Vicor Corp (VICR) 2006 Q2 法說會逐字稿

Good day ladies and gentlemen and welcome to the Vicor 2006 second quarter earnings results conference call.

We will connect a question-and-answer session toward the end of this conference. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Mark Glazer, CFO.

Please proceed.

Thank you.

Good afternoon and welcome to Vicor's quarterly conference call.

I'm Mark Glazer, Chief Financial Officer, and with me is our CEO, Patrizio Vinciarelli.

Before we begin, we would like to remind all of you that today's conference call is being recorded and is the copyrighted property of Vicor Corporation.

Any rebroadcast, reproduction, or other transmission of this conference call in whole or in part without the prior written consent of Vicor is prohibited.

We would also like to remind you that various remarks that we may make during this call about future expectation, trends, plans, and prospects for the Company and its business constitute forward-looking statements.

For purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995, these forward-looking statements merely reflect our current beliefs, expectations, and estimates which we share with you during our quarterly conference calls.

Actual results may differ materially as a result of risks and uncertainties, including those discussed in our quarterly and annual reports filed with the SEC.

A replay of this conference call will be available beginning shortly upon its conclusion to August 7th, 2006 by calling 888-286-8010 and using the pass code 3429 1555.

In addition, a webcast replay of the conference call will be available on the investor relations section of the Company's website at www.Vicorpower.com\IRwebcast, beginning shortly upon its conclusion.

However, the information we provide during this call is accurate only as of the date of this call.

We undertake no obligation to update any of these statements made during this call, and you should not reply rely upon them after the conclusion of this call.

We're now ready to begin the Q & A portion of our conference.

I would ask that you limit yourselves to up to two questions at a time so that everyone gets a chance to ask his or her question.

You may, of course, get back in the queue to ask additional questions.

We will now take the first question.

(OPERATOR INSTRUCTIONS).

Walter Nasdeo, Ardour Capital Investments.

Can you go into maybe a little bit of breakdown or the geographic breakdown of the revenues for the quarter, please?

Don't have a breakdown to give you by geography.

The softness that is referenced in the press release was experienced pretty much across the board.

So it's here and in Europe?

And in Asia.

Okay.

Have you been seeing any increase in order activity here in this quarter -- third quarter?

The last couple days have a lot better than earlier, but that doesn't make for a reversal trend.

Okay.

And then just as a follow-up to that, how is the R&D spending -- how you are looking at that going forward?

Is there going to be an increase in that?

Well there was some increase this past quarter.

There may be some further small increases.

I think part of it is we had a solid increase this -- taking effect on May 15th of this last quarter, so there was a fact of -- and beyond that, there's going to be some additions, but nothing to earth shaking in terms of changing the R&D level.

Okay, so it will be a little bit of increase, but basically kind of steady from there.

Yes, pretty much.

Thanks a lot.

Steve Smigie, Raymond James.

I was hoping you could comment on the nature of the larger orders that got pushed out.

Are they specific, say, to telecom or -- if you could say which end market they're specific to?

I think all I can say is that there were a number of orders that were pretty significant that got delayed.

And they're currently forecasted for this quarter, but I wouldn't bet on that happening.

When things slip out, sometimes they slip out for longer than is projected at the time.

So we'll have to take a wait-and-see attitude with respect to that.

Okay.

And could you tell me are they -- was it for license customers or was it for sort of typical OEM type revenue?

This was for secondary generation products, brick-based solutions.

Dick Feldman, Monarch Capital.

With the increase in R&D and also the increase in selling expense, would the losses generated by the V-I Chip and Picor have increased during the second quarter?

And if so, could you give us an annual run rate?

The (indiscernible) is significant change with respect to that as we discussed in earlier conference calls.

What I need to keep the expense level with respect to the new entities, reasonably say we've had some key additions in key people and there may be a few more people joining Picor and V-I Chip.

But that being said, I don't expect to see a major change in the (indiscernible) expense level associated with the V-I Chip and Picor in the next six months.

So would it to be fair to say that -- I think from a previous call you had said that the losses were running at an annual rate of roughly 28 million.

Yes, that is still an applicable ballpark figure.

Okay, thank you.

Steve Smigie, Raymond James.

I was hoping you could comment a little bit on what the 0.86 to 1 book to bill might mean in terms of sequential growth on your topline.

Well, it does not bode well for sequential growth this quarter.

The realization of some of the opportunities that slip within the quarter or not would make all the difference with respect to the very near-term prospects.

Would it make sense to say maybe down a couple percentage points sequentially?

I would rather not comment on that beyond the obvious, which is that the book-to-bill not being strong or, to put it bluntly, being quite weak for Q2, it does not bode well in the near-term.

On the other hand, I think we've had earlier quarters where we were able to achieve sequential growth in spite of a book-to-bill in the prior quarter that was not all that encouraging.

So as suggested in the press release we have to take, given volatility of the current environment, a wait-and-see attitude with respect that.

Okay.

And then in terms of the general economic activity that you mentioned in the press release, you say [upon] capital equipment spending is deteriorated, is that -- could you describe the nature that capital equipment spending?

Is it telecom versus say servers?

Just help me understand what you meant by that.

Well, most of the products that are converters get applied to our capital equipment products in one form or another.

And so what we see happening pretty much across the board is more caution, some delays, funding that doesn't quite happen on time, that kind of thing.

And by the way, we are about to be an example of that same behavior because given the very short-term outlook, we ourselves are going to push on the brakes a little bit with respect to our own capital equipment investments in the balance of the year.

So we may not do the amount that we had earlier projected in terms of investment in capital equipment.

And so it goes.

And that capital equipment refers to just Gen 1, Gen 2 or to V-I Chip capital or all of it?

Well, it's more heavily weighted towards V-I Chip, so we feel that thereto we can delay somewhat further investments for the balance of this year.

So we will be spending some more money and buying some more capital equipment.

And we simply signed off on some equipment rights, but the level of $10 million that we had forecasted the beginning of the year will not be reached; we'll probably fall short of that in terms of capital equipment by at least $3 million, maybe $4 million.

I'm sorry, if I could just ask one more and then I'll let you go.

Your expense levels for say Q3, I think you already talked about R&D a little bit, but can you talk a little bit about SG&A -- how you guys might react with that given the book-to-bill ratio?

Is that on a dollar level maybe?

Well, in SG&A too, we had the impact of the salary increase.

We had some higher commission levels within the quarter.

We had some advertising.

We had some pretty significant fees for head [answers] and some relocation costs associated with new hires.

There's going to the some of that this quarter, but perhaps not as much.

Great, thank you very much.

[Jim Bartlett], [Bartlett Investors].

Roughly what is the mix of your capital expenditures of -- what percentage of it is V-I Chip related?

Most of it is in V-I Chip.

And, so most being 75% or something like that?

Roughly speaking, yes.

And how much CapEx have you spent so far in the first six months?

$3 million.

It is in the press release.

Sorry, I missed that.

So 3 million -- so you'll spend another $3 or $4 million in the second half.

Yes, which is less than what we thought we were going to spend at the beginning of the year.

And to lay it on the table, with V-I Chip opportunities, there too we've seen good progress with some key accounts [and fashion], some further significant win [after] a particular key account.

But programs that have slipped by at least six months and that's behind the reasoning with respect to not pulling the trigger on some further capital equipment investment until late this year, or early next year.

And what do you -- what is your capacity currently for V-I Chip?

I'm not going to give you a number, but we know it is adequate for the purpose of satisfying near-term needs and we keep -- as we discussed repeatedly a number of conference calls, we keep a close watch on that and will be pulling the trigger on additional investments in time to make sure the capacity is not an issue.

And what is your headcount at the end of the six months, your anticipation going forward?

Total headcount is 1080 people roughly, roughly a 15 -- 18 person reduction from the end of 2005.

So there has been some attrition.

We've had some key new hires.

We're continuing to work at the productivity front and that's what's behind those numbers.

And are there any near-term -- and near-term being within the next year -- revenues, opportunities in laptop or mobile adapters?

I'm not going to stick my neck out with respect to that.

We all have to wait and see with respect that.

I think any comments with respect that would be speculative one way or the other.

At one point you thought there might be a lot of longer-term opportunities in that area.

Would you still feel confident about that?

Absolutely.

We're making inroads in a number of different directions with respect to V-I Chip opportunities.

Okay.

I will get back in queue.

Peter Wright, PAW Partners.

Yes, what percent of your revenues were V-I Chip this past quarter?

And next year, what percent of revenues would you think that it might be?

We don't breakout the percentages yet.

They have been very small, not material on overall reporting basis.

They've been growing at -- and as you might expect, reaching new highs quarter after quarter and they're now on a pretty steep ramp as we look at the next several quarters in terms of growth rate from quarter to quarter.

Could you maybe some timeframe which you would expect V-I Chip to be 50% of your business?

Is that a year away, is that five years away?

Could you give me some thought process on that?

I think that -- I know you're not going to like my answer to that question, but it would be very speculative given the multiplicity of scenarios that exist with respect that.

I think that it would be fair for me to say, as I have suggested earlier, that we see some very large prospects.

We're making very good progress as I indicated earlier, though the rate of progress with those programs that have been won as of a year ago because of delays associated with the program have not been as we expected, so we see at least a six month delay with respect those.

And that's a factor with respect to where we are at this point in terms of the V-I Chip contribution to total revenues.

And I guess it would also ask last quarter, you were bullish for two reasons -- one, orders were okay in general and two, you saw the opportunities in the V-I Chip as the year unfolded, particularly for '07 and '08.

Is there anything that you have seen in this quarter competitively or based on how the product does in trials that makes you less optimistic about how strongest product cycle is going to be over the next couple of years -- in '07, '08 timeframe?

There's no (indiscernible) whatsoever for the medium to long-term.

With respect to the very short-term, a book-to-bill below one is significantly below one is obviously not desirable.

But I would urge us to look at it in the right perspective.

We had a very strong book-to-bill in the first quarter.

It became very weak in the second quarter.

In hindsight, it was probably a mistake to attach as much significance to it at the end of the first quarter, and it would be perhaps an equal mistake to attach to much significance to it at this juncture because it could change very, very rapidly to a very up strong book-to-bill again.

So I think it's more important to focus on in a sense -- the second half of your question which is what are the underlying forces at play in terms of (indiscernible) opportunities, and technological trends and fit in V-I Chips in particular and other products into key end markets.

In that regard, we believe that we are extremely well positioned and we think that our growth opportunity is very strong and nothing has changed with respect to my view of that today relative to three months ago.

And finally, could you speak a little bit about what you think the lifecycle of design-ins are going to be?

Is this going to be longer and bigger in both markets and products than you had in previous design cycles?

Could you give some color on how you see [the end] holding -- I mean, as an investment?

I'm not looking at Vicor in terms what the opportunity is for the next month.

I'm looking whether this is an opportunity for the next year or is -- these residues product cycles are going to be elongated and have three to five-year length once you win some contracts?

I think what we're going to see is a mix of different kinds of design wins, starting from the ones that have the longest gestation.

In particular end markets, the nature of a design-in is that it's a very long cycle time.

And the investment is made let's say today in terms of a design activity will only bear fruit three years from now.

Then, there are other opportunities that are more [capitalistic] that are in the twelve-month to fifteen month timeframe.

And then, notably, there's going to the opportunities where V-I Chip in particular can rescue a program that is otherwise challenged in terms of being able to address the power system requirement given what is available in terms of allocated space for V-I Chips.

And going back to the experience we had many years ago with bricks, in the early days of bricks and seeing similar things happening today with V-I Chips, I can tell you that it's going to be relatively short turnaround, new opportunities where -- from the customer contacting us with respect to addressing their need to begin to see initial volume production -- as little less four or five months might go by.

So unfortunately, because of the complexity of the marketplace and the difference in circumstances depending on the operating cash, you got a whole range of scenarios from -- at the very medium, nothing is shorter than four or five months, to the other end of the spectrum, it could take three or four years.

And one final question.

Are there equal -- well, I don't know equal -- are there large opportunities -- people have suggested there a lot of opportunities in both consumer electronic kinds of products, whether they're game machines or notebooks to server types of products.

Are there are equal opportunities in defense products?

Is that a market that you're pursuing with indications of interest?

Yes.

It is not the power market for V-I Chips going forward, certainly not in terms of unit volumes, but it is part of our overall strategy with respect to all of our products.

Okay.

Thank you.

Jeff Bencik, Jefferies & Co.

Thank you.

Can you tell me was there any particular strength or weakness in each of your end markets i.e. defense, industrial, telecom, if you could break it down for me that way?

The answer to that is very simple.

We saw things slowing down pretty much across the board, by end market and by geography.

Okay.

And again, it's one of those things that in the very short-term it's hard to make a lot of sense out of.

And in terms of -- I am trying to get my hands around whether this is a general slowdown systemically of a longer nature or just a quarterly blip, but I guess what makes you -- I guess since you're cutting your capital spending as well, it appears like you're taking it goes a more longer-term pullback than just a one quarter type of pullback in orders.

No, I would be careful those two elements.

The weakness in the book-to-bill in the second quarter had to do with brick programs.

In that regard, if we were to take our customers at their word with respect to when those orders are going to book, they would book in the third quarter.

And that would in effect rectify the situation, [normally] the second quarter.

With respect to V-I Chip, the issue is a little different than as I suggested earlier.

The issue there is that even though the programs are still there, we have the design win; the programs are not getting into volume production on the timescale that the customers had originally anticipated.

And (indiscernible) delayed by 6, 7, 8 months, and because of that the capital equipment plan with respect to V-I Chip is not in need of seeing the investments that we originally anticipated for the second half of this year, and that will probably slip by 4,6 months.

These are two different, and I would submit, totally unrelated developments.

Okay.

Can you -- how was your Gen 1 versus Gen 2 in the quarter?

Did Gen 2 continue to outgrow Gen 1?

Yes, it did.

And that played a little bit of a role with respect to the margin.

There were various factors at play with respect to the margins.

Part of it was the behavior concentration on Gen 2 where our margins are still, even though they have come a long way, they're still shy of the levels of Gen 1.

Now, you might look at that as a negative, but it's also in another way of looking at it, a positive because that's area where we still have a lot of opportunity with respect for the margin improvement.

There were also other factors.

As I mentioned earlier, we had a (indiscernible) increase and then [S&Ps] in the quarter -- [accidentally] were not quite as good as they were in the prior quarter.

I wouldn't read any trend in that, but just one of those (indiscernible) fluctuations that happen from quarter to quarter.

Okay.

And a couple of little housekeeping things.

The other income was a little higher and the expected -- the tax rate was a little bit lower.

Can you just explain what was happening there?

If you're looking quarter over quarter, the interest we earn on our money is a lot higher than it was at this point last year and somewhat versus Q1 also.

And then the -- we had better foreign exchange activity than we had this time last year.

So last year we had some losses in foreign exchange and this year we have some gains.

Okay.

And then on the tax benefit you had this quarter?

Yes, we actually adjusted our year-to-date rate to 9%, and that's what caused the small benefit for the quarter.

Okay.

Thank you.

Dick Feldman, Monarch Capital.

You mentioned that with one customer in your V-I Chip [arena] that you are doing quite well and they're expanding [your] usage.

I wondered if you could give us any color on that.

I think the only color I can give you is that that's an example where we recently had another design win on a relatively short fuse type application.

And it's systematic of the fact that the technology is -- [be] recognized and valued for its flexibilities and technical appeal.

Would this application be a more demanding one than the initial application, or a different one?

Well, I wouldn't rank it as such.

I would say that it's an example of an application requirement that conventional technology would have a hard time dealing with and where V-I Chips can bring a lot to the party.

But there's a lot more along those lines that V-I Chip can provide in future years with future systems, so we expect to see customers going through these phases where they get comfortable with the technology and then fall on it to solve problems that they encounter.

And beyond that, take it to the next stage of what I would characterize as greater leverage in terms of a taking fuller benefit in terms of truly Factorized Power system implementation of their power system.

Have you gotten any indication that this customer intends to review their power requirements in just the manner that you're mentioning?

Yes, it's not a typical (indiscernible) that customers will go through from project to project through a reconsideration of their power system architectural options.

And again, if there's an opportunity to take a good advantage of the technology because the technology of that system, long-standing challenges in power system implementation then as they get more comfortable with it, they can capitalize on it, and we are seeing that happen.

Okay thank you.

Jim Bartlett, Bartlett Investors.

Getting back to the -- you said roughly a 6 month delayed of programs slipping on V-I Chip and you did mention that -- you just mentioned that they were -- delays were because you already had design wins.

But this is in volume production delays, is this correct?

Yes.

In effect, the six months delay -- six months or so could be 7 or 8 months in that ballpark.

That has to do with when these projects are going into volume production.

So we are in a ramp with respect to these programs, but where they get to certain key milestones in terms of real volume, very significant volume, is currently anticipated by the customer to be somewhat delayed relative to where the expectations were a year ago.

And how many of these are delayed?

How many are you talking about here?

There's a few (multiple speakers) in that category.

You said a few programs?

Yes.

There also -- and when did this really become apparent?

Well, this is something that has a way of changing as you might expect from literally month-to-month.

And -- so, the decision to delay some capital equipment investment has been very recently made.

Has there also been the case of delays in the V-I Chip program just because the design-in times take longer?

No.

No.

Okay.

What's -- you had mentioned second gen doing better than first gen.

Again, what's the volume of second gen as say a percentage of the volume of first gen?

At this point we're essentially half and half.

They're comparable in terms of volume.

And how would you describe the [relative] margins?

The first gen margins are still outstanding.

The second gen margins are catching up.

They still have a ways to go to get past the first gen, but we believe that it's only a matter of time and perseverance.

Is it something they could get equal to first gen within a year?

Let me not stick my neck out too much on that.

I think it's fair to say as we said in past press releases, a comment on this general subject, that we see an opportunity for continuing improvements in margins on a quarterly basis.

And obviously, that pattern of cash only gets distorted by statistical fluctuations, but we see continuing opportunity in that regard.

Growth in overall volume is an important part of being able to accomplish that, so the overall level of demand plays a significant factor or because it is at the root of being able to drive a lot of the productivity improvements.

But subject to that, we see a continuing opportunity and that will come about as the percentage of second gen is a part of brick business gets past the 50% mark.

(technical difficulty) so there's -- (technical difficulty) the markets are within striking distance?

I think that this is by the [finish], a never-ending process.

I would say that for the first generation product which is 25 years old, the process ended in the quite some time ago and we have very stable high margins with respect to those.

With second gen, it's a never-ending process in the sense that as the volumes increase and as we can capture further productivity improvements, there is further margin improvement opportunity with those.

Just (technical difficulty) with the V-I Chip, if you are to rank the top four areas in terms of near-term revenue opportunities, and I believe you mentioned server as being the top one recently, how would you rank that?

Well I would give you a very general answer with respect to that -- short-term, medium-term or long-term.

My attestation at this point if I were to stick my neck out for many years would be that it will be server for the short-term.

It would be consumer electronics for the medium-term.

It would be transportation for the longer-term.

And with then the short-term after servers, where would you rank?

Well, there's going to be a contribution from channels including the Vicor channels -- traditional Vicor channels which are very broad.

They involve thousands of A to Z accounts and as we gear up with more V-I Chip product capability an with what we call where we go in terms of applications (indiscernible) and sales and marketing to deal with the bandwidth issues that result from entertaining more customer opportunities.

There's going to be more of the A to Z account opportunities as well, and those are very diverse in terms of -- [they naturally] involve virtually every market opportunity from communications to medical to military was suggested earlier, defense, to other kinds of opportunities.

Thank you.

[Darren McKenna], [DB McKenna].

Good afternoon.

I wanted to ask you, at the annual meeting Barry Kelleher indicated that he looked forward to the existing product line, that being the gen 1 gen 2 doubling in size revenue-wise over the next few years.

I wanted to see if -- question one, if you're -- agree with that kind of assessment that he had, and secondly, where that meeting took play 7 or 8 days before the end of the quarter, and there was no indication or inkling that there was any slowdown that you now express as being broad-based.

Is the reason that wasn't addressed because either you didn't know was taking place at that late time, or is it because you don't see the annual meeting as being a public format in which to disclose that information?

Okay.

First of all let me go back to I think a similar question was asked of Barry -- not at this recent meeting, but the meeting a year ago where I think he gave a similar answer.

And if you took a picture of my face, I was somewhat concerned with respect to that answer then, as I was when he gave it most recently.

And to be fair to Barry, I think his forecast of a year earlier with respect to the growth of the big business in progression with respect to the longer term objectives that he has outlined, were pretty much on the mark.

And in a similar vein, I think that his comment a month or a month and a half ago was also (indiscernible) on the mark.

If you were to ask me, I wouldn't be quite as bullish.

I wouldn't have been quite as bullish with respect to what [I call a] legacy business a month ago or a year ago, but I will welcome the opportunity to (indiscernible) with respect to that.

And I do believe that there is a lot of life and legs left in our brick business, and I will say this particular life and opportunity there with respect to the business model for the channels, the mass customization capabilities that underlies our big business model, and that's what is in the back of the mind of Barry making these kinds of comments.

As you know, we can't at an annual meeting make comments with respect to very short-term business conditions (indiscernible) publicly disclosed.

So anything along those lines will be improper, and we are very careful with respect to not making improper statements.

So you can't expect us at an annual meeting to comment with respect to where we might be at that point in time with respect to the bookings in that quarter.

And by the way, those things can change on a day's notice as it has happened from time to time.

[Ron Opal], Vicor (sic).

Not of Vicor, of [Marston Capital].

Patrizio, I'm wondering, speculating to myself as to the reasons for the push outs of the V-I Chip OEM customer programs.

Is it your sense that those reasons have to do with a soft demand climate or the products -- the OEM products involved, or is it your sense the reasons for the push out have to do with other factors?

My sense is that it would have to do with other factors.

These are complex systems that have, generally speaking, a number of technical challenges associated with them.

And it's not unusual that as they get closure closer to the intended fruition date, something happens on some front that causes some slippage.

But would you rule out, in that context, something happening that would favor a competitive solution?

Well I can tell you that we don't see a chance of that.

And I would (indiscernible) to say that I'm glad to say that we are not -- it's actually (indiscernible) [a challenge] standing in the way of anyone of these programs that are going into volume production.

And that's the way we like it to be.

But as you can imagine, these -- with complex systems, that there are so many different factors at play, and this happens in the information technology business.

It happens in the consumer electronic business, particularly with very advanced systems.

It happens in a variety of leading edge systems where companies more and more to push the envelope on a variety of fronts.

So part and parcel of that is that occasionally, some facets of a very complex (indiscernible) don't fall in place quite on-time.

But if you're dealing with companies that know what they're doing, which is what we're dealing with here, there's a reason to have confidence that they will get the bugs out of product and the product out to market.

It may take a little while longer, but I think we can reasonably expect that these are all going to be very successful products.

Good, thank you.

And there was a statement in the press release that caught my -- that peaked my interest.

It has to do with exploring new opportunities that will leverage Vicor's traditional products and channels.

That starts out given the potential enabled by our technology we're continuing to invest in products and capacity for V-I Chips while exploring new opportunities that will leverage traditional.

Yes, what is meant by that is the opportunity which we're now approaching to addressing system solutions that fit within the traditional Vicor product lines and channels, that leverage the V-I Chip building block capability.

And that's going to be an area of significant focus beginning next month.

I see.

And there's no danger of cannibalization here because it would involve all-new design-ins, I would imagine.

Yes, it would involve enabling new capabilities that fit within a business model that as certain companies (indiscernible) as I was suggesting earlier, we see still being very leveraged in the marketplace and still being very vital.

Even though the building blocks, i.e. the bricks, of the '80s may be getting a little aging, the business model has a lot of great attributes to it that there are -- I will submit as (indiscernible) today as they were in the '80s.

And therein lies a good deal of opportunity by injecting the capabilities of new technology, of new building blocks in every new kinds of our system solutions.

Where for instance customers may not -- some customers may not have seen the bricks as cost-effective, the V-I Chip element might be?

Well, it's not just an issue of cost-effectiveness.

It's also an issue of sheer performance.

The characteristic of the electronics industry at large is that it is dependent upon a model of continuing improvements in performance, coupled with continued reduction in cost.

And where you want to be is in a position between the (indiscernible) both ideally at the same time.

And we see those kinds of opportunities being applicable to what [I view of] systems both AC/DC and DC/DC systems that have been very much at the heart of the Vicor type of product line and these customer [effects].

Great thank you.

Jim Bartlett, Bartlett Investors.

Getting back to -- you said of the second generation of push out so our customers -- you said several significant orders I believe were pushed out to the third quarter.

They're saying (indiscernible) in the third quarter.

Is there any common theme in what they were telling you there?

And again, how many of these orders were there?

To be clear, these were not all push outs in the sense of orders that earlier being booked and were reset for a later date.

It was a case of orders that were expected, that had been forecasted to take place in the second quarter and were -- the program according to the customer got delayed by -- you know, it's going to be next month and then it's going to be next month.

And this began to happen in the second half of the quarter and that's the nature of the change taking place.

It's not push outs.

It's (indiscernible) (technical difficulty) somewhat delayed.

Right, thank you.

We'll take one more question if there is one.

(OPERATOR INSTRUCTIONS).

At this time there are no more questions.

Okay, well thank you all for participating we'll be speaking to you at the end of third quarter sometime in October.

Thank you very much.

Have a good day.

Thank you for your participation in today's conference.

This concludes the presentation.

You may now disconnect.

Good day.