Synaptics Inc (SYNA) 2005 Q2 法說會逐字稿

Welcome to the Synaptics second-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. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, Thursday, January 20, 2005.

I'd now like to turn the conference over to Mr. Alex Wellins. Please go ahead, sir.

Good afternoon and thanks for joining us today on Synaptics' second-quarter conference call. This call is also being broadcast live over the Web and can be accessed from the investor relations section of the Company's at synaptics.com.

With me on today's call are Francis Lee, President and CEO of Synaptics, and Russ Knittel, the Company's Chief Financial Officer.

We would 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 on the Company's forward-looking statements. We refer you to the Company's SEC filings, including Form 10-K for the fiscal year ended June 30, 2004, 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 would like to turn the call over to Francis Lee. Francis?

Thanks Alex. Thanks, everyone, for joining us on the call today.

Synaptics had a terrific quarter, achieving our third consecutive period of record revenue and profits. Revenue for the second quarter was $56.5 million, ahead of our guidance range and up 48 percent from the previous quarter and 65 percent over the same quarter last year. GAAP net income more than doubled over the preceding quarter to $9.7 million, or 33 cents per diluted share.

As expected, we experienced unit shipment increases in both the portable music and PC markets as our solutions were incorporated into many of the season's popular consumer devices. Our performance reflects the increasing popularity of hard disk drive portable music players this holiday season. We benefited from continued success with not only our first customer, but with our expanding base of OEMs in this rapidly growing sector.

Revenue outside of the PC market increased sharply, growing 94 percent sequentially to approximately 43 percent of total revenue. This is up from 33 percent of our revenue mix in the preceding quarter and represents our highest quarterly revenue today from new markets. Revenue from the notebook segment was also higher than anticipated, as total revenue from the PC market grew approximately 26 percent sequentially, including incremental contributions from our desktop and peripheral applications.

Industry reports suggest that end-device sellthrough was robust during the December quarter, and moving forward, we see continued strong demand for products utilizing Synaptics technology, particularly in the digital music segment. Entering into what has traditionally been a seasonally-weaker March quarter, we ended December with an exceptional backlog of $35.4 million.

Now, I would like to make a few comments about our progress during the past three months. Recently, we announced a unique interface solution in the NEC LaVie notebook computer. The solution is at a part for the keyboard and consists of 10 of our LightTouch (indiscernible) buttons that control the multimedia functions for the notebook, including TV, DVD and CD controls. This custom module incorporates LED in blue, red and green, and is another example of a unique implementation, further demonstrating the flexibility of our capacitor technology. I'm pleased to announce that we have secured two additional design wins based on this product concept, and look forward to sharing more details about this in the coming months.

Next, I am pleased to announce that we have secured another design win in the PC peripheral space. While I can't go into details at this time, we hope to be able to update you on this within the next six months.

Turning to the portable digital entertainment segment, digital music devices continue to gain momentum, and we continue to see demand for our custom interface solution from both existing as well as new customers.

During the December quarter, Median introduced a new MP3 player in Europe, the NB (indiscernible) 200, which utilized our TouchScreen (indiscernible) solutions. We also secured three new design wins for hard disk players, two of which are with new OEMs, bringing the total number of OEMs that have designed-in our solutions to eight.

In addition, at the recent Consumer Electronics Show, two of our existing customers announced either expended product offerings or increased availability. Creative expanded its Zen Micro product line, adding four new devices employing Synaptics' innovative solutions, including a gigabyte flash player, 4 and 6 gigabyte hard disk drive player, and a photo-enabled device. And the Olympus M:robe 100 MP3 player, which was previously available only in Japan, is now being sold in the U.S.

As I have mentioned on previous calls, we continue to work diligently on our mobile initiatives and are in various stages of development and investigations with a number of mobile OEMs. As we move forward with these programs, we are increasingly confident of the value our MobileTouch solutions provide to this market. We are optimistic that we will be able to update you on more specific design activities in the mobile space within the next three to six months.

Synaptics is a company targeting multiple high-growth markets, and looking at calendar 2005, the demand picture of our markets remains positive. While unit growth in the overall PC market is expected to slow, notebooks are expected to continue to grow in the high double-digit range, according to IDC, and to exceed 30 percent of total PC unit shipments as wireless and mobility trends continue to drive the migration of desktops to notebooks.

Regarding the digital music segment, IDC is projecting the total market for portable music players to grow almost 60 percent, to 48 million units in 2005 from 30 million units in 2004. We see flash-based players as an additional opportunity as flash storage becomes more cost-effective and as capacity expands, allowing OEMs to incorporate more features that play to Synaptics' strengths.

To recap, we posted record revenues and unit volumes in the December quarter and again demonstrated the scalability of our business model and our ability to meet our customers' increasing demands. I want to commend our team on their outstanding execution, and I am confident that we'll remain well-positioned to continue to deliver increasingly higher business levels. The successful diversification of our business into incremental market opportunities is serving us well. We remain intent on continuing our leadership position in those segments in which we are well-established, and feel confident that we will further our strategic road map in the new calendar year with penetration into additional new markets.

With our strong performance in the first half and current outlook for solid demand trends over the remaining six-month period, we are extremely pleased with the way fiscal 2005 is tracking and believe we will have an exceptionally strong year.

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

Thanks, Francis. Unless I specifically note otherwise, all the numbers I discuss regarding our quarterly results will be on a GAAP basis. In addition, any references to the PC market will include notebook revenue as well as revenue from our desktop and peripheral applications.

Revenue for our second fiscal quarter was 56.5 million, a sequential increase of approximately 48 percent over last quarter's 38.1 million, and an increase of approximately 65 percent compared with 34.3 million in the same period last year. Revenue outside of the PC market increased approximately 94 percent sequentially to 43 percent of total revenue, again, primarily reflecting the rapid adoption of our product solutions for the high-growth portable music player market.

Unit shipments into the notebook market were seasonally up more than anticipated and revenue from this category exceeded our expectations, up roughly 24 percent sequentially, driven primarily by single pointing applications. We did, however, also see an increase in corporate demand, as revenue from dual pointing applications was up 20 percent sequentially, representing approximately 14 percent of total revenue.

Gross margins for the quarter were better-than-expected at 46.7 percent compared to 45.1 percent in the preceding quarter, primarily reflecting a richer product mix within both the notebook and digital music player segments, as well as the impact of our continued cost reduction efforts.

Total operating expenses for the quarter were $10.7 million, including $85,000 of noncash charges from the amortization of our deferred stock compensation, compared with $9.9 million in the preceding quarter, which included approximately $102,000 of noncash charges from deferred stock compensation. This 8 percent increase in operating expenses reflects our higher business levels, including an increase compensation costs, project costs and travel expenses.

R&D costs were 6.2 million compared to 6 million in the prior quarter, and SG&A costs were 4.4 million compared to 3.8 million in the prior quarter. Total headcount at the end of December was 204 compared with 199 at the end of September. Our headcount will continue to increase as we are actively recruiting to staff our internal and external initiatives and meet the demands of our increasing business levels.

Net interest income was up slightly, to approximately 246,000 compared to 242,000 in the prior quarter. Net income for the quarter was 9.7 million, an increase of 119 percent compared with 4.4 million in the prior quarter, and an increase of approximately 178 percent compared with the 3.5 million in the comparable quarter last year. EPS for the quarter was 33 cents per diluted share, compared with 16 cents per diluted share in the prior quarter and 13 cents per diluted share in the comparable quarter last year.

Now a few comments on our balance sheet. We ended the quarter with total cash and short-term investments of 229.9 million, up from 97.3 million at the end of the September quarter. As you are aware, the market conditions during the quarter allowed us to complete a $125 million convertible financing on very favorable terms. We believe this financing gives us additional flexibility to execute our growth strategy moving forward as we work to continue to build on our internal capabilities while also exploring external opportunities.

I also want to update you on our search for a new corporate headquarters that we mentioned on our last earnings call. On January 5, we purchased a building in Santa Clara for 8.5 million and are currently planning the modifications and improvements, with the goal of moving into the new location in the May/June timeframe.

Cash flow from operations was approximately 7.2 million for the quarter, primarily reflecting our operating profit of 15.7 million, partially offset by increased working capital resulting from our higher operating levels. Stock option exercises and employee stock purchase plan contributed approximately 5.2 million for the quarter. Capital expenditures were approximately 522,000 and capital depreciation was 246,000 for the quarter.

Receivables at the end of December were 34.6 million, up from 29.5 million at the end of September, reflecting the 48 percent sequential increase in quarterly revenue. DSOs declined to 55 days compared to 70 days at the end of the prior quarter, reflecting more typical linearity in the December quarter. Our inventory level increased 3.2 million during the quarter, totaling 10.9 million at the end of December, as we continued to target a six-month supply of our proprietary ASICs. Inventory turns in the December quarter were unchanged from the prior quarter at 11 times.

Now I'll make a few comments regarding our near-term business outlook. Although backlog was approximately $4 million below the prior quarter's level of 35 -- at 35.4 million, it represents a strong entry point for what is typically a seasonally- down quarter, suggesting healthy end-device sell-through during the holiday period.

Based on our backlog and current indicators, we're projecting revenue in the March quarter to be approximately flat sequentially. This forecast reflects our increasingly diversified revenue and customer base, as we expect continued momentum for portable music players to offset seasonal declines in notebook demand.

As we look ahead to the June quarter, we are projecting revenue will be up from the March quarter, reflecting typical consumer patterns, and expect to continue strong demand for portable music players. Based on our current backlog, we expect gross margins in the March quarter to be similar to the December quarter levels. We expect operating expenses to be up sequentially, primarily reflecting the impact of our anticipated staffing increases and higher payroll taxes as we enter a new calendar year.

Net income per diluted share for the March quarter is expected to be in the range of 29 to 30 cents. Non-cash expenses related to the amortization of deferred stock compensation are estimated to be approximately 72,000 in the March quarter.

In closing, as we entered the new calendar year, we believe we are positioned to capitalize on continued growth in the PC market, driven by the underlying mobility trends and the continued shift towards notebooks, as well as our extension into the desktop and peripheral products. As demonstrated by our success in the explosive portable music player segment, where our intuitive, easy-to-use interface solutions have been designed into products offered by an expanding base of OEMs, we believe our solutions fit well with the emerging digital lifestyle, and look forward to further leveraging our innovative technology within additional new markets over time.

That concludes our formal remarks and we will now turn the call over to the operator to start the question-and-answer session.

(OPERATOR INSTRUCTIONS). Andrew Neff.

Bear Stearns. Nice quarter. I guess I had three questions. One is, just to follow-up on some of your comments earlier, Russ, you talked about the outlook of operating expenses and gross margins for the third quarter. Can you make any sort of comments about fourth-quarter expectations along those lines?

Second, in terms of the mobile phone market, could you talk about some of the issues and try and sort of help to set expectations? As you often entered markets before, that's been at the upper end and it's sort of been a slow ramp. Any way to size that?

And third, in terms of -- just as you -- if you could just talk about pricing trends and pricing pressures, and do you see any competitors emerging for the existing markets you have in music players?

Certainly. So let me just comment on the mobile phone and then I will turn it over to Russ about the operating unit expenditures and the pricing trends.

I mean, as we have, Andy, talked about it in the past number of quarters in here, we continue to invest heavily in that sector. We continue to see progresses on that, and we're going to update you within the next three to six months on the progress that's moving forward there. I guess in order to kind of set expectation in terms of how fast this segment revenue is going to go -- number one, I'll be the first to say that we really do not have some good historical data to tell us right now. So I'm going to give you both ends of the spectrum here.

One end of the spectrum here -- we use the digital music player as a for instance. We were first designed into a digital music player almost more than two years ago, and frankly, it has not ramped up until the December quarter, when you start reporting, by Apple. There is over 700,000 music players, and the momentum continues to go unabated and the ramp has been pretty fast.

Now, in the case of the mobile phone, the installed base is already there. Right? So it does not have to worry about an emerging application. But what is emerging is our functionality in this application. And for that, we really have got to get the first product out and let people use it and figure whether this thing here -- is the way that we expect it to be successful. Now the good news there is the mobile phone is getting incrementally more complex in terms of functionality. A number of those phones -- right -- is going to have, for example, ability to play MP3 music player files. So I can see that there's a relationship between the application. That has been proven in the digital music segment. But frankly, Andy, again, it's tough for us to predict how fast this thing is going to ramp.

I guess my -- just to follow-up on that if I could. The question would also relate to should we only expect -- there's been a lot of talk about MP3 players in phones. Should we only look for that sort of opportunity, or is there a broader opportunity as phones get -- the broader smart phone category?

I think it's the latter, Andy. Our application is not just for MP3 music players, although there is the presence out there that our capacitor technology works real well with music players. I think there is more of a general trend that the functionality of the phones gets more complicated, and they would like to have interface. And we believe we can help them out with navigation. And sometimes navigation is more than one-dimensional. It has to be two-dimensional. And we also believe we can (indiscernible) and stuff like that. But (indiscernible) MP3 music player because it's obvious -- right -- application out there that is already using that kind of technology. Although the technology (indiscernible) Synaptics is not targeting only that application.

Thank you, Francis. The other two questions was about fourth-quarter guidance and also --

Andy, let me talk about op expenses as we move from the March quarter to the June quarter. We do have a major stacking initiative inside the Company, as we have indicated. And I would expect that, as we have always said, operating expenses at Synaptics -- we're going to continue to grow those as we grow the business. And so you ought to assume that OpEx is going to continue to grow as we move from quarter to quarter.

With regards to gross margins beyond the March quarter, as you know, usually I use our backlog sort of as a proxy to guide what I think margins are going to be in the upcoming quarter. And so, when I look out beyond 90 days, it's a little hard to speculate what margins are going to be. I clearly -- I think we have had some really significant advances in some of our cost reduction efforts that are being broadly benefited within our product line. Our target gross margin ranges is in the 40 to 45 percent, as you know. And we've been running slightly ahead of that last quarter, last quarter being September. And in the most recently closed quarter we're well above that range. So as I look out into the June quarter, I guess I would expect margins to at least be at the high-end of the range, but again, I don't have that much visibility at this point in terms of product mix.

Maybe, Francis, this last question about competition. Do you see that changing? How comfortable are your customers with you as a sole source, and do you see anyone coming into your market?

Andy, certainly -- forget about our customers; I'm not very comfortable as being a sole source on anybody because of the nature of our business. Right? Okay? And, Andy, it has not changed in the sense that (indiscernible) severe (indiscernible) and we always have to move ahead there. I do think having said all that stuff, Andy -- I do think that there is reasons why our solution is being adopted. Okay? And we do provide a level of service as well as technology to OEM customers. We don't take any of those competitions lightly, and they are everywhere, Andy, Especially with a real successful emerging segment like the digital music players. Okay? So the way how I see it is we are positioned, our OEM base continues to expand, and we are well braced for increased competition.

Joe Sullivan.

Craig-Hallum. Congratulations on a great quarter there. A couple of questions. As far as the March quarter, what is your view for normal seasonality on the notebook side, or what is implied in your guidance?

If you look over the last five years, there's no discernible trend from an industry perspective. I think last year notebooks were down sequentially about 7 percent.

On the MP3 wins, you talked about -- make sure I'm clear on what you said. You've got two new ones and one existing customer. Is that existing the Creative that was referred to from CES, or is that something in addition to that?

We can't comment on who they are yet, but the way you've interpreted the comment is correct. We have three design wins, two of which are with new OEMs that have yet to be announced, and the third is a design win with an existing customer.

But it would not refer to Creative, what we saw in the new launches?

We can't comment on that.

Going to the market statistics you talked about, I'm not sure I was quite clear on what the numbers were and what you're putting into the category. Can you go through that again?

Are you talking about the digital music player, Joe?

Yes.

I think what I said was between calendar year '04 and calendar year '05, if you look at the last IDC data, it's expected to grow approximately 60 percent, from 30 million units to 50 million units. But that number includes both. Okay? The flash player as well as the hard disk drive. 60 percent (indiscernible) I just (indiscernible) it to 50. Actually what I said was 48 million units.

Right. Okay. So I was just wondering what you were referring to. It's both the flash and the hard drive (multiple speakers)

Correct. From 30 to 48 between '05 from '04.

One other financial question on the tax rate and some of the stuff you've been working on there. When you get out into 2006 is there going to be a change? I saw it was down just a little bit this quarter. What is the expected tax rate as you get out?

For this fiscal year we had originally signaled that we thought the tax rate was going to be in the 40 to 42 percent range. Based on the increased profit levels and the structure that we've implemented, it looks at this point like our tax rate probably will be below 40 percent in this fiscal year, and it's probably going to be in the 39 to 40 percent range. And as we have said on earlier calls, as we move into fiscal '06, I would expect the tax rate to be in that 35 to 40 percent range.

One last question for me, going back to the question about the mobile phones, or that opportunity. Is there a price point you think you need to hit to be able to get a win there? Is that at all an issue?

I don't think so, Joe. Obviously, each of the solutions have to justify on there's value and there's merit there. But there is really no magical threshold there, mainly because the solution we are proposing here is not suggesting to replace any particular existing solution, because the functionality that we are trying to provide here stands on its own merits. Right? But having said that, you have consumer devices, and there's always price pressure on the consumer devices. But there is really no magical threshold per se, Joe.

Rob Stone.

SG Cowen. Congratulations guys (multiple speakers). Three questions. First on the notebook environment, what trend do you see looking into March and June as far as the corporate contribution? Can there be some further migration up in the dual mix?

If I just look at the current backlog today, it would suggest that I think dual pointing trends will continue at least into the March quarter to some extent, recognizing that as an overall category we believe notebooks will be down sequentially. But the relative mix of some of the corporate boxes is up a little bit. Whether or not that trend will continue into the June quarter, I think it's too early to tell. This is really the first quarter in the last three quarters that we have actually seen an uptick in corporate demand, using the dual pointing applications as a proxy for that.

A second question on clarifying the way you are talking about revenue segments now. I had always understood in the past that we were talking about notebook interfaces and then everything else as sort of your new markets, which in a couple of cases included things that were PC desktop, or for instance the Logitech mice. Is it now the case that you're putting things like the Logitech mice into the -- what was formally notebook is now PC, and everything else that's not PC is the new category?

As we said during the prepared comments, if you look at the PC revenue for us for the quarter, which included both the notebook applications and the peripheral and desktop applications, sequentially those revenues were up 26 percent. If you look at just the notebook category, that was up 24 percent.

What my question goes to, is that a different way than you split out revenues last quarter, for instance, where there were some PC-related non-notebook contribution in there? Was that -- which category was that lumped in with last time?

It would have been with notebooks, but it would have been -- last quarter it was really immaterial. So if you looked at the September quarter, there wasn't much contribution from that. So it really didn't have any meaningful impact on the results. This quarter those products ramped into the holiday season. It was a nice piece of incremental business for us. We think that potentially provides another leg of revenue growth for us moving forward, but it would also be hard to categorize that as being terribly significant, even in the December quarter, as it relates to the other two major markets we're in, that being notebooks and the portable music players.

Final question relative to your portfolio of technologies. We haven't heard anything about your inductive -- the spiral technology for a long time. Are you still doing anything with it? I recently saw a handheld sort of miniature Windows machine -- I think it was OOQ or OQO, something like that -- with what looked like an inductive pen interface.

Yes, Rob. We have really not talked anymore about (indiscernible) because we had given up on it, but because opportunities on the capacitive technology has been so well received. So we basically have focused our R&D resources in that sector.

Do you see, with respect to your specific technologies -- I know there may always be alternative ways of doing things, but with respect to the capacitive technologies, has the landscape changed? Who do you see as your closest competitor?

I mean, the capacitive technology -- there are lots of guys out there claiming they have capacitive technology. So there are a number of people, especially now with the success of the digital music segment, that are coming out and claim they have capacitive technology. So, I don't think we are limited in the sense (indiscernible) along in the notebook space. A lot of people claim to have it. We have not, Rob, in a significant manner seen any of those guys play in any of the leadership positions, successfully designing in the leadership OEMs.

Scott Barnum.

Credit Suisse First Boston. I wanted to follow-up real briefly on the previous question just to clarify something. You had mentioned notebooks only were up 24 percent sequentially. Was that units or revenue?

That's revenue.

Great. Also, you were talking about competition. Have you actually went in trying win a design and lost out to any competing technologies similar to yours?

In what sector are you talking about, Scott?

Well, outside of the notebook sector. I'm talking I guess in the portable (multiple speakers)

I guess, Scott, it is difficult for us to say here, because sometimes decisions are being made internally without our knowledge. Right? Having said that, it's obviously possible that due to (indiscernible) in the market there could be changes in terms of industrial design or the requirements of the particular product, Scott. So it's really tough for us to mention it to you definitively one way or the other. But having said that, I would tell you that it shouldn't be surprising if indeed it does happen.

Scott, we're not aware of any design losses against anything other than a mechanical solution today. Having said that, we are aware of a couple of resistive-based solutions that are in the portable music player market today, but we didn't compete for those solutions. So as Francis indicated in his comment, there are solutions that are made or decisions that are made that we're not aware of, obviously, because you can't blanket the world.

Right, okay. I wanted to talk a little bit about price pressure on the -- I guess the iPod side of the business. I know you enter into contracts for the duration of a product, or at least a fulfillment contract. On the laptop side, previously you've stated that there is an annual price succession built into that. Is the contract for iPod constructed similarly?

We can't comment on specific customer pricing for obvious reasons. Markets that we're in -- notebooks, consumer electronics -- they all have pricing pressure over time, and generally the expectation is that price points do decline. And as Francis indicated, we are out there and we have to earn our stripes everyday as we compete. So we have to assume that prices will come down. And the challenge that we have as a company is, again, innovating and bringing new capabilities, functionality, new industrial design capabilities to our customers. And that's one of the things that differentiates Synaptics solutions in the marketplace today.

I'm trying to get a feel for how much other non-PC revenue there is outside of your iPod business. Can you give any feeling at all with iPod?

Well, the portable music players for us today represent more than 95 percent of the non-PC revenue category. So of the 43 percent of revenue content last quarter, more than 95 percent of that would have come from the portable music player segment.

Can you at least -- can you verify if Creative then with their product line is second behind iPod in that category?

Creative, I think, is having a major impact in that market segment.

And then, in terms of gross margin in your non-PC segment, is there a big variation in the gross margin you see across (technical difficulty) different product lines, or would you say that they're fairly similar?

Again, we haven't commented on specific margins within those categories. As a company, we continue to target 40 to 45 percent on a blended basis for margins. Clearly, the last couple of quarters our margins have been outside of that range on the upside. But going forward, we still think 40 to 45 percent is a sustainable level for us, and that's -- again, that's the way we approach the business on a blended basis.

(OPERATOR INSTRUCTIONS). Suma Danda (ph).

This is actually Jason Jones for Suma Danda, Banc of America Securities. I had a quick question on your outlook. If you could -- kind of going back to this notebook seasonality. That 7 percent number -- was that your result from last year, or is that what you think the industry did overall last year?

That's what the industry did overall last year as reported by IDC.

Your guidance for March on notebooks -- I mean, is that based on that number, or can you give a little more color on where that is coming from?

We use our backlog as an indicator. We do get rolling forecasts from our customers and we kind of build our forecast from the bottom up. Our projections would assume that we would see seasonal declines in notebooks that would be similar to last year's level.

Ari Cole (ph).

Best of luck in 2005. As you know, recently you raised some money through a convertible offering. Can you just refresh my memory in terms of how many shares are convertible into? And more importantly, can you just kind of embellish on how the money may be used. I know you can't tell us, if you're going to buy someone, who it is. But can you just give me the sense for -- in terms of order of priorities, how the money is going to be used, in terms of acquisitions or other uses? And if they are for acquisitions, what are your criteria for what you're looking for? Because I would gather for many companies, acquiring 10 or 15 smart people is all you need to do. You don't need to go out and spend $200 million to acquire a company.

The reason we did the convertible offering last quarter was because of the very favorable terms that were offered in the marketplace. We decided to take advantage of those favorable terms, and we believe that that additional capability or flexibility on our balance sheet will give us the ability to not only bolster our internal capabilities, but also to take advantage of potential external opportunities that may present themselves.

Now, the convertible, I think, based on the conversion rate, converts into somewhere around 2.4 million shares. As a company, and you look at external opportunities, we have been looking at potential acquisition targets now since going public in January of 2002. And it's something that's been part of our strategy all along. We have done one small acquisition since going public. And we take a pretty disciplined approach here, so we're not going to go out and feel like we need to do an acquisitions simply because we have this additional cash on the balance sheet. And with regards to the criteria for acquisitions, the kinds of things we look at are things that would be synergistic to our existing technologies, things that would allow us to sell more applications, more products into the same customer base, things that might leverage our entrance into a new vertical market category. And no, we're not just looking at the big guerilla type acquisitions. We would consider things that would make sense on an incremental basis.

Best of luck. And I just encourage you to be careful on the acquisition side.

Our final question is a follow-up from Andrew Neff.

A quick question just to follow-up on something you raised before. When you talked about new design wins in the music player, are these names that we would be very familiar with? Are these international names? Any way to characterize them?

They're names that you would recognize.

Maybe I shouldn't have asked that. I recognize a lot of names.

I don't know what your categorization is, Andy, for whether or not they're major or not.

I guess maybe (indiscernible) -- would you characterize any of these as major names, or how would you characterize these design wins given you already have major names?

This is a category that is drawing a lot of new names to it. And people who weren't previously in this category, like Olympus, are now getting into the MP3 space. I would say the names are well-recognized. Would they be well recognized within the MP3 space? Probably not.

Management, there are no further questions at this time. Please continue.

Okay. Thank you for being on the call with us today and we look forward to update you again next quarter. Bye-bye.

Ladies and gentlemen, this concludes the Synaptics second-quarter conference call. You may now disconnect.