Synaptics Inc (SYNA) 2012 Q3 法說會逐字稿

Good day ladies and gentlemen. Thank you for standing by. Welcome to the Synaptics third quarter 2012 earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions). This conference is being recorded today, Thursday, April 26, 2012. I would now like to turn the conference over to Alex Wellins of The Blueshirt Group. Please go ahead.

Good afternoon and thank you for joining us today on Synaptics third quarter fiscal 2012 conference call. This call is also being broadcast live over the web and can be accessed from the investors relation section of the Company's website at synaptics.com. With me on today's call are Rick Bergman, President and CEO, and Kathy Bayless, the Company's CFO. In addition to the Company's GAAP results, management will also provide supplementary results on a non-GAAP basis which exclude non-cash share based compensation charges and certain other non-operational and non-cash items.

Please refer to the press release issued after the 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 (technical difficulty) April outlook, including fourth quarter of fiscal 2012. Anticipated sequential and year-over-year changes in the PC and mobile product revenue for the fourth quarter, and expectations for year-over-year MobileTouch screen unit growth for the fourth quarter, Company's belief that it's Design Studio Four support tools are gaining widespread adoption.

Company's belief that it is seeing increased adoption of its high performance touch solutions among major OEMs enabling it to expand its customer base and increase its share with the mobile market. Company's expectations of the introduction of Windows 8 will help drive the next wave of the PC refresh cycle. The Company's confidence in its ability to succeed in its markets based on its continuing technology investments. 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 statements. We expressly disclaim any obligation to update the forward-looking information. I'll now turn the call over to Rick Bergman. Rick.

Thanks, Alex, I would like to welcome everyone to today's call. I'm going to start off today with a review of our high level results and a summary of our progress over the past few months. Then I'll ask Kathy to review our third quarter results in more detail and to provide our current outlook before opening up the call to your questions. Revenue for the March quarter was $132 million, in line with our guidance.

Our top line results reflect better than anticipated PC revenue offset by lower than expected mobile revenue. We continue to post strong margin performance as gross margin of 47.4% was above the high end of our expectations and drove solid non-GAAP operating profit of 18%. Non-GAAP net income of approximately $18 million or $0.51 per share was also within our target range. Over the past few quarters, we have been showcasing our advance technology road map at consumer electronic trade shows such as TES, and Mobile World Congress.

We've continued to advance our R&D effort, incorporating our systems level knowledge into a broad range of high performance touch solution and next generation display integration options. I'm pleased to say that we've begun to see tangible evidence that our ongoing technology development has started to bear fruit as we achieved two big milestones during the quarter. We began volume shipments of our first in-cell solution in a smartphone, in addition, we are shipping our single ASIC ClearPad 7300 large touchscreen solution into new 10 inch flagship products by a leading OEM.

Our development team continues to push the technology envelope as work continues with leading smartphones that display OEM in the next wave of solution with touch and display driver integration. Now I'd like to touch on the specific progress we've made delivering our latest technologies to our customers, strengthening our leadership position in the markets we serve. Starting with the mobile market, we're proud of the progress we've made in expanding our customer base, engaging with our broad product portfolio and unparalleled system level engineering knowledge that our customers value.

With our technology leading the way, we are building momentum with our leading edge offering for In-Cell, On-Cell and single ASIC large touchscreen solutions on the product side, as well as our Design Studio Four support tools which are gaining widespread adoption. Design Studio Four allows our customers to leverage our history as a full solutions provider and our deep understanding of touch technology.

There are a few specific smartphones I'd like to highlight. The first is a Sony Xperia P, the industry's first In-Cell enabled smartphone that will begin shipping with our ClearPad 3250 In-Cell Solution this quarter. The ClearPad 3254 enables In-Cell capacitive touchscreen, which eliminates the discreet touch sensor by integrating touch within the display, resulting in a thinner smartphones with improved displays and lower power consumption. The interest level in In-Cell solutions is very high among a broad range of top tier LCD and OEM customers.

Next is the LG Optimus View which features a 1024 by 768 resolution screen and a stylus friendly five inch IPS LCD display. Finally, the HTC One X. A device described by a reviewer from the Verge as, "Not just one of the best Android phones I've ever used, it's one of the best mobile devices I've ever used, period". This smartphone features and an eight mega pixel camera with 1080P recording capabilities and a 4.7 inch LTPS display.

Shipments of our industry leading technologies into the flagship devices of top tier OEMs and support for a full range of operating systems are strong proof points of the advantages we deliver to our customers. In addition to the products I just mentioned, we continue to ship our ClearPad Solutions into a number of devices from leading OEMs, such as Wah-Way, Nokia, LG, HTC, CTE, Sony Mobile, and Samsung. We said that we would be gaining share at key OEMs and these products are evidence of that trend. Many of our solutions for the hand-held market were showcased in flagship products at Mobile World Congress in Barcelona.

Thinner, lighter, and more energy efficient devices were a strong theme, building on the trends that we saw at CES. Our ClearPad solutions continue to penetrate the mobile and tablet market with their ability to help deliver industry leading performance versus competitive solutions. As I mentioned, our ClearPad 7300 Single ASIC solution is featured in the flagship tablet of a major OEM and we have other designs in the pipeline for products scheduled to launch in the second half of this calendar year.

The drive towards thinner, lighter and more energy efficient devices is a prevalent message across the personal electronics market. Now as we shift to the PC space, we continue to collaborate with Intel on the adoption of Ultrabooks, which are optimized for size, weight, high performance, and efficient power management, with larger TouchPad surfaces. Our Ultrabook support is widespread with the HP Folio 13, Toshiba Z830 and the Dell XPS 14 currently in the market. Other recent shipments from a leading PC manufacture include the well-received HP Spectra, Lenovo U300S and the Toshiba Satellite U840. And our pipeline is filled by over 65 new Ultrabook designs.

As the Microsoft co-engineering partner, we continue to be actively involved in the development Win 8 touch experience for both Touch Screen and TouchPad solutions. Synaptics recently released our beta driver to OEM that offers high performance and gesture support for the exciting Metro Interface featured in Windows 8. With our history of innovative touch solutions, we are well positioned to leverage our broad product portfolio for Windows 8 support in future notebooks, [slates] and hybrid models that could feature two touch input solutions.

In the large touchscreen area, Windows 8 drives a higher touch technology requirement that our industry leading Single ASIC ClearPad 7300 Touchscreen Solution satisfies. Coupled with our advanced TouchPad and ClickPad solutions, we believe that Windows 8 represents a strong opportunity for Synaptics and we expect to help drive the creation of exciting new products and uses models based on our solutions.

Now I'd like to take a moment to discuss the general market dynamics. As evident in our product discussion, we are seeing increased adoption of our high performance touch solutions among major OEMs, enabling us to expand our customer base and increase our share within the mobile market. At the same time, our performance is being tempered by sale through levels of our smartphone customers who continue to be subject to share shifts within the broader OEM landscape. We expect this trend to continue in the fourth quarter.

While we expect mobile units to be up during the period, our product mix also reflects the movement from feature phones to lower end smartphones as we support growing demand from countries like China, as well as emerging markets. In the notebook market, we are starting to see general signs of recovery and anticipate the introduction of Windows 8 in the second half of the year to begin to drive the next wave of the PC refresh cycle. The initial media and beta user feedback regarding Windows 8 has been positive.

As I've mentioned before, we expect Windows 8 to drive larger TouchPad and ClickPad implementations, which carry higher ASPs, as well as possible TouchPad and large Touch Screen combinations. With regards to tablets and notebook and portable solutions, Synaptics is engaged in a number of notebook and slate designs from leading OEMs and we are excited to increase our footprint in this category with our recent and potential new design wins.

So while our near term results are expected to reflect some of the headwinds on the mobile side of the business I just described, there are important positives to take away from the third quarter. We are excited about our growing presence with key OEMs, a broad adoption of our technology road map, and improving trends and catalyst within the notebook market. And we remain extremely confident in our ability to succeed in our market based on our continuing technology investments. With that said, I'll now turn the call over to Kathy.

Thank you, Rick. Revenue for the March quarter was $131.7 million. Revenue from the PC market was stronger then expected while revenue from the non-PC market was weaker then anticipated. Reflecting the OEM customer dynamic in the mobile market. The revenue mix from PC and non-PC applications was approximately 49% and 51% respectively in the March quarter.

I would like to note that revenue from large touch screen products including tablets is now included in the sector non-PC applications, along with other ClearPad solutions. Revenue from PC applications was up 6% from the prior year, and down 3% sequentially. Primarily reflecting seasonality in the March quarter.

Synaptics continues to lead the market for notebook TouchPads and ClickPads, and design activity continues to be very strong. Revenues from MobileTouch screen applications in the March quarter was down 17% year-over-year and 15% from the strong December quarter. Mobile unit shipments increased significantly from the same quarter last year, but were down sequentially.

The mobile products mix was predominantly tails and chips in the quarter with integrated module solutions representing less than 5% of mobile revenue, compared (technical difficulty) with around 50% of mobile revenue in the year ago quarter. As we mentioned on prior calls, tail and chip solutions have lower average selling prices, but carry higher gross margin percentages than full module solutions. Non-GAAP gross margin was flat sequentially at 47.4%, but up 670 basis points year-over-year.

Gross margin percentage was slightly above our expectations, due to overall product mix. Non-GAAP operating expenses were $38.8 million, down $571,000 from the prior quarter. The decline was primarily due to the additional week of employee related expenses in the December (technical difficulty) quarter which was a 14-week quarter. Headcount at the end of March was 703.

GAAP operating expenses were $47.4 million, including $8.7 million of share-based compensation in the March quarter. Our non-GAAP tax rate was 25.5% in the March quarter, compared with 23% in the December quarter. Primarily reflecting our geographic profit mix. Our GAAP tax rate was 23.7%. Third quarter non-GAAP net income of $18 million or $0.51 (technical difficulty) per diluted share was on target near the midpoint of our guidance range.

EPS included $0.02 negative impact due to an increase in diluted shares resulting from the higher average stock price this quarter, compared to the prior quarter. Turning to our balance sheet. We ended the quarter with $324 million of cash. Cash flow from operations was $19.5 million. While overall cash was up $41.7 million.

Option exercise activity provided $17.4 million and redemptions of longer term investments provided $5.7 million. Capital expenditures were $1.9 million for the quarter, and depreciation was $2.4 million. Receivables at the end of March were $95.5 million, up $8.7 million from December. Reflecting 65 days of sales outstanding. Inventories at the end of March were $28 million, down $1.2 million from December and inventory turns were 10.

Now I'd like to make a few comments regarding our quarterly outlook. Looking ahead to the June quarter, we continue to monitor the customer spending -- the consumer spending environment, as well as the impact of individual mobile customer dynamics on overall unit volume, as Rick mentioned earlier. Based on our backlog of approximately $60 million entering the quarter, customer forecast and the expected product mix, we anticipate revenue will be up sequentially in the range of $133 million to $140 million.

Specifically, we expect PC revenues to be up and mobile revenues to be down on a sequential basis. This outlook reflects an improving PC environment and continued unit growth on the mobile side. Offset by a product mix inclusive of solutions for lower cost smartphones for the rapidly growing China and emerging markets. On a year-over-year basis, PC revenue is anticipated to be flat to slightly down from the very strong June quarter last year.

While we expect mobile phone touchscreen units to be up substantially, mobile revenue is expected to be down reflecting the mix shift to lower price tail and chip solutions. Taking into account our overall revenue mix, including our module based notebook business and product mix for MobileTouch screens, all of which fluctuates on a quarterly basis, we expect non-GAAP gross margin for the June quarter to be in the range of 46% to 47%. We expect non-GAAP operating expenses in the June quarter to be up from the March quarter, reflecting increase in engineering headcount to support our expanded product portfolio and technology road map.

We anticipate the FAZ123R charge in the fourth quarter to be in the range of $8.8 million to $9 million. We anticipate that our non-GAAP tax rate for the June quarter and for the year will be in the range of 23% to 24%, reflecting our expected geographic profit mix. Non-GAAP net income for diluted share for the June quarter is anticipated to be in the range of $0.47 to $0.55 per share.

With that, we will now turn the call over to the operator to start the Q&A session. Operator?

Thank you. (Operator Instructions).

Our first question is from the line of Kevin Cassidy, with Stifel Nicolaus. Please go ahead.

Thank you for taking my question. One thing on the gross margins, another quarter where you beat gross margins. Could you give us a little more details of how you came to the high end of that with PCs coming in better than expected?

Hi, Kevin. I'll try and give a little more color on that. It's basically the underlying product mix just within the different products that we're selling, so if you look within the PC side of the business as well as mobile, we had a fairly healthy gross margin mix for just the particular skews that we're shipping in the quarter.

Okay. When we think of going into the June quarter, you're guiding down again slightly with PC being up and mobile being down. Is there a change in the mix?

It's a stronger mix of PCs. We do think that the blended average will come down a little bit.

Okay. Maybe just one other question on the designs. You announced the HTC 1X. Seems like those models have different processors depending on which market they're shipping into. Were you in every version of the HTC 1X?

In the 1X, yes, we are.

I guess there's the HTC 1S also. Are they different for you or are you still on every screen?

We are in the 1X model.

Okay. Okay, thanks.

Thank you. The next question is from the line of Charlie Anderson with Dougherty & Company. Please go ahead.

Good afternoon. Thanks for taking my question. Looking at the non-PC for the June quarter, you guys have a number of new things turning on like the HTC phone, you've got the tablet revenue. I wondered if you could talk about what kind of contributions you're expecting from some of this new stuff versus the existing customers and how I should think about those two buckets in that number that you kind of guided down?

Sure, Charlie. When I look at the June quarter, we do have some very exciting things that are starting to ramp. They just started to ramp in the March quarter, and so we do expect it to have additional volume in the June quarter associated with those products.

On the tablet side of the business, with the 7300 products, again, it's the initial ramp in the March quarter so we do expect some additional volume. Right now, I wouldn't expect it to be material enough to really breakout in the June quarter. We'll give you more information as we go a little bit further.

So more of a second half of calendar ramp for that one?

Well, it will be in shipping for the quarter, but again it wouldn't be to a level yet that we would consider material, but we'll let you know if it gets there sooner.

Fair enough. And then you mentioned through the mix shift that some of the lower end smartphones. I wonder if you see that as a one-time event in the June quarter, is that going to be something that's going to persist for you? I also wonder if you're seeing, aside from the cost of the phone, if there's been any pricing pressure on the chip itself in some of these Asian markets where you've done pretty well?

I think we have to step back and look at the overall market. When we talk about the capacity of touch, capacity of touch is growing very rapidly in phones and the adoption rates have been very, very fast. When you drill down and look at where the biggest volumes are coming from, are moving into mid tier and lower end phones. So when we look at those segments of the markets, we have great presence within a couple of the larger China guys. Those particular phones, they're lower price point phones so we're offering lower cost solutions in that environment.

Okay, thanks so much.

Thank you. The next question is from the line of Daniel Amir with Lazard Capital Markets. Please go ahead.

Hi, Rick, hi, Kathy, this is actually Phillip Lee on behalf of Daniel Amir. Thanks for taking my questions. What kind of traction are you seeing from your recent tier one customers in the mobile space? And when can we see revenues from these engagements?

Hey, Phillip. When you say traction, what do you mean in that sense? The ramp of these new products?

Yes, the ramp of the new products at your recently acquired mobile OEMs?

As Kathy just indicated, these products are just coming into the marketplace, so you have the Sony Xperia product that I mentioned, then the HTC 1X, those just start, very soon you'll be able to purchase those phones. So it's early to call, other than looking at the reviews that they're getting from the various publications and the reviews have been very, very strong, especially if you listen to the one quote that I gave on the HTC phone. It's a fantastic phone. So we'll see. We're encouraged and certainly hope that ramps through this current quarter, and then of course back in the back half of the year as well, calendar year.

Got it, thanks. Do you see any risk from the display driver vendor integrating cab touch into their solutions?

It's obviously an integration point that we've gone out and evangelized because we think long-term that is the directions of the industry, and doing touch is very complicated and difficult. It requires a lot of expertise. So certainly, is there a risk, yes, I would expect some of them to be heading down that directions. We feel we got a jump on the industry. We're sampling a product today. We showed the demos at CES, and we feel we're in a leadership position on a key industry trend.

Great, thanks so much.

Thank you. (Operator Instructions). The next question is from the line of James Medvida with Cowen and Company. Please go ahead. Your line is open.

Sorry, I had it on mute. Are you able -- did I hear you correctly, you've moved the tablet revenue into the non-PC side of the house?

Yes, we did. So what that's doing, how we are looking at it is, when you look at the tablet revenue and the product is our ClearPad 7300, so what we've done is we've moved that type of solution, all of our ClearPad solutions into the non-PC category so they're with the rest of our ClearPad solutions.

So what remains in that segment or that revenue segment is just your traditional PC business and notebooks? What about these Ultrabooks and those kinds of things? Are those also in the non-PC side now?

No. Ultra books are, they're a notebook. They're basically a notebook form factor, so we consider Ultrabooks as part of the notebook market. So in that category you've got traditional notebooks, Ultrabooks, you have PC peripherals that we continue to supply as well.

Okay. And those numbers are all still pretty small, so it's not a big change, is it?

Right, right.

In other words, the other side of, the rest of -- if taking handsets out of what was your old non-PC reporting segment, there was very, very little left in sort of MP3 and other kind of stuff; right?

Right. That's been a small contributor for a while.

But now that number is going to be bigger because --

Now large touch screens will also be included in that.

Right. Okay, so that's going to take some work there. Just another one. Are you able to discuss the sort of different price points between some of these -- I know you came out with the series one about a year ago for this low end market that you saw coming, and then the Intel design is shipping now and the single ASIC large screen product. Can you talk about the price points between, kind of across that spectrum?

Well, there is a range of price points, so typically what we've said, what we sell today are chips and tails, so for chip solutions for small screens, we've said they're typically less than $2 sales, $2 to $3, so looking at the range of solutions, when we're talking about our first Intel solution, those solutions are premium products and would carry higher ASPs than a traditional type solution. The solution for midrange and lower end phones, they would have a lower ASP within those ranges. Large touch screens, again those are premium products, they would have larger ASPs beyond the small screen.

Okay. Do you earn the same sort of margins on all three?

Well, typically chips, what I've said before is, chips are typically above 50%, sales are somewhere in the 45% range.

James, where we really brought innovation, if you think about Intel, we're now in production. We're the only touch controller company in production and that's the only cell phone in the industry that's in production and that brings a lot of value. Obviously, the elimination of the center, certainly the thinner, lighter, more energy efficient properties that naturally brings. So we do get a premium there, a premium I think that we deserve.

Okay, thank you.

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

Thanks for taking my question. On the mobile handset side. When do you think the, I guess the -- where you're going to be able to offset the ASP declines with more unit growth?

When do you think that cross-section will happen? Obviously, in June you're saying a lot of unit volume in the low to midrange and that's kind of what you're hinting at is the future. Maybe talk a little bit about the pricing environment and how you think you'll be able to offset and actually start to grow revenue on an absolute dollar basis.

Well, revenue is going to be, again, dependant upon the mix of products out there. I think some of the important things we've talked about on the call, we've been working on expanding our customer base, so we're really excited to be able to expand the base into a couple of larger accounts within the ClearPad family this quarter.

As we go forward there will be a combination of very high-end solutions with Intel type solutions. There will be some additional large touch screens. And then there will also be large volumes of the lower and midrange solutions. So it's really going to be dependant upon the overall mix. But again, from a volume standpoint and a market standpoint, when you really look at where the growth in the market is, if there's a lot of growth coming from China and emerging markets.

Right. So how will you offset that. Because it's great to have unit growth, but if you can't do any revenue growth, then it's end of story type of thing. How do you look at that?

Well, as I said, we look at it that we're going to have a combination. We have a combination of solutions, as we go forward there will be more solutions with Intel type solutions. We're the leader there and we also have a lot of new traction for our TDDI solutions as well. A lot of new solutions coming down the pike, and we're really excited about being able to lead the market and also broaden the customer base as we go forward.

In some ways you can increase the units, increase the ASP, or go into new markets is the way to grow our mobile business. The smartphone market is still growing 30 plus percent per year so there is plenty of opportunity to grow unit. Solutions like TDDI or Intel bring additional value or additional integration, which allows the possibility to grow or at least help the ASP trend. And then there's new markets. In that latter one we haven't spent a whole lot of energy in, but we'll continue to look at opportunities there to approach other markets out there as well.

You might have mentioned this, so I apologize, I was in another conference call so I jumped in late. On Intel designs going into production, it seem likes a very game changing technology industry. Can you talk about, are these design wins with tier one handset OEMs, are they on the tablet side, are they on the notebook side?

How do you look at that going forward? Do you think it will represent a larger percentage of your overall units? I would also think that Intel brings the cost down, so perhaps you could bring Intel down to that low to midrange market that you are talking about and still get a higher ASP on the chip. Sorry that's a lot of questions but I just wanted to talk a little about Intel.

Sure. So let's talk about those longer term trends. We've been talking about Intel for quite some time as being the ultimate trend and now it seems like a lot of the industry is finally agreeing. In fact, over the last week there's been a flurry of press around Intel based on speculation about one large OEM going that direction. Because it makes since. As I mentioned they are thinner, lighter, as well as better optical properties.

However, you are talking about changing the manufacturing process for a very big operational organization. Of course, the LCD manufacturers, and that doesn't happen overnight. I believe we have one tier one, which we talked about, Sony, earlier in the phone call. And you'll continue to see additional Intel implementations over the course of the coming quarters. It won't be a light switch type of event, but certainly the trend is evident and clear at this point.

Thank you.

Thank you. (Operator Instructions). The next question is from the line of Shaw Wu with Sterne, Agee. Please go ahead.

Thanks. Just to follow-up on the question asked earlier. You look at your non-PC revenue, most of which was obviously mobile phones. It's been declining on a year-over-year basis because of the transition. I guess, when do you think we hit an inflection point where that business can actually start growing year-over-year inline with your strong unit growth? Thanks.

Hi, Shaw. Yes, we've talked about, you allude to the transition we've been going through from modules through chips and tails. As we have mentioned for a while, we had some significant head winds for sure during this year, so moving from 50% module solutions to, well what I said this quarter was under 5%. Looking at the June quarter last year, we still had over 30% solutions for module base going to primarily less than 5% and I had talked about before, so throughout this year, it has been a head wind. Moving forward, there will be less of that particular head wind, then we get into looking at the broadening the customer base, looking at the mix of products as we go forward.

Okay. So I guess the comps, basically, you still have a tough comp in the June quarter, but I guess after that it gets easier?

Well, for that particular transition, then we have to look at who are we shipping to and the blended mix of products. So as we mentioned before, we are seeing big growth waves within the China based customers in emerging markets, so those are lower cost solutions. Then you have to blend that in with, we will see some additional skews at the higher end within Intel solutions, but that's going to take some time to come through. Then with the wider product mix, we'll have some additional skew volume and different mix of products, and some larger touchscreen volumes coming in as well.

Okay. Then to follow-up, I don't know if you can disclose the tablet revenue for the quarter. How do you see the tablet contribution going forward? Previously, you had been more conservative there, in terms of -- right now clearly there's the iPad is by far the tablet leader.

Just any insight in terms of the tablet ramp as we go into next fiscal year, I guess it would be calendar second half? Any color you can share there in terms of the ramp profile of the contribution there. Thanks.

The phones that we're shipping now, as we mentioned, they just started to ramp so they will increase -- not the phones, the tablets so the tablets will increase into the fourth quarter and then as we get into the second half of the year, one of the things that we're looking for is a big trend is Win 8. So when Win 8 comes in, we expect to have additional tablet devices, slates, convertibles and other devices to take advantage of large touch screens, as Win 8 comes out later in the fall time frame.

Okay. This will be my last question. Now, tied to, your gross margin has expanded a bit into this 46%-47% range. When you look at the mix of business going forward, I guess the question is, is this a similar type of trend that you see? I know on the near-term basis, you said for the June quarter you're sticking with that, but what about when you look at the mix of business into fiscal 2013, any color there you can help us? Thanks.

We haven't really updated any longer term target models, so as I said for a couple of quarters, near-term target is 45% to 47% from a gross margin standpoint, and that's based upon the 50/50, plus or minus a few points PC versus non-PC market. As we get further along we'll update that if we see a different trend.

Okay, yes, thanks.

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

Thanks for taking my question. Regarding the gross margin, you look at PC and mobile mix for March quarter versus previous quarter. What really drives your gross margin above the high end of the guidance? Is it because of these two like the enotebook, quick pad versus TouchPad and within the mobile one? What is the trend of chip to tail, became smaller as well?

Well, there was, as I said, it is really a mix of the products, so within each one of those portions of the business, skew by skew there are different gross margin profiles depending upon what the particular products are. It was more favorable mix of products within both of the segments this quarter.

And also, for the long-term, the Company growth, lots of people talk about touch market will become commoditized, also ASP erosion. How should we think about the Company long-term growth?

I touched on this in my CES presentation. We're very focused on how we have to get back in a growth model as we start to look into fiscal year 2013, and there's multiple opportunities for us there. One is, of course, being in high growth markets.

As I said, the smartphone market is still growing 30% per year, touch is highly valued in that marketplace. We continue to get strong design win activity with our higher end touch products, and we mentioned a few of those design wins today. Likewise, in the LPS or tablet market, again, as mentioned, iPad has had a great deal of success and the other players haven't had as much success as everybody hopes, but there's Windows 8 coming and the volumes are starting to grow, not to expectations at some point but certainly we're starting to see solid growth in a number of those players.

Then there's the notebook market. Again, as we mentioned in the prepared remarks, that market is coming alive again with year-over-year growth, tremendous amount of excitement around Ultrabooks and Windows 8. So we see a pretty rosy picture there on the notebook side. All those three things, then adding additional value in to these things like TDDI and other potential areas that we can grow, certainly the prospects for growth are strong at Synaptics.

Okay. My last one is, given, the stronger and increasing cash position Synaptics has, what's your plan to use the resource, the cash resource?

As always, when we get that question, we recognize the importance and value of the cash, and look at the various uses of it, so we're not prepared to announce any specific plan about the utilization of cash at this time, but we continue to look at the opportunities out there for Synaptics.

Thanks.

Thank you. Our final question is a follow-up from the line of Kevin Cassidy with Stifel Nicolaus. Please go ahead.

Thanks for taking my follow-up. I think there's still $132 million in the repurchase program. Can you just say what your thoughts are? You didn't repurchase stocks last quarter?

Yes, it's about $134 million that is left on the authorization and that authorization is good through October of 2013. This year we repurchased about 4% of our shares. We do continue to look at stock repurchases on an opportunistic basis, and we will continue to do so as we valuate the other opportunities that we see is well for our cash.

Kevin, you are correct, we did not purchase any shares in Q3.

Okay, thanks. Just noticing you hired about 11 new employees last quarter and you said OpEx would increase based on new employees. Are the new employees coming on as you win new designs? Was it once a way to measure your new design wins or is it just new products you're developing? Related more to customers or to products, I guess is the question?

I would always be cautious of using headcount as a metric. There's always ebbs and flows in terms of how we support our business. For example, it takes a different type of, in quantity, of headcount to support the module business than it does more of a chip type of business.

I would say, yes, there's two basic categories. We're all excited about the investments we have for our product line and that's a majority of the new headcount that we're putting out there. But some of the things like Intel takes tremendous engineering support, so we have to certainly put additional technical application engineering type support in the field at our customer base.

Okay, great, thanks.

Thank you. There are no further questions at this time. I will turn it back over to management for any closing remarks.

Thank you everyone for joining us on the call today, and I look forward to updating you next quarter as well.

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