Synaptics Inc (SYNA) 2012 Q1 法說會逐字稿

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Synaptics first-quarter fiscal 2012 earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, Thursday, October 20, 2011. I would now like to turn the conference over to Jennifer Jarman of the Blueshirt Group. Please go ahead.

Thank you, Alicia. Good afternoon and thank you for joining us today on Synaptics' first-quarter fiscal 2012 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 website at www.Synaptics.com. With me on today's call are Rick Bergman, President and CEO; former interim CEO, Russ Knittel; and Kathy Bayless, CFO.

In addition to the Company's GAAP results, management will also provide supplementary results on a non-GAAP basis, which excludes non-cash share-based compensation charges and certain other non-operational and non-cash items. Please refer to the press release issued after Market close today for a detailed reconciliation of GAAP and non-GAAP results.

Additionally, we would like to remind you that during the course of this conference call Synaptics will make forward-looking statements, including predictions and estimates that involve a number of risks and uncertainties, including, but not limited to statements regarding the Company's future financial performance and outlook, including financial guidance for the second quarter of fiscal 2012 and its revenue outlook for fiscal 2012; the Company's expectation that first implementations of its InterTouch high-speed interface will be on the market on second half of fiscal 2012.

The Company's expectation that its first ClearPad 3200 on-cell implementation will be shipping within the current quarter; the Company's expectation of broadening its mobile customer base in fiscal 2012; and the Company's expectations of strong gross margin and operating margin performance for fiscal 2012 and increased gross profit dollars year over year resulting from its product mix shift.

Actual results may differ materially from any future performance suggested in 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, 2011, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement. We respectfully disclaim any obligation to update this forward-looking information.

With that said, I'll now turn the call over to Rick.

It's a pleasure to be on the call today as I'm very excited to have recently joined as Synaptics' CEO. First I'd like to acknowledge Russ for the tremendous job he has done as interim CEO and to thank him for helping me with the transition into my new role.

To share a little bit about my background I spent the early part of my career at Texas Instruments and IBM. More recently I was responsible for the product development and strategy at ATI and AMD while serving on the executive management team.

One of the questions I've been asked is why did I decide to join the Company. Essentially, Synaptics represents a great opportunity for me. The Company is well-positioned for the next major wave of computing, the human interface.

I was attracted to its leading position in rapidly-growing markets, its marquee customer base and its sustained track record of success. I became even more enthusiastic when I began to understand the depth of its technology, its culture of innovation, and the extensive talent across the organization.

My initial priorities are 3-fold. First is to get to know our customers and to better understand how Synaptics can become more deeply integrated within their product road maps. Second is to become engaged with our global leadership team and to develop a thorough knowledge of the Company's capabilities and resources around the world.

And third is to gain a deeper understanding of the Company's technology and products and how we can further capitalize on the opportunities that lie ahead. I also look forward to meeting many of our analysts and investors over the coming months.

With that I'll turn the call over to Kathy for a review of the financial results of the quarter, then Russ will provide an overview of recent product development and trends in our markets before we take your questions.

We are pleased with our first-quarter financial results considering the macroeconomic conditions impacting our market. Revenue for the September quarter was $133 million, slightly above consensus and in line with the guidance we provided last quarter.

Our top-line results reflect better-than-anticipated revenue from mobile phone touch screen applications, offset by lower-than-expected PC revenue. Our gross margin performance was above our expectation, primarily due to product mix driving strong operating profit, net income and EPS. As a result, non-GAAP net income was $19.1 million, or $0.57 per diluted share.

In addition, we repurchased 4%, or 1.4 million shares of our stock during the quarter and I am pleased to announce that our Board of Directors has approved an increase of $100 million to our stock repurchase plan. As a result we have $134.3 million of authorization available for stock repurchases through October 2013.

In the September quarter the revenue mix from PC and non-PC applications was approximately 52% and 48%, respectively. Revenue from PC applications was down 13% year-over-year, reflecting weakening demand for both consumer notebooks and PC peripherals, and down 12% from the June quarter.

As we discussed on our last call, the June quarter revenue from PC applications was up 26% sequentially and was stronger than anticipated due to new product launches in advance of the back-to-school season and timing of channel fill relative to consumer notebook inventory. Our market share continues to be in the 65% and design activity for our notebook product solution continues to be very strong, including new designs for our image-sensing TouchPad and ClickPad, as well as our InterTouch capability.

Revenue from the mobile touch screen application in the September quarter was down 13% year over year and down slightly from the June quarter. Mobile unit shipments increased significantly from the comparable period. The mobile product mix was primarily sale and ship, with integrated module solutions representing approximately 10% of mobile revenue. Modules were about 30% of mobile revenue in the June quarter and over 50% of mobile revenue in the comparable period last year.

As we've mentioned on prior calls, tail-and-chip solutions have lower average selling prices but carry higher gross margin percentages than full module solutions, reflecting the reduced third-party content in the [bomb]. Non-GAAP gross margin was 46.1%, an increase of 490 basis points year over-year and up 370 basis points from the June quarter. The gross margin percentage was above our expectations due to the overall product mix and higher-than-expected mix of revenue from mobile phone applications and strong manufacturing performance.

I am pleased to note that despite a $10 million decline in revenue from the preceding quarter the higher gross margin percentage resulted in a slight increase in gross profit dollars and flat operating dollars. Non-GAAP operating expenses were $37.1 million, up $750,000 from the prior quarter, primarily due to annual compensation adjustments and increased engineering staffing. Headcount at the end of September was 682.

GAAP operating expenses were $44.9 million, including $8.2 million of share-based compensation in the September quarter. Our non-GAAP tax rate was 22.4% in the September quarter compared with 20.1% in the June quarter, reflecting our geographic profit mix. Our GAAP tax rate was 21.3%. As I mentioned previously, first-quarter non-GAAP net income was $19.1 million, or $0.57 per diluted share.

Turning to our balance sheet, we ended the quarter with $241 million of cash. Cash flow from operations was $31 million and we used $33.5 million to repurchase 1.4 million shares, or 4% of our stock. Capital expenditures were $3.6 million for the quarter and depreciation was $2.9 million.

Receivables at the end of September were $95.3 million, reflecting 64 days of sales outstanding, and inventories at the end of September were $28.8 million, comparable to June, with inventory turns at 10.

I will now make a few comments regarding our quarterly outlook, but first I'd like to mention that the second fiscal quarter will span a period of 14 weeks rather than 13 weeks, as fiscal 2012 will be a 53-week year. Looking ahead to the December quarter, we remain cognisant of the on going uncertainty within the consumer spending environment and the impact on end demand.

Based on our backlog of approximately $85 million entering the quarter, customer forecasts, and expected product mix, we anticipate revenue will be in the range of $141 million to $149 million. We expect both PC and mobile revenues to be up sequentially. PC revenue is anticipated to be up year over year and while we expect mobile phone touch screen units to be up, mobile revenue is expected to be down year over year, reflecting the mix shift to lower-price tail-and-chip solution.

Taking into account our overall revenue mix, including our module-based notebook business, the product mix for mobile touch screen, we expect non-GAAP gross margin for the December quarter to be in the range of 46% to 47%. We expect non-GAAP operating expenses to increase in the December quarter, primarily from increased engineering headcount and also reflecting the 14-week quarter.

We anticipate the FAS 123(r) charge in the second quarter to be in the range of $8.5 million to $8.8 million. We anticipate that our non-GAAP tax rate for the December quarter and for the year will be in the range of 22% to 23%, reflecting our expected geographic profit mix. Non-GAAP net income per diluted share for the December quarter is anticipated to be in the range of $0.57 to $0.$66 per share.

I will turn the call over to Russ for an update on our business.

I'd like to start off by saying we are extremely pleased to have Rick on board. He brings the right combination of technology and industry experience, as well as a solid track record of success in driving shareholder value. I also want to thank everyone at Synaptics for their support during my 10 years as interim CEO.

I look forward to helping Rick through the transition and to continuing my involvement as a board member, working with Rick, the management team, and the rest of the board to realize Synaptics' long-term potential.

Turning to our progress over the last few months, I'll start with the PC market. Synaptics was recently featured as a Microsoft co-engineering partner at the Windows BUILD conference, where Microsoft unveiled the key features of Windows 8, highlighting the new user experience driven by touch.

Our Series 7 premiere touch solution, based on our image sensing technology, along with our InterTouch-enabled TouchPad solutions, helped qualify Synaptics as the only touch provider with solutions optimized for both touch screen and TouchPad interfaces that are supported in the upcoming release of Win 8.

We are working closely with OEMs, host processor providers, and sensor partners to create reference designs and OEM solutions that maximize Microsoft's touch-first experience for Win 8 resulting in fast, fluid and intuitive multi-touch user experiences through both the touch screen and the TouchPad. With the announcement of Win 8 and our co-engineering partnership with Microsoft, we expect to see increased activity for both tablets and refreshed notebook designs as OEMs work through the new requirements that capitalize on the touch-based interface.

In addition to the design activity around Win 8, we are pursuing next wave of notebooks that comprise the Ultrabook category. This category is made up of ultra-thin, light, and affordable notebooks that provide a high-quality user experience. We are engaged with all of our OEM customers on implementations of our ultra-thin Quickpad solutions and saw the first model launch earlier this week with the Acer Aspire S3 Ultrabook.

We also continue to partner with the top OEMs on the integration of our InterTouch high-speed interface that enhances multi-touch gesture performance on TouchPads and quick pads. We expect the first implementations to be available in the market in the second half of fiscal 2012.

There continues to be a growth opportunity for our touch solutions of the digital home environment as consumers seek simplified ways to control and navigate through their entertainment options. During the September quarter we began shipping a TouchPad solution for remote controls that come bundled with several Panasonic 3-D Blu-Ray players.

Moving to the mobile market, our ClearPad touch screen solutions were featured in new smartphones offered by LG, [WahWai], Nokia, RIM, Sharp, and ZTE. We are pleased to see our next-generation solutions gaining traction in the marketplace and we expect to see our first ClearPad 3200 on-cell implementation shipping within the current quarter.

The design pipeline for our ClearPad sensor on lens on-sell and in-sell integrated display solutions is strong. In addition we continue to sample our most advanced Series 4 ClearPad solution, which integrates touch and display driver functionality into a single chip for integrated displays.

Now I'd like to make some comments on the general trends and industry dynamics in play as we look forward to the remainder of the fiscal year. Near-term consumer notebook demand continues to be uncertain amidst an environment of renewed macroeconomic concerns and industry forecasts for notebook growth have continued to come down.

In the mobile market, overall unit growth remains strong and we expect to broaden our mobile customer base this fiscal year. Specific dynamics related to our current OEM customers continue to be reflected in our forecast, somewhat offset by the strong growth of sales of touch screen-enabled smartphones in China.

From a mix standpoint, the shift away from module touchscreen solutions to tail-and-ship solutions is largely complete. As a result, the year-over-year revenue comparisons for the remainder of the fiscal year will be challenging. However, the result in expansion in gross margin percentage has added leverage to our operating model.

Considering the effects of the current global macroeconomic trends on our market resulting in soft demand for consumer notebooks, the product transition in mobile, as well as continued uncertainly in the developing tablet category among the broader set of OEMs, our current outlook for fiscal 2012 suggests revenues to be down 1% to 6% from the prior year.

Given the additional operating leverage we are seeing as a result of the product mix shift in mobile we expect to continue to achieve strong gross margin and operating margin performance for the year and we expect gross margin profit dollars to increase year over year.

In closing, the macroeconomic environment notwithstanding, we are confident in our competitive positioning in our target markets, as our enhanced product portfolio and industry-leading technology continues to be very well received by our customers.

We are excited by the design engagements underway, which encapsulate the expanding opportunities for capacitive touch solutions leveraging our new technologies, as well as key industry developments, such as Win 8, the Ultrabook initiative and the growing adoption of integrated displays. We continue to execute well and we are very bullish on our long-term growth prospects.

With that I'll now turn the call over to the operator to start the Q&A session.

Thank you. (Operator Instructions). The first question is from the line of John Vinh with Collins Stewart. Please go ahead.

Hi, congratulations on the solid results.

Thanks, John.

Thank you for taking my question. First question on the PC outlook. I know this is pretty fresh but I assume you guys are aware of the Thailand catastrophes, is that reflected in your outlook at all and can you just talk to us about how you're looking at that impact?

We are clearly aware of what's going on in Thailand today and we've taken steps to mitigate any material impact on the quarter from any supply chain disruption there.

Okay. Turning to the Smartphone side, you talked about revenues up in the quarter. Can you talk about the drivers of growth for smartphones in the fourth quarter here? it sound like China's a factor. Are you benefiting from a build ahead of Chinese New Year's? Are you also potentially gaining share? And then finally on the in-cell on-cell solution that you're ramping, can you give us a sense of how material or how meaningful it will be in the quarter?

Okay. Well, the Smartphone demand generally has been strong and continues to be strong so we're benefiting from that. We do have a strong relationship with Wah Wei and DTE. We're doing very well in the China market and that was reflected in our last quarter results and we'll continue to see the benefit of that in the December quarter. So overall we're very bullish about the prospects of what the Smartphone opportunity represents to us. The movement, again, toward on-cell and integrated -- on-cell and in-cell integrated displays also works to our advantage given our industry-leading position there with those technologies. We're ready to go. As I said in the prepared remarks our first on-cell implementation will be shipping this quarter and we are pretty confident that we will see our first in-sell implementation in the second half of this fiscal year. So overall, we're very well positioned for where the market dynamics are setting up and as everybody's aware, the penetration of smartphones within the overall mobile phone category continues to grow and that's adding to the overall organic opportunity there.

Great, thank you.

Thank you. The next question is from the line of [Srinivasan Sundararajan] with Oppenheimer. Please go ahead.

Hi, this is a question for Rick. I think my question is a very simple one. What kind of changes are you making in terms of the forward schedule in 2012? You must have done an analysis of where the Company is and you where you want to take it forward so any position of what you will do would be helpful.

Sure. It's been an very interesting first three weeks on the job. The first conclusion is Synaptics has got tremendous technology and actually a strong product pipeline, so in terms of wholesale changes those won't be necessary. But over the course of the next couple of months I'm going to continue to work with the team and review the strategy and look at different areas where we can invest or whatever it will take to make Synaptics successful. But nothing specific to tell you at this time.

Okay, thank you.

Thank you. The next question is from the line is from [James Medvedev] with Cowen and Company. Please go ahead.

Good evening and welcome aboard, Mr. Bergman.

Thank you

I have a couple of question about gross margins. You've said in the past that the PC and notebook side of the house earns 40% to 41%. Is that still the case?

Yes, that's generally the case. As I said before that we look at the PC opportunity that's more reflective of the old gross margin model.

Right. And so then the question is, on the handset side, the gross margin looks like it was really pretty robust this quarter and the question is, how sustainable that is, basically getting into a question about competition. Could you just address that a little bit with the upcoming integrated sensor technologies and some bigger players whether those gross margins are sustainable?

Well, we feel very good about our gross margin profile so I think based upon the comments that I made earlier in the script, moving to 46% in the September quarter, that was ahead of our expectations. But we had a very good mix of product overall in the business in general, as well as mobile operations and we did see some manufacturing efficiencies related to scrap and yield improvement. So we feel very good about that gross margin range. Going forward based upon -- our gross margin will continue to fluctuate just based upon the specific mix of product that we're going to be shipping and we don't see any major changes other than the mix of the product going forward from a gross margin standpoint. So we're kind of -- we're basically looking at a blend of business that would keep us relatively in a target range of, say, 45% to 47% right now.

That's good. So that's an up tick from your prior range that you had for a few years.

Right.

Just on the -- are you able to discuss -- as you've gone to market and shown some sampling of the in-cell and on-cell products are you able to discuss any war stories that have gone on in that market? You're shipping something this quarter, something looks likely for the second half. Just wonder who you're seeing when you go to bid these things and how competitive it is, if you've had big successes so far?

Well, these are very competitive markets, as you know, and we are leading a technology transition here, bringing new capable to the Smartphone lineup, and with the advances available to the OEM handset providers here with integrated displays that bring touch to the market, it gives them the ability to better differentiate their product platforms and, in fact, probably drive touch deeper into their product lineups. So we feel good about the dynamics that are developing in the market as we go through these transitions and the fact that we will continue to driver innovation. We expect to be in a leadership position to continue to push the envelope.

Okay, just one last one, more mechanical. Are you able to break out how much of the PC revenue was tablet related?

Yes, the tab -- the percentage of tablet revenue at this point in time is still not material to us. We announced a couple of tablets we're ship into the market. As we get into the back half of the year we do expect to have additional tablet revenue and for it to grow after that but right now it's not material to break out.

So similar to what it's -- well, similar should be a very small number. Okay, thank you very much.

Thank you. The next question is from the line of Jeff Schreiner with Capstone Investments. Please go ahead.

Thank you very much for taking my questions and, Rick, welcome aboard. Great margin profile this quarter. Just was wondering if I could follow up just a previous question. Kathy, you talked about PC being 40% to 41% typically and PC was about 52% of revenues this quarter and gross margin was 46%. So I was just wondering if you could help justify was there other things going on where you got some new product benefit, perhaps in the PC markets, that maybe helped juice that typically legacy margin, or what happened there, because it would seem that the PC revenues would then probably pull gross margin down slightly or unless you did very, very well on mobile -- excuse me. Any help you could give us there?

Yes. The -- as I mentioned, Jeff, during the quarter the strong gross margin performance, we saw a good mix of overall product, higher mobile products than products that we had anticipated and we did see some manufacturing efficiencies related to scrap and yield improvement. But where our product -- in the products that we see today we expect to have continuing strong performance there.

Okay. And just one last question and I'll get off and let others get in, as well. Relative to the mobile market, Russ, you've talked about this growth and it's deeper penetration into customers, could you help us understand. Maybe is it -- should we be seeing that reflected more in your units for mobile this year because of the transition and maybe because of that we're not really getting to see the full picture because of that transition from module to chip, thus with the implied revenue growth of down 6% it might imply that there's only maybe single-digit growth this year in mobile. Just wondering how you could help us, give us a way to maybe measure that throughout the year?

As we discussed on the last call, Jeff, we are expecting significant unit growth this year. In fact, industry forecasts for Smartphone growth in calendar 2012 would suggest something around 50% unit growth and we're expecting something above that because we are going to broaden our customer base in calendar 2012. But the issue we have is coming from fiscal year 2011 where across the year about 45% of our overall mobile revenue came from selling relatively high-priced integrated module solutions and when you look at where we'll end up in fiscal 2012, less than 5% of our overall contribution from mobile is going to come from integrated modules this year. So while we're expecting very robust unit growth, as we said on the last call we are expecting that for the year mobile revenues relative to fiscal year 2011 will be down. The plus side of that, though, is what you're seeing in terms of the gross margin and expansion and the leverage that we're getting from the operating level, which you -- which your earlier question addressed. So it's got the downside on the top line but very positive impact for us in our operating model, which will be sustainable on a longer-term basis when we work through that transition and the tough compares and we'll get back to solid growth track for mobile revenue entering fiscal year 2013.

Okay, thank you very much for answering my questions.

Thank you. The next question is from the line of Shaw Wu with [Stern Agy]. Please go ahead. Please go ahead.

Hey, thanks, congrats on a very strong quarter.

Thanks, Shaw.

Just a follow up on some of the design activity. You talked about the in-cell on-cell, I'm just wondering, in terms of the -- in terms of those wins, do you expect that to be a meaningful contributor in the December quarter? And then also, what about the March quarter, do you expect some of those wins to kick in then? Just a little bit more color there. Thanks.

Well, we are expecting to have our first on-cell implementation shipping this quarter so that'll be one model in the market and we're expecting to have our first in-cell implementation in the second half of the fiscal year, could be as early as the first quarter. But there's no question based on the design pipeline that we have today, the design activity we're engaged in, that you're going see a movement toward integrated displays occur fairly quickly because of the advantages it brings to the end handset.

Okay, and then just to follow up on that. Normally the March quarter you see a bit of seasonality in terms of the decline -- the sequential decline. I guess with some of these wind\s that could be kicking in Q1 potentially could that be -- could we see better than seasonal? I just wanted to reconcile -- get just a little bit more color on your full-year guidance and thoughts on the March quarter. Thanks.

Okay. Well, we haven't given any commentaries that relates to the -- specifically the March quarter. As I said earlier, we are expecting unit growth for the fiscal year to be very robust because, again, the approach we take to markets is try to get as broadly adopted by the major tier 1 players in that market and this year we expect to add additional tier 1 players to our customer base, which will help us, I think, outpace overall industry expected unit shipment.

Okay, thank you very much.

Thank you. The next question is from the line of Raj Gill with Needham & Company. Please go ahead.

Yes, thank you and congrats, again. Just trying to understand the on-cell in-cell competitive differentiation. Could you maybe describe that as it relates to, say, your competitors Cypress and ATML. Do you feel that you have a first mover advantage and particularly against, say, Cypress, which is their single ITO [sensor-layer]. Is that a comparable type of product with your on-cell implementation? Maybe if you could talk about that would be great.

Well, single-layer discreet sensors are completely different from an on-cell or in-cell implementation where you're building the touch sensor into the LCD stack up. I believe we do have a first-to-market advantage there in both instances. And again, the way the -- when I look at our design pipeline and the number of engagements where our OEMs are looking to implement these integrated displays I think it does put us in a position here where we will have an advantage in the marketplace and we will be able to take it -- help our OEM customers take advantage of the additional capabilities those technologies bring to their end devices.

Do you see any challenges on the yields on those sensors as you start move from -- [to on-cell]?

Well, that is one --

Any manufacturing problems?

That is one of the issues that challenges of the Lams in these markets is when you go through these technology transitions they have to move their manufacturing capabilities in line with the technology capabilities and that does have a gating item on the pace of which things can be adopted. But we -- in addition to partnering with the OEMs on design engagements we're working very closely with four of the major SCM providers in that market to help them with that transition.

And just last question on that particular topic. Are you seeing on-cell more adopted in -- say with Wah Wei, ZT, some of the Chinese guys versus some of the higher-end phones in Korea -- from the Korean manufacturers or the other leading top OEMs?

Well, we haven't talked specifically about the engagements for on-cell or in-cell with any of the OEM customers, but what I can tell you is all the handset OEMs that we're working with today are aware of the advantages that those integrated technologies bring to their devices and we are engaged with all of them on looking at ways to implement those advantages into their product line.

Okay, great. Thank you.

Thank you. (Operator Instructions).The next question is from Charlie Anderson with Dougherty & Company. Please go ahead.

Yes, good afternoon. Thanks for taking my questions and congrats again on the quarter.

Thanks, Charlie.

Just a housekeeping question or two for Kathy. If I look at operating expenses I think you're going to be up because of the 14-week quarter. If I look at the March quarter do you expect that with hiring you would be in line with where you were in December, or is that going to go down as you go back down to 13 weeks, do you think?

You're talking about going forward beyond the December quarter?

Exactly. When you go back to 13 weeks, are you -- does hiring keep you at the same level or are you going to go back down because you're down to 13 weeks?

I think that some of that's going to be dependent upon just how fast we bring in the engineering talent that we continue to look for, but generally speaking I would -- on a 13-week quarter basis I would expect as we go out through the rest of the year for expenses to continue to increase.

Got it. And then on the gross margin you mentioned some manufacturing efficiencies, so taking mix out of the equation, if I just looked at the products would I be seeing little gross margin improvements sequentially that's leading to your 46% to 47%, or is it primarily driven by mix?

Going forward in the December quarter it's primarily driven by mix.

Okay. And then share count, what are you using for your guidance in December?

Using flat with this quarter.

Got it. And then one for Rick. Thanks for your comments earlier on your plan and the three areas you were looking at. I wonder if you have any early feedback on those three areas, Rick, and maybe not on the products, maybe on any customers you've talked to? Just any color would be helpful.

Well, at this juncture it's mostly with the team and the products as opposed to any specific customer feedback. I'm very impressed with the depth of the talent at Synaptics. There's folks that have been here a number of years and their enthusiasm is extremely high about the technology and the products and where Synaptics is going as a company. And then likewise on the products, as I mentioned the pipeline seems to be filled with some very interesting products. As Russ alluded to we have a leadership position in a number of different areas and now it's up to us to make sure we fully seize the opportunity in front of us with those products with the various customers.

Great. Thanks so much.

Thank you. The next question is from the line of Li-Wen Zhang with Pacific Crest. Please go ahead. Please go ahead.

Hi, thank you for taking my questions. Given the mobile mix and transition away from the margin solution has kind of completed, how should we look at your seasonality for the four quarters?

Mix seasonality is -- some of that's just dependent upon the macroeconomic environment, as well as the new models that are being introduced into the markets so right now it's -- we're not calling any specific kind of seasonality. If you look at the December quarter, as we said, we expect the PC and Mobile revenue to be up and also for the rest of the remainder of the year for mobile units to continue to grow. And notebook, we're very -- the leader in the Notebook market from a share standpoint so we would expect to pace the market. We'll see how it goes but I don't have any other clear comment from a seasonality standpoint.

Okay. And also, mobile touch is growing very fast and also attracts a lots of new interest, can you comment on the ASP erosion in the market?

Generally what we're seeing is fairly rational pricing. Clearly with the explosive growth in the market, as we've said before, we do expect we're going to see more competition going forward rather than less, but we're very confident that with the existing product line and the road maps looking forward we're very well positioned to compete effectively here. And again, the growth and the opportunity there today is such that it's way too early, I think, for people to try to bomb the -- marginalize the value of the technology because the opportunity is exploding at a level that it just doesn't require the kind of price competition you see in more mature markets. So today I would say -- I would categorize the pricing environment today as being fairly rational.

I see. And so in this way how is Synaptics' positioning the guidelines in terms of as -- effect the pricing?

Again, with our competitive line up I think we're very well positioned to compete at the price levels that will continue to help promote the adoption of capacitive touch into mobile device.

Okay, thanks. That's all I have.

Thank you. The next question is from the line of Anthony Stoss with Craig-Hallum. Please go ahead.

Hi, guys, just to follow up on that. Russ, is it fair to say that what you expect for 2012 on the ASP side it's not dissimilar to what you saw in 2011? And then on the second part of that, given on-cell in-cell, are ASPs are slightly higher for on-cell in-cell given the technology advantages? Then I have one follow up after that.

From our pricing perspective there isn't a lot of difference in what we would sell in either an on-cell and in-cell implementation. We're doing the system-level engineering but what's happening with those is the touch sensor itself gets integrated into the LCD stock up and that's outside of what we are providing to the customer anyway. We're providing the system-level understanding to integrate at the system level or at the full touch implementation so there isn't a big price differential for us between in-cell or on-cell. It's always hard to talk about what a pricing environment's going to be when you look further down the road. All I can tell you is that with our current road maps we feel like we're very well positioned to offer pricing to customers that will continue to promote the adoption of touch more broadly within their product line.

Okay. And then the second part was on Win 8, is that a September quarter 2012 new revenue for you guys when do you expect that revenue to be added on?

Well, it's going to depend on the timing of the actual launch of Win 8. I guess the current speculation is that will be some time in the September quarter of next year.

Second half of next year.

Second half of next year.

Calendar year.

Right. So we are very well positioned and, in fact, are working with OEMs today to make sure -- even the current designs are contemplating going into the marketplace in advance of Win 8 are going to be engineered and design in a way that once Win 8 is available those platforms will be able to take advantage of that next-generation user experience.

Got it. Okay.

I think one of the market advantages we have today of being a co-engineering partner with Microsoft and, in fact, as I mentioned on the script, we're the only touch supplier working with Microsoft today that's qualified to do both the direct touch, which is interacting directly with the screen, the LCD, and indirect touch, which is interacting through the TouchPad and giving the end user the same experience independent of whether they're on the screen or on the TouchPad and taking full advantage of the touch-friendly environment that Win 8 has created for end users.

Got it. Great, thank you.

Thank you. There are no further questions at this time. I will turn it back over to Rick Bergman of Synaptics for closing remarks.

Thank you for joining us on the call today and I look forward to updating you next quarter. I'm also looking forward to meeting many of analysts and investors in the coming months after I take the necessary time to immerse myself in Synaptics' business. Thank you very much.

Ladies and gentlemen, that does conclude the conference call. You may now disconnect and thank you for your participation.