know, I will be able to maneuver through the various menus and point to the locations that you need to point to, you know, and those kind of applications, very similar in some way to a touchpad on a notebook computer in the sense of using for pointers. So, both of those applications have been received really well by the potential handset OEM partners. As far as some of the activities on the new product areas, I can tell you that the TouchPad Under Plastic implementation has been extremely successful and lots and lots of new products, I can tell you, coming in the near future always going to utilize that kind of a technology and you are going to see reasonable increases in terms of notebook computes out in the market with that Synaptic innovation in it. Other products like integrated speaker, pad functions, song, as was touch, you know, we're still doing a lot of design activities about, okay. We have suggested a one-time, what we call, LuxPad, you know, we expect that product to be in market within probably 6-9 months from now, okay. So, I would say that the design activities remain to be reasonably strong there, but I think the strongest one is probably the various implementation of the TouchPad Under Plastic.

Given the various inputs, the mix dual point versus single and competition and your new designs, can you comment on trends in general for your ASPs and notebooks?

Well, again, moving from the March to the June quarter, the backlog we had entering the quarter suggested that dual pointing applications would trend back down to the mid 20% range. So, obviously, that has a negative impact on overall average selling prices. Having said that, there are some of the newer single pointing solutions that we have in backlog that we're going to market with generally are trending up and so, it's hard to say where we will end up in the quarter in terms of overall average selling price, but I wouldn’t expect to see a real significant dip quarter-over-quarter in the overall impact. And so again, as you know, single pointing devices are in the, generally, the 3-6 range and that includes both what we do in the notebook space as well as the portable music player space. And dual pointing applications, again, the ones we’re shipping today tend to be in the $9-12 range.

Great. Thanks very much.

Thank you Rob.

And our next question comes from Michelle Gutierrez with Schwab SoundView. Please go ahead.

Can you hear me?

Yeah, sure, Michelle.

Okay, great, thanks. I had some questions about the notebook market. You don’t get a lot of visibility in to demand trends and the inventory level because of the ODM contact that you have. What do you think in terms of inventory levels at this point?

Well, again, in terms of direct visibility, Michelle, what we do get is direct information as it relates to our product sitting with in their manufacturing location. And we do get those reports from them on a weekly basis and generally they will target 2-3 weeks supply of our product in their shop. And generally speaking today, I would say everybody is within that range. Once our product is integrated into a notebook computer though, we lose visibility and we have to rely on actually people like you who happen to do surveys of the ODMs and the OEMs to talk about, where their inventory levels are, and what’s going on in the channel, but we really don’t have visibility beyond the point where our product is incorporated.

And just a reminder, your revenue recognition is upon the sell-through from the ODM?

No, it's when we sell in.

Okay. And then do you have any updates on the ASP ranges for the three different segments?

I think as I just mentioned, single pointing solutions and that include solutions both in the notebook market and the portable music player market, those solutions today are in the range of $3-6 and our dual pointing solutions in the notebook market today are in the range of $9-12.

And the other products that you haven’t mentioned, say, the biometric solutions and the Chinese character recognitions phones, is there any update to that?

The integrated fingerprint touchpad solution, as we said on last quarter's call, is something that’s had a very slow start in terms of market penetration and we attribute that to the fact that we think it's an enterprise play and as you know, corporate spending has been fairly soft. You know, where that’s going to go ultimately, you know, it's not clear to us, but as you recall, that does have a price point that’s a multiple of 4-6 times what a single pointing solution would be.

Okay. That’s helpful.

Okay.

And on the dual point that rose significantly more than I expected, actually that's probably what offsets all things in my model. What would you attribute the strength in dual point this quarter to?

I guess just an uptick in orders our customers received for corporate notebooks.

It wasn’t a specific new product win that was starting to ramp up?

No, it wasn’t.

Okay.

No, it wasn’t. Again, as we have said in our formal comments, it wasn’t something that we anticipated going into the quarter either, it was just a -- it was a positive mix shift for us during the quarter, which did offset higher than expected seasonality from our perspective.

And then in terms of the notebook market in general, pulling out into the second quarter and the second half of the year, what are you guys expecting?

Well, I think the last number I saw for IDC for the June quarter suggests that notebooks are going to be down sequentially. My recollection is it's, you know, in the 1-2% range. Beyond that, I think, for the last two quarters of the year, they are expecting fairly robust growth.

Given your visibility into the market with your new design wins, is that, sort of, in line with what you guys are seeing to?

Well, again, remember what -- design wins are a leading indicator for us, but to the extent that they actually create real volume depends on what's going on in the market overall. So, yeah, I mean, certainly our view of the market today and where just the general economic condition seem to be trending, I would say that the remainder of 2004 should see some pretty nice levels of business.

Okay, and just more on the competitive landscape -- just another one quick follow-up on that. The Alps, are you seeing any increase pricing pressure from Alps, any change in the pricing there?

Nothing out of the norm.

Hey, great, thanks a lot.

Thank you Michelle.

Our next question comes from Matthew Curtis with Kenny Securities. Please go ahead sir.

Hi, good afternoon guys.

Hi Matthew.

Hi Matthew.

Couple of things real quick here. Now that we are into April and we got some better numbers on what was shipped in calendar year '03, do you guys have some kind of internal calculation of what you think your market share was for that calendar year?

For calendar year '03 I think we were somewhere just right around mid-50%. So I would say somewhere between 55-56, in that range.

Okay. And then did I understand the PDA project design that we had talked about last quarter, it was on the same timeframe that we had talked about last quarter that we should see about in about 3-6 months now?

Yeah its on the same track as we mentioned last quarter.

Okay. Since I haven’t heard you mentioned, I am assuming we don’t have any updates on the [City One] project at this time.

[City One] no, there is really no update on that. As we know we made our initial production trial shipment of that product back in the June '03 quarter and I would say you know feedback has been slow.

Okay. Is there any anticipation your Shanghai office might be able to help with that?

Its not likely.

Okay. Could you break-down for us who your 10% customer were for the quarter.

Again, you know the 10% customers aren’t relevant as an indicator of how our business is as you know.

Right.

Because we do sell to the OEM and so its more a reflection of whose wining in that space than it is necessarily a reflection of our business per say. But if we look at the quarter, I think we only had one 10% customer and that was [Aventec].

Okay, I assume then the -- you don’t characterize Apple as one of your customer then?

Not, not from an accounting reporting view point.

Okay.

Because we don't sell directly to apple.

All right, fair enough. You had mentioned that the design activity in your pipeline remained strong. Would say that, that fairly characterizes the design activity that we’ve been talking about in the cell phone design market, have we seen any increase or decrease in the design activity there for those potential designs?

I would say that, Matthew, in general design activity is strong across the notebook, the PDA as well as in a mobile phone arena. We are pretty pleased in general with how all those market segment is progressing. As I kind of talked about a little earlier there in a PDA arena, we just won another design with another MP3 OEM supplier. Activities in the mobile phone sector, which obviously is difficult to characterize to you at this time -- actually we’ve been very pleased with the progresses that we have made you know in that arena as well, and we continue to win our fair share of the local design wins, Matthew. So in general, you know this is going quite well.

Okay. The MP3 design that you mentioned in your opening comments, do I understand that to be fourth design win?

It's our fourth quarter design win with a separate OEM.

With a separate OEM. Okay. All right. And then just a couple of quick final ones here. The capacitive solution that you briefly mentioned at the end of your comments, I assume this is something substantially different from what we saw with the IBM keyboard for the PC desktop market?

Matthew, as usual, we really cannot talk about specific products before OEMs announced it, okay, and we are actually engaged in this design activities right now. But it actually related to a leader in that part of the space there, Matthew, and we will keep you updated on future developments.

Okay. Yeah that’ I certainly don’t expect you to [inaudible] to it. I guess I was just curious if you could characterize it as following along the same lines as a keyboard implementation. Are you able to comment on that all?

Well I mean, it will be an interface solution so --

Okay. Fair enough. And then one last question. Just out of curiosity, the finger print solution that we have mentioned talking off a little slowly, how would that pricing for the finger print work if a business wanted to integrate the finger print solution into a dual pointing solution, would it still be a 4-6 times or would there be even a greater premium there for the dual pointing solution on top of that?

There would be an add-on for the additional interface solution capability.

Okay. very good, nice quarter guys, thanks a lot.

Thanks

Thanks, Matthew.

our next question comes from Satya Chillara with RBC Capital Markets. Please go ahead.

Hi, guys,

Hi, Satya.

Couple of quick questions, the dual pointing, so and Russ, you talked about the pricing between 3-6 for the TouchPad and 9-12, does that mean you are not reducing the pricing in the dual-pointing market, you are still in a two times kind of number between TouchPad and the dual-pointing?

Well, again the solutions that we are shipping today are design wins we have had in prior quarters. So, you know, in response to Mitchell's question what she asked that that resulted from new design wins that ramp this quarter quicker than we expected, it wasn’t that at all, it was just, you know, it was late-end demand that was out there for those solutions, I guess, that the OEMs finally placed orders for.

Okay.

So, the -- the solutions we are shipping today are design wins that we have had in the prior quarters.

So, I guess the question is in future, let's say in calendar Q2 if you get a design win, do we expect in the same kind of price band or at a reduced price basically -- how do we look, talking about some of that between $8-10, how should we model that in going forward for a dual-pointing solution?

For a new dual pointing design wins, you know that our major competitive, Alps has set a new threshold price there and certainly it does put downward pressure on our range. So going forward, you can probably look it in at the 8-10 range. Okay.

Okay. So, yeah. So the calendar Q1 is a real surprise in the sense, your corporate -- it appears there is a false start in the corporate demand. Is that the way you have got to price?

Well, I wouldn’t say at false start, I think, we are just being cautious, given that when we look at the component of dual pointing in our backlog exiting the March quarter, it doesn’t suggest a repeat at the 30% level we saw in the January quarter. I mean that doesn’t mean it couldn’t occur because again going into the March quarter, we also didn’t see that demand develop until later in the quarter.

Thanks. So, what I am trying to understand, Russ, is okay so you guided to 25% of the revenues next quarter. Now so it sounds like is that a function of pricing or unit share.

Well, when I guided to 25%, we were talking about revenue.

Right. So, basically obviously so I am trying to understand. So, the pricing is going down or the units are going up which way is that.

Well, I think, next quarter we do have one or two new solutions in dual pointing that we will be shipping, but they will be early in their ramp. So, it really depends on demand and what boxes the OEMs are placing orders for.

Okay. Moving on to the non-notebook, basically the numbers suggest your ASPs on the non-notebook went up, is that fair to say that?

I am not sure, how you are getting to that.

Okay. You know you have what in production iPod and the Samsung MP3 player so far that I know of?

Right we have two versions of the iPod that are shipping in volume today as you know -- both the full version iPod and the mini, and as we have indicated on prior calls, we do have less revenue content in the mini then we do at the full shipping version.

Right. So, I would think the --

And the Samsung device is a high-end flash based device, which generally has a lower price point then the full version iPods.

Right. So, looking --

There is nothing to suggest that in our product mix there was any factor that would have driven averaged selling prices in that sector up quarter-to-quarter.

Okay may be we will take it off line and talk about, but my numbers are showing its off. But in terms of the 6 months forecast when you talk about -- do you show your dual pointing trending up in calendar Q3 at this point or is that too early to say?

It's too early to significantly and we haven’t given any specific guidance for the quarter.

Okay what about the non-note book as a percent of your revenues by the end of the calendar '04. What could it be right now what's the guidance?

Again we haven’t given any guidance beyond the September quarter. But based on the guidance we have given you for the June quarter, clearly that would suggest that revenue content from the non-note book application is going to continue to grow.

Yeah. This question is for Francis. Francis you acquired the company for the inductive sensing solution. Is this at this point -- we haven’t heard anything about inductive sensing solution, is that pretty dead is it a -- because we haven’t seen any products out of that acquisition. So can you comment on that please?

Sure, Satya. First of all it is not that, okay. I think clearly the market opportunities on the capacitive solution have overshadowed any other significant development in this part of the discussion. For example we have not talked a whole lot about [inaudible] PCs. You know that really has not been a significant thought okay of the product mix you know so far. And a very quite inductive kind of a solution and that’s where our confidence and expertise you know resides, right. On top of that talent in that site actually has been tremendous in terms of complementing our innovative solution offerings in a number of other areas. But as far as the inductive solutions is concerned you are correct in a sense that we have not and not any major design win [inaudible] other on it ,but that’s not because their technology is bad Satya.

Okay the final question on the PDA stuff. When are you going to ship the product?

Within next 3 to 6 months.

3 to 6 months and what's the average ASP on that?

It's very similar to a single touch resolutions.

Single touch band. Okay. Great. Thanks guys.

Thank you.

And our next question is follow-up question from Andrew Neff, please go ahead.

My question was basically answered, so thanks very much.

And our next question is also a follow up question from Michelle Gutierrez.

Hi, it's just a quick one. You did say that your backlog is pointing to a dual point being at a 20% range. What is the backlog saying for the other two segments in your business, the single point and the non-notebook? Thank you.

Well I mean, we are expecting revenue growth sequentially and I do expect contributions from both the notebook and the non-notebook applications, although it will be the non-notebook applications that will drive the bulk of it.

You could see non-notebooks being over 20% of the June quarter revenues?

Well if you look at the guidance it would certainly suggest that we are going to be something north of 19% and --

Okay. Thanks

And at this time we have no further questions I would like to turn the conference back to management for closing comments. Please go ahead.

Thank you for being on the call with us today. And we look forward to talk with you again next quarter. Thank you.

Ladies and gentlemen, that concludes the Synaptics Third Quarter Conference Call. If you would like to listen to a replay of today's conference, you may dial 1800-405-2236 or 303-590-3000, using pass code 575185#. We thank you again for your participation and you may now disconnect.