威世科技 (VSH) 2008 Q4 法說會逐字稿

Good morning, my name is Felicia and I will be your conference operator today. At this time I would like to welcome everyone to the Vishay fourth quarter earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (Operator Instructions). Thank you.

Dr. Yahalomi you may begin your conference.

Thank you. Good morning, ladies and gentlemen, and welcome to Vishay's fourth quarter 2008 earnings call. On the line with me today are Dr. Gerald Paul, Vishay's President and Chief Executive Officer; Dr. Felix Zandman, Vishay's Executive Chairman and Chief Technical and Business Development Officer; and Lori Lipcaman, Vishay's Executive Vice President of finance and Chief Accounting Officer. Before I start, Bill Clancy, Vishay's Senior Vice President and corporate controller, will read our customary opening statement. Bill?

You should be aware that in today's conference call we will be making certain forward-looking statements that discuss future events and performance. These statements are subject to risks and uncertainties that could cause actual results to differ from the forward-looking statement. For a discussion of factors that could cause results to differ, please see today's press release and Vishay Form 10-Ks and Form 10-Q filings with the SEC.

Thank you, Bill. I will make summary comments, Dr. Paul will add a more detailed analysis of our fourth quarter and our 2008 year, and finally, Dr. Zandman will update our R&D and acquisition activities and will make summary remarks.

For the fourth quarter of 2008 Vishay reported revenues of $575 million, approximately 22% lower than the third quarter of 2008 and 21% lower than the fourth quarter of 2007. The decline in our revenues is attributed to the significant and rapid downturn in all Vishay's end markets. On a GAAP basis our consolidated gross margins for the quarter were 14.8% as compared to 21.6% for the third quarter of 2008 and 22.9% for the fourth quarter of 2007. This was mainly the result of lack of overall volume. The GAAP number for the fourth quarter 2008 includes $6 million of losses on adverse purchase commitments, primarily for copper and palladium. Excluding this charge the gross margin would be 15.9%.

SG&A expenses for this quarter were $98 million, or 17% of revenues, compared to $112.8 million, or 15.3% of revenues for the third quarter of 2008 and $109.7 million, or 15% for last year's fourth quarter. This quarter includes a net gain on sales of fixed assets of $4.5 million compared to a net gain of $3.1 million for the fourth quarter of 2007. Restructuring and severance costs in our fourth quarter were $28.6 million. Total cash paid out for restructuring during Q4 2008 was $31 million. Other income consists mainly of $6.7 million interest income and $1.9 million foreign exchange gain. The effective adjusted tax rate for the year-ended 30 -- December 31, 2008 was 28%, an increase from the 26% we expected at the end of our third quarter of 2008. The increase in annual tax rate is mainly due to the change in the mix of income in low versus high tax rate jurisdictions.

Capital expenditures for the quarter were $53 million, compared to $41 million in our third quarter and $92 million in the fourth quarter of 2007. Depreciation and amortization for the quarter was $54 million compared to $56 million in our third quarter and $57 million in the fourth quarter of 2007. As announced in our press release, Vishay has reported additional goodwill impairments of $565 million in the fourth quarter of 2008. The total impairment of goodwill and indefinite lived intangibles for 2008 is $1.668 billion, net of tax. As of December 31, 2008 Vishay's goodwill is zero. In light of sustained decline in market capitalization for Vishay and its peers group companies and year-end assessment, Vishay determined that an impairment test was necessary as of the end of the fourth quarter of 2008. The charge is non-cash in nature and will not affect Vishay's liquidity, cash flows from operating activities, or debt covenants, and will not have any impact on our future operations.

As announced in our press release we share reported a loss from continuing operations of $3.47 per diluted share for the fourth quarter of 2008. A loss of $3.40 is attributed to the after-tax impact of the non-cash goodwill impairment charge and other items, which I will describe. The adjusted net loss is $0.07 for the fourth quarter of 2008 as compared to adjusted net earnings per share of $0.18 for the third quarter of 2008 and $0.19 for the fourth quarter of 2007. The reported GAAP earnings per share for the fourth quarter of 2008 include impairment of goodwill and indefinite lived intangibles of $565 million; restructuring and severance costs of $28.6 million; related asset write-downs of $0.9 million; losses on adverse purchase commitments of $6 million;and a gain of $4.5 million on a sale of land. These items and their related tax consequences have a negative $3.40 per share effect on the loss from continuing operations.

For the fiscal year ended 2008 Vishay reported revenues of $2.822 billion as compared to $2.833 billion for the first fiscal year ended 2007. 2008 was positively impacted by the International Rectifier, PCS acquisition completed on April 1, 2007 and exchange rates. On a GAAP basis our consolidated gross margins for the year were 21.2% as compared to 24.5% for the prior year. The GAAP number for the fiscal year 2008 includes $6 million of losses on adverse purchase commitments, primarily from copper and palladium. Excluding this charge the gross margin would be 21.4%. SG&A expense for the fiscal year 2008 were $450.8 million, or 16% of revenues, compared to $439 million, or 15.5% of revenues for the fiscal year 2007. Restructuring and severance costs in fiscal year 2008 were $62.5 million. Total cash paid out for restructuring during 2008 was $56 million.

Other income consists mainly of interest income and other miscellaneous income. The effective adjusted tax rate for the year ended December 31, 2008 was 28% as compared to 24% for the fiscal year ended 2007. The increase in annual tax rate is mainly due to the change in the mix of income in low versus high tax rate jurisdictions. Capital expenditures for the fiscal year 2008 were $152 million as compared to $200 million in the fiscal year 2007. Depreciation and amortization for the year 2008 was $221 million as compared to $215million in fiscal year 2007.

As announced in our press release we share reported a loss from continuing operations of $9.03 per diluted share for the fiscal year 2008. A loss of $9.56 is attributed to the after-tax impact of the non-cash goodwill impairment charge and other items. The Company reported $0.53 of adjusted net earnings for the fiscal year of 2008. The reported GAAP earnings per share for the fiscal year 2008 includes impairment of goodwill and indefinite lived intangibles of $1.723 billion, or $1.688 billion net of tax; restructuring and severance costs of $62.5 million; related asset write-downs of $5.1 million; losses on adverse purchase commitments of $6 million; terminated tender offer expenses of $4 million; loss on early extinguishment of debt of $13.6 million; and a gain of $4.5 million on the sale of land. These items and their related tax consequences had a negative $9.56 per share effect on the loss from continuing operations.

Vishay had a total debt of $347 million as of December 31, 2008. The debts consist dominantly of the following three segments: $105 million of long-term notes with 100 years maturity due on December 21 of the year 2102, with interest rate of 90-day LIBOR plus 0%; $112.5 million of long-term loan maturing on July 1, 2011, with payments spread over the next two and a half years and interest rate of 30-day LIBOR plus 2.5%; and $250 million revolver maturing on April 20, 2012 with an interest rate of 30-day LIBOR plus 1%, $125 million of which was unused on December 31, 2008.

As of December 31, 2008, Vishay had cash of $324 million, total available credit line including the $125 million unused revolver in the US was $148.4 million at year end. Vishay's total available liquidity measured by cash plus all available credit lines as of December 31, 2008, was $473 million. Some other key summary financials are, total inventory at quarter end was $538 million; working capital at quarter end was $900 million; free cash flow was $30 million for the fourth quarter of 2008 and $133 million for the year-ended 31, 2008. Vishay's liquidity remains strong and our focus now is conserving and generating cash.

I will now turn the call to Dr. Paul, our President and Chief Executive Officer. Dr. Paul?

Thank you, Lior. Good morning, everybody. As you could hear from Lior, Vishay's 2008 results have been impacted by an economically extremely difficult fourth quarter, which due to an unprecedented brought a decrease of demand showed negative operating profits and earnings per share. The earnings for the entire year remained on the level of 2005. Thanks to good discipline and quick reaction Vishay again generated free cash in the respectable way and unprecedented measures -- and I will report more about it, unprecedented measures for cutting fixed costs have been implemented or are under way.

Let me talk about the economic environment. Starting in September the world economy step by step went into a deep recession. The problem really wasn't caused by electronics, but our industry clearly is one of the victims. All geographies and most of the market segments are hurt by an unprecedented decline of demand. In particular, laptops, mobile phones and automotives suffer. Avionics, military and space and industrial, especially in Europe, are still holding up to a degree. Inventory turns at distribution are low due to drastically reduced POS levels. Worldwide inventory turns in distribution dropped to 3.0; the Americas at 2.7, Europe at 3.1, and Asia dropped to 3.1. There's of course a strong push to decrease inventories and this burdens the POA. Altogether Asia by far concerning distribution is the most problematic.

Management for cash became a broad trend. We see plant shutdowns at suppliers, at customers, we see layoffs, reduction of inventories in the supply chain. This is a difficult time for projections. We have not reached the bottom yet, at least as it relates to shipments. Our business development was quite disappointing in quarter four, sales and orders are far below our original expectations. We have seen substantial cancellations and push-outs of orders. It has to be stated that the (inaudible) are hurt in a much more dramatic way than the [past is].

As Lior said, we achieved sales of $575 million in the quarter versus $739 million in prior quarter, and $730 million in prior year. Excluding exchange rate effects, sales versus prior quarter were down by $138 million, or 19%, and down versus prior year by $139 million or also 19%, steep drop. Book-to-bill was very weak at 0.74. Some details, 0.65 book-to-bill for distribution, 0.83 for OEMs, 0.59 for the actives, 0.88 for passives, 0.92 for the Americas, 0.78 for Europe, and just 0.59 for Asia. You can clearly see that there is an extreme -- there was an extreme weakness in quarter four for to the actives in Asian distribution. The backlog has been further reduced in the fourth quarter to 2.4 months and it has to be stated that this is measured at the present low sales levels. The very low price decline continued in the fourth quarter. We haven't seen practically any price decline versus prior quarter. Vis-a-vis prior year all Vishay was at 2.3% price decline, whereby the passives dropped by just 1%, practically price stability, and we have seen 4% year over year for the actives.

Let me talk about the reconciliation of our results vis-a-vis prior quarter. Based on $164 million lower sales, $138 million lower excluding exchange rate impact, the adjusted operating margin decreased by $58 million from $47 million to minus $11 million. The real driving force of all that was volume, which caused a drop-off of results by -- of $62 million. The fixed cost based on our activities were better than in the third quarter by $8 million. Talking about the reconciliation of our results, vis-a-vis the fourth quarter of 2007, we can say that based on $154 million lower sales, $139 million lower excluding exchange rate impact, the adjusted operating margin decreased by $66 million from $55 million to minus $11 million. In this case it's practically exclusively the volume which caused the drop. $50 million drop out of the $66 million in operating margin was just because of lower volume.

Now, let's have a look at the comparison of the entire year 2008 versus 2007. Based on $11 million lower sales, which was $86 million lower excluding the exchange rate impact, the adjusted operating margin decreased by $105 million, from $253 million to $148 million. Price decline of $84 million negative, as well as a severe impact from exchange rates year over year of $33 million, burdened results, whereas our fixed costs altogether were lower by $8 million. It has to be stated that these fixed costs include an increase of $18 million from acquisitions, so actually on an apples-to-apples basis fixed costs went down by $26 million year over year.

Some highlights from operations. Excluding exchange rate effects, inventories in the quarter decreased by $20 million; $9 million from raw materials and $11 million from (inaudible) in process and finished goods. We are quite proud of that because it shows that we really reacted fast, because the demand dropped very sudden. Nevertheless, due to the lower cost of goods sold the inventory turns dropped to 3.4. Capital spending in the quarter was $53 million as compared to $41 million in prior quarter, and to $92 million in prior year. Depreciation was $48 million, capital spending, as Lior indicated, in 2008, was down to $152 million. Our original plan, as you will recall, has been a spending ra -- a spending level of $170 million to $180 million. In 2009 we expect much lower capital spending of about $70 million.

During the quarter about 2,600 employees were let go, equivalent to more than 9%. This includes the reduction of 356 (inaudible) equivalent to 5% and more reductions are to come. In January alone we have reduced another 700 people. The share of employment in high labor countries remained close to 25%. We minimized the usage of foundries and of subcons, introduced short work, in Europe, in particular, and temporary plant shutdowns in other places. We have seen weak capacity load, as you can imagine, mainly in actives. In general, lead times in the market are very short. We are aiming at further consolidation in 2008. We closed a factory in Breda in the Netherlands, in Roeselare in Belgium, in [Avery] in belgium, and in Brazil also a factory, and we are in a process to close factory in Monroe, Connecticut and Westbury, New York, and there's more to come. We generated $76 million cash from operations in the quarter, as compared to $89 million in prior quarter and to $144 million in prior year. We generated $30 million free cash in the quarter as compared to $55 million in prior quarter and to $56 million in prior year.

Now, let me comment on the main product groups we have, and I would like to start, as always, with resistors and inductors. Also our traditional and successful business with resistors and inductors has started to suffer. Sales in the quarter were $139 million, 11% below prior quarter and 13% below prior year disregarding exchange rate effects. We have seen the fourth quarter for resistors and inductors a relatively weak book-to-bill ratio of just 0.85. Backlog has dropped to 2.4 months. Due to low sales volume -- just due to low sales volume gross margin dropped to 21% of sales. Selling prices for resistors and inductors are stable, vis-a-vis prior quarter and also vis-a-vis prior year. Inventory turns remained at an excellent level of 4.3 and all announced restructuring projects have been finalized last year according to plan.

Coming to capacitors, due to the strength of power and tantalum capacitors the business is not fully exposed to the economic crisis. Sales in the quarter were $121 million, down by 4% versus prior quarter and down by 0.5% versus prior year. Book-to-bill was at 0.95. Backlog in this product group is still at a comfortable level at 3.4 months. As projected, gross margin recovered to 14% of sales. Price decline in capacitors continued to be very modest, just 1% versus prior year. Inventory remained -- inventory turns remained at 3.0. The closing of the Monroe multi-layer capacitors factory is on plan. All other announced restructuring projects have been finalized and we are evaluating further steps to consolidate. We also have integrated in the fourth quarter quite successfully the acquired line of tantalum (inaudible).

Coming to measurements group, the economic downturn started to impact also the principally stable business with [strain] gauges, load sales and weighing systems, which is quite a unique situation. Sales in the quarter were $43 million, as compared to $51 million in prior quarter, and to $54 million in prior year. The backlog is rather weak, it's 2.1 months. The book-to-bill ratio, as well, at 0.81. Due to lower volume and the unfavorable impact of exchange rates -- in this case the British pound -- the gross margin decreased to 27% of sales. Inventory turns we have seen at 2.5 in the quarter. As I mentioned before, the factory in Breda in the Netherlands has been closed.

Coming to the actives and starting with diodes and opto products, the business suffers in a broad way from present -- from the present economic crisis. The weakness in Asian consumer accounts and in automot -- in European automotive, as well as high inventories at Asian distributors, are a burden. Sales in the quarter were $152 million, 26% below prior quarter and 27% below prior year. Book-to-bill ratio was weak at 0.74, backlog of 2.2 months for this product group. Due to lower volume, again, exclusively due to lower volume, gross margin dropped to 13% of sales. Inventory turns remained good at 3.7. We have seen normal price pressure on -- for this product group, -1.1% versus prior quarter and -3.8% versus prior year. We already have reduced about 20% of all personnel related to this product group and we are evaluating additional plant closures and further consolidation.

Last, but not least, Siliconix. Also the market leader in MOSFET, Siliconix, suffers the most of all Vishay businesses. High inventory levels at Asian distributors, substantial weakness of Siliconix main markets, mobile phones and laptops have to be stated. Sales in the quarter were $121 million, down by 33% versus prior quarter, down by 31% versus prior year. We have seen in the fourth quarter an extremely weak book-to-bill ratio of 0.41. Backlog has dropped to 1.8 months, which required temporary plant shutdowns in California and at the packaging units. Due to low volume gross margin dropped to 12% of sales. Price decline remained normal. We have seen 4.2% year over year . Due to somewhat higher inventories and much lower cost of goods sold, inventory turns dropped to 3.2.

We are in process to minimize the usage of foundries and of subcons in order to maximize the load for the owned plants. The move of IR international rectifier packaging operations out of Mexico has been finalized and the fab transfer from IR fac -- from the IR facility will be finalized within the second quarter '09, just according to plan. And we are in the process to close packaging in Israel and the volume will be consolidated into the Shanghai plant. There is a severe program for overhead streamlining on the way, which will be fully established during the first quarter of this year.

Let me talk about -- let me give you an overview of what we are doing operationally to cope with the downturn. First of all, there is a strict adaptation of manufacturing capacities to the saleable volume. We want to avoid at any account the increase of inventories. We do this by layoffs, plant shutdowns, short work, minimization of foundries and subcons usage, and I think that we have achieved that. You will remember that inventories went down in the fourth quarter by $20 million. The next step, in the course of this year we want to adapt the inventories to the lower level of sales regarding inventory turns of about 3.5. In such a way we will reduce inventories of Vishay between $50 million to $100 million during the course of 2009. We minimize capital spending to below $70 million, which is under way. Of course, this is a temporary measure.

We have established -- designed and established a reduction of all fixed costs by $150 million year over year of current exchange rates, which is equivalent to 15%. Excluding depreciation and amortization the reduction is even 17%. Manufacturing fixed will be reduced as part of it by 14%. Our focus is SG&A, which we will reduce by 19%. All this is a combination of permanent and temporary measures. In order to quantify its approximately 65% of the measures are permanent, whereas 35% I would classify as temporary. Permanent measures contain, of course, layoffs, closing of factories, reduction of fees. Temporary measures contain lower or no bonuses, short work or plant shutdowns, et cetera. We expect cash costs for these restructuring measures of 2009 of below$ 50 million, which will cover all of the existing plants.

Let me summarize. Vishay, like our industry, currently experiences economic conditions, which none of us has seen during his career. Global demand for electronics has virtually collapsed. As a consequence, we now manage Vishay strictly for cash, adapting quickly production capacities, reducing fixed costs, minimizing capital spending and reducing inventories. We achieved this target in the fourth quarter and managed to have another respectable year of free cash generation, as was mentioned before, on the level of $133 million. Operating profits and earnings per share of 2008 were burdened by a difficult fourth quarter when volumes dropped in an unprecedented way. Vishay in 2008 achieved earnings per share of $0.53, which is above 2005. The fourth quarter, on the other hand, showed negative earnings of $0.07. Based on disappointing orders in the fourth quarter, and in January '09 to a degree, we have not reached the bottom, yet, at least not concerning shipments. We decided to establish, as I said before, year-over-year fixed cost cuts of $150 million, or 15%, and have to emphasize that we are ready for additional steps if they are required. Altogether difficult times, but I am personally convinced that Vishay will emerge out of this crisis stronger than it was when it entered into the crisis.

Thank you very much and I would like to transfer to

Good morning. This is Felix Zandman. Just a few words to summarize that. Due to the present economic crisis we revised many of our plans. The main focus will be on creation of free cash. We want to have as much liquidity as possible. Free cwash -- free cash this quarter was $30 million and $133 million for 2008. We'll push into this direction. Presently there will be no major acquisitions. All activities in this direction of major acquisitions have been stopped temporarily. Small acquisitions only, if it pays back within a very short period of time and if they're absolutely necessary. R&D programs will continue as in the past, except that some long-term programs with creation longer than five years will be postponed. However, the focus continues on R&D and the roll out of new products. We have announced fixed cost savings of $150 million, you heard Gerald talking about it, and we will be evaluating additional savings by pushing more and more the cost reduction. All in all Vishay is well positioned to weather the crisis and we'll come out of it stronger than ever.

Thank you. We open now for questions.

(Operator Instructions). Your first question comes from the line of Shawn Harrison.

Hi, good morning, this is [Joe Whitene] on the line for Shawn. Can you hear me okay?

Yes I can.

Hi. I wanted to talk about the restructuring. I'm -- specifically I'm trying to understand, first off, the splits in the P&L, how we should be modeling it versus -- as far as cost of goods sold versus SG&A. I think you mentioned that SG&A you are focusing on a 19% year-on-year decline? .

Exactly.

My quick math is about $85 million, $86 million?

Yes, I guess you're right, yes. If you do the math , yes, 19%

So little bit more than half of it on the SG&A line and the remainder in cost of goods sold?

Right.

And then what about the timing of it? Anything you can add to that? (inaudible) SG&A dollars came down in the fourth quarter, has any of that been incurred through year end and then how should we expect the time --?

Well, I think -- so if you compare with savings quarter going -- quarter by quarter going forward and compare it to the equivalent quarter of prior year -- this is how to do it, right? -- approximately 60% of the savings will occur within the first six months.

Okay. And I would assume of that of relatively minimal impact in the March quarter, or should we --?

You will see something in the March quarter already. It's relatively -- it's not exactly equal, but it has already a substantial contribution in the March quarter.

Okay. And any idea -- once all of the actions are complete, which will be in six months, like you said, substantially 60% were to be complete --

But 40% stands still -- it will all be completed by the end of the year, obviously, but it's approximately 60% in the first half and 40% in the second.

Okay. Maybe just jumping off of that then, gross margins, what's a good target to focus on, maybe with any guide posts along the way would be helpful. What kind of gross margins could you maybe generate once the 60% is achieved and how much after that?

Well, it totally depends on the sales level, which I am not ready to project at this point, it totally depends. But it's a very major contribution to stabilize gross margin, no question.

Okay. And then my follow up I want to move over to inventory. You're focusing on $50 million to $100 million of inventory reduction. How much of that, if any, will be centered around tantalum powder production?

Approximately I would say $20 million will come from the tantalum powder sale, approximately, guess -- a good guess, so to speak.

Okay. And then lastly on inventory, you mentioned the Asia distribution channel continuing to be problematic, what's your general thoughts on how long that inventory will take to be worked out based on the current booking range?

For Vishay they have approximately $60 million to March inventory.

$68 million?

$60 million approx -- $6-0 million to March inventory alone for the actives, but this is the lion's share of our business in Asia. I would say this will take at least a quarter, maybe two. It all depends, of course, on their orders, and their book-to-bill is below one, also, so let's count, I would say, on half a year.

Okay. And then just lastly we have a quick modeling question. Interest expense jumped during the quarter. Is that -- that $6.7 million, I guess, of net interest expense, is that what we should expect going forward.

Lior?

About the same, yes.

Okay. I'll jump out and let someone else get in. Thank you.

Thank you.

Your next question comes from the line of Ingrid Aja.

Good morning. I wonder if you could go back to the inventory, how much will inventory work down will impact gross margins this year?

Approximately $10 million P&L wise.

$10 million P&L wise, okay, great. And then in terms of -- for budgeting SG&A dollars down the next couple of quarters, do you have an amount besides the restructuring amount or are also budgeting down those dollars?

Well, we are going to reduce according to our plan year over year by 19%.

And that's both restructuring and just reducing?

This is just SG&A. This is SG&A portion.

Okay . And that's not just restructuring, that's just cutting costs,

Well, it is restructuring, we call it restructuring. In fact, this is really cutting people, most of it.

Okay, cutting people. And then I guess lastly are you getting -- or do you expect pricing pressures will increase as you see some restocking, is that your expectation?

The characteristics of Vishay's business will remain the business also in the crisis. You may remember that approximately half of our volume, which is the passives submissions group, is not really subject to price pressure because it's a high share of specialty products which we sell on -- and in this case I expect no change. I don't think there will be price pressure on specialties. We cannot -- it never has been like that in past crises. But what we have to expect, of course, is an increased price pressure on the discreets, on the active side. But at least in quarter four we have not seen it yet. There will be some more but I don't think it will be chaotic.

Okay, great. Thank you.

Your next question comes from the line of Steve Smigie.

Great. Thank you. I was hoping you could talk about the difference between the actives and the passives in the terms of the book-to-bill ratios and what you think explains that. Is it heavy reliance on distribution in Asia for actives? I was just hoping you'd characterize it a little bit.

Well, it's very true what you're saying. The share of actives in Asia for Vishay is much higher than for the passives and this is exactly where we have -- where distribution has too much inventory, so it goes hand in hand. But in the end it's the industry. In passives we are quite strong in European industrial, quite strong there. And in the fourth quarter the decline of the overall economy was much stronger in laptops, in cars, et cetera, in mobile phones than in the -- especially European part of industrial, so it's not necessarily the difference between actives and passives. It is really the industry where we sell to.

Okay, great. If I look at your book-to-bill, I think overall, if I remember correctly, it was a 0.75.

0.74, yes.

Oh, 0.74, okay, sorry. I know you didn't give revenue guidance but if I look at what comparable companies to you have guided it's been roughly down 25% from March, you've got a book-to-bill of 0.74. Is something in the order of it down 25% plus or minus four points is that sort of reasonable to think that way?

Don't want to comment but 25% is, of course, a lot.

It's a lot as in too much or as in --

Don't want to --

-- unfortunately yes? I'm sorry?

As you said.

Okay, okay. And then I guess just finally in terms of the Siliconix business, what -- do you think your substantially undershipping demand there? I think if you look generally at some of the OEMs they're not down as much of that in terms of their end demand, or their -- what they've been shipping, so obviously there's the distributors in there, do you think they're having distributors that creates that extra (inaudible)?

Siliconix is very much focused on Asia and also they are focused on distribution, so they are hurt the most by this mechanism that Asian distributors have too much.

Okay. So is there a quarter that comes where you have an up 20% revenue quarter, is it a snap-back quarter or something like that? I guess obviously you can't predict the future, but does that --?

I don't think it will go like that. This will come back regularly . When nobody

Okay.

But what we have seen really is a stabilization of orders since December and things are not as bad any more as they looked in December, so to speak, in terms of orders.

Okay, and to follow up -- I apologize, one more question to follow up on that. Is that any special change in orders post Chinese New Year, and is that -- do you think it's just restocking the channel in certain instances or do you think there's some actual demand out there?

Hard to say, really hard to say, because what can be seen as small changes, as a matter of fact. But restocking I don't know whether this is needed. I think they are very well equipped these days.

Okay. All right, thanks very much.

Thank you.

Your next question comes from the line of Jim Suva.

Hi, this is [Ausia Merchant] on behalf of Jim. Can you hear me?

Yes.

Oh, great.

Good morning.

Good morning. Can you talk a little bit about just the raw pricing environment, please, particularly as it relates to tantalum?

Raw material pricing, yes. Generally speaking raw material, especially metals, year over year came down last year substantially and I think things have normalized, except for the gold, as a matter of fact. Gold keeps up and we all understand why. So in this case there's no real relief in the gold, but altogether metal prices in particular came down. Of course, we expect more success this time with -- in talking to our vendors than we had in the two years before. No question.

Okay. And one other follow up on the end markets. Any color you can provide on the auto and the consumer end markets going forward, if you've had any (inaudible) there?

Well, we are quite strong in this case. What we are suffering from is not a lack of design wins. You know that even in Europe in automobiles, which was always a stable factor in the past, is dropped enormously. We had plant shutdowns at all the major end users there, and so we suffered just like everybody suffered there, even there. What is relatively good, as I've tried to say, relatively good is European industrial. This is especially in Germany, so this is the backbone of the economy here and this is still doing relatively well. I'm not saying well, but relatively well. On the other side, laptops and mobile phones, I cannot see any turnarounds here at this point.

Okay. Thank you.

(Operator Instructions). Your next question is a follow up from the line of Shawn Harrison.

Hi, okay. Back to me, again, this is Joe on the line for Shawn. My only additional question -- and I suppose it's just asking the guidance question in a different way, but based on the bookings you've seen in January and you said you've seen a slight sequential improvement since December. If you were to multiply January by three, what kind of sequential decline in sales would we be looking at for the March quarter? Thank you.

I don't want to project that. One thing is for sure. As I said in my presentation, concerning shipments, at least, the fourth quarter was not the low point. We expect, concerning shipments in the first quarter, based on the very low orders of quarter four, a decline in shipments, no question about it. It was estimated before 25% down, and I said this was aggressive. Hello?

Okay. Thank you very much.

There are no further questions at this time. Dr. Yahalomi, do you have any closing remarks?

Thank you. I want to thank you for anticipating in our call. We appreciate the interest in Vishay, and we look forward to your continued interest in the future. Thank you.

Thank you. This concludes today's conference call , you may