威世科技 (VSH) 2009 Q2 法說會逐字稿

Good morning, my name is Crystal and I will be your conference operator today. At this time, I would like to welcome everyone to Vishay's second quarter two009 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).

At this time, I would like to turn the conference over to Dr. Lior Yahalomi, Executive Vice President and CFO. Please go ahead.

Thank you, Crystal. Good morning, ladies and gentlemen. And welcome to Vishay's second quarter two009 earnings call. On the line with me today are Dr. Felix Zandman, Vishay's Executive Chairman and Chief Technical and Business Development Officer; Dr. Gerald Paul, Vishay's President and Chief Executive Officer; and Lori Lipcaman, Vishay's Executive Vice President 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 risk 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's Form 10-K and Form 10-Q filings with the SEC.

Thank you, Bill. I will make summary remarks. Dr. Paul will add a more detailed analysis of our second quarter and year-to-date 2009, and finally, Dr. Zandman will update our R&D and acquisition activities and will make summary remarks.

For the second quarter of 2009, Vishay reported revenues of $460 million, 2% higher than the first quarter of 2009 and 41% lower than the second quarter of 2008. The decline in our revenues from the prior year quarter is attributed to the significant and rapid downturn in virtually all Vishay's end markets. On a GAAP basis, our consolidated gross margin for the quarter was 17.1% as compared to 15.1% for the first quarter of 2009 and 23.2% for the second quarter of 2008. The increase from the first quarter of 2009 reflects the cost reduction initiatives implemented by the Company.

Selling, general and administrative expenses for this quarter were $83.8 million, or 18.2% of revenues, compared to $87.5 million or 19.5% of revenues for the first quarter two009 and $121 million or 15.6% for last year's second quarter. The decrease of $37 million from the prior year is mainly the result of the Company's cost reduction initiatives. Restructuring and severance cost in our second quarter were $12.1 million, total cash paid out for restructuring during the second quarter of 2009 was $14 million.

On May 13, 2009, the Company entered into an amended and restated employment agreement with Dr. Felix Zandman. This agreement amends and restates the existing employment agreement between the Company and Dr. Zandman that was previously amended and restated on January 1, 2004. The purpose of the 2009 agreement was to eliminate the right of Dr. Zandman to receive a royalty during the 10 years following his termination of employment, equal to 5% of gross sales, less returns and allowances of Vishay products, incorporating patents, inventions or any other form of technology created, discovered or developed by him or under his direction. Pursuant to the 2009 agreement, as detailed in the 8-K filed on May 13th, 2009, Dr. Zandman's rights to the royalty payments with estimated present value between $370 million to $445 million has been terminated. Dr. Zandman received a payment of $10 million as of the effective date of the amended and restated agreement and is entitled to receive five additional annual payments of $10 million each. The Company recognized compensation expense of $57.8 million during the second quarter of 2009, representing the present value of these payments. This amount is presented on a separate line in the consolidated condensed statement of operations.

On June 25, 2009, Vishay and International Rectifier Corporation entered into a settlement agreement related to certain claims arising from Vishay's acquisition of International Rectifier's Power Control Systems business on April 1, 2007. Under the settlement International Rectifier refunded $30 million of the purchase price associated with the acquisition and Vishay released International Rectifier from claims relating to certain outstanding disputes regarding the acquisition. Vishay recorded a gain of $28.2 million during the second quarter of 2009, equal to the amount received pursuant to the settlement agreement, less certain related expenses. Other income and expense for the second quarter two009 consists mainly of $0.9 million of interest income and $6.2 million of foreign exchange losses.

Vishay's practice has been to not use financial instruments to hedge foreign currency exposure, as in normal business environment the mix of operational currencies do not leave us exposed significantly. In this temporary volatile economic environment, we had a large gain of $12.8 million in quarter one, 2009, followed by a loss of $6.2 million in this quarter. As the economic environment stabilizes, we expect to return to our normal low level exposure. Despite our pretax losses, we recorded a tax expense for the second quarter. This is attributable to the fact that a significant portion of these losses occurred in low tax jurisdictions where we recognize no substantial benefit. Capital expenditures for the quarter were $7 million, compared to $11 million in our first quarter two009 and $32 million in the second quarter of 2008. Depreciation and amortization for the quarter was $56 million, compared to $54 million in the first quarter two009, and $57 million in the second quarter of 2008.

As announced in our press release, Vishay reported a loss attributable to Vishay stockholders of $0.32 per diluted share for the second quarter of 2009. The net loss attributable to Vishay's stockholders for the fiscal quarter ended June 27th, 2009 was impacted by pretax charges for restructuring and severance costs of $12.1 million, and for an amended executive employment agreement of $57.8 million, partially offset by a gain of $28.2 million on settlement of matters related to the acquisition of International Rectifier's Power Control Systems business. These items and the related tax effects had a negative $0.22 per share effect on the net loss attributable to Vishay stockholders. The adjusted net loss is $0.10 for the second quarter of 2009 as compared to adjusted net loss per share of $0.08 for the first quarter of 2009 and adjusted net earnings per diluted share of $0.20 for the second quarter of 2008.

For the first half of 2009, Vishay reported revenues of $910 million, approximately 40% lower than the first half of 2008. On a GAAP basis, our consolidated gross margins for the first half of 2009 were 16.1% as compared to 23.4% for the first half of 2008. Selling, general and administrative expense for the first half of 2009 were $171.2 million, or 18.8% of revenues, compared to $240 million or 15.9% of revenues for the first half of 2008. Restructuring and severance costs in the first half of 2009 were $31 million. Total cash paid out for restructuring during the first half of 2009 was $30 million. Other income and expense for the first half of 2009 consisted mainly of $1.9 million interest income and $5.6 million of foreign exchange gains. The Company incurred significant pretax losses in low tax jurisdictions during the first half of 2009 which meant we could not benefit from the losses and this led to negative effective tax rate. We expect this to be a temporary problem.

Capital expenditures for the first half of 2009 were $18 million, compared to $58 million in the first half of 2008. Depreciation and amortization for the first half of 2009 was $110 million, compared to $111 million in the first half of 2008. As announced in our press release, Vishay reported a loss attributable to Vishay stockholders of $0.47 per diluted share for the first half of 2009. The net loss attributable to Vishay's stockholders for the fiscal month ended June 27th, 2009 was impacted by pretax charges for restructuring and severance costs of $31 million, and for an amended executive employment agreement of $57.8 million, partially offset by a gain of $28.2 million on settlement of matters related to the acquisition of International Rectifier's Power Control Systems business. These items and their related tax effects had a negative $0.29 per share effect on the net loss attributable to Vishay stockholders. The adjusted net loss is $0.18 for the first half of 2009 as compared to adjustment net earnings per diluted share of $0.35 for the first half of 2008.

As previously disclosed, Vishay was required to adopt two new accounting standards on January 1, 2009 which required adjustment of previously issued financial statements. The retrospective application of FSP APB 14-1 increased previously reported interest expense by $6.2 million or $0.03 per diluted share for the second quarter of 2008, and $12.3 million or $0.07 per diluted share for the year-to-date period.

Vishay had a total debt of $349 million as of June 27, 2009. The debt consists predominantly of the following four segments. $105 million of long-term note with 93 years maturity due on December 12, 2102 with interest rates of 90 day LIBOR plus 0%. $100 million of long-term loan maturing on July 1, 2011 with payments spread over the next two and-a-half years with interest rate of 30 day LIBOR plus 2.5%. $250 million revolving credit facility maturing on April 20th, 2012 with an interest rate of 30 day LIBOR plus 1%, $125 million of which was used on June 27th, 2009. And a $15 million long-term loan maturing January 27, 2014 with payments spread over five years with interest rates of 30 day LIBOR plus 3.45%.

As of June 27, 2009, Vishay had cash and cash equivalents of $394 million. Total available credit line including the $125 million end user revolver in the US was $168 million at June 27, 2009. Therefore, Vishay's total available liquidity measured by cash plus all available credit lines as of June 27, 2009, was $562 million, while our total debt payable over the next five years is only $244 million.

Some other key summary financials are total inventory at quarter end was $470 million, working capital at quarter end was $902 million. Free cash flow was $9 million for the second quarter of 2009 as compared to $42 million for the first quarter of 2009, and $37 million for the second quarter of 2008. We project to generate free cash flow of over $100 million for 2009. Vishay's total liquidity again is $562 million, and our continued focus is generating free cash flow will further improve our liquidity throughout 2009.

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

Thank you, Lior. Good morning, everybody. Vishay's business in the second quarter still was impacted by the global economic crisis. But during the quarter, tangible signs of a recovery became apparent in several market segments. Due to tight cost management, operating profits improved noticeably over the first quarter at approximately the same level of sales. We continued to generate free cash. Fixed costs and inventories were down further and we continued to be ahead of the amounts planned to reduce fixed costs by $200 million and inventories by $100 million.

Let me comment more on the economic environment. The world economy in the second quarter was still depressed. On the other hand, Asia started to show signs of a recovery but Europe continued to decline. Recovery in Asia is driven by netbooks, notebooks, smart phones and fixed telecom. As you know, there are governmental programs that especially helped the fixed telecom development. Industrial applications in the US and in Europe suffered but seemingly have to be bottomed out. Automotive applications in Europe are in a modest recovery, driven by small cars. Military and medical continue strong. Distribution inventory, and I believe this is encouraging, distribution inventory continued to come down quickly, by 12% in the quarter after a 10% reduction in the first quarter. Turns in distribution are still low with Asia clearly recovering. We saw worldwide turns of 3.1, in the Americas 2.3, in Europe 2.8 and Asia back to 4.1. There are selected shortages on the market but in general, there are still short lead times.

Talking about Vishay's business development in the second quarter, the historically low level of sales continued also in the second quarter, as we expected it to be. Orders for the first time since one year picked up on the other hand, noticeably, by 20% versus the prior quarter. We achieved sales of $460 million in the quarter as compared to $450 million in prior quarter and $774 million in prior year. Excluding exchange rate effects, sales versus prior quarter were up by $6 million or 1%, and down versus prior year by $292 million or 39%.

Book-to-bill improved to 1.06 from 0.89 in the first quarter. Some book-to-bill details. Book-to-bill was 1.20 for distribution, 0.93 for OEMs, was 1.14 for the actives and 0.97 for passives, 0.99 for the Americas, 0.95 for Europe, 1.19 for Asia. When you look at the scenario, it's clear that Asia actives and distribution, this combination leads the recovery. This is as always.

Backlog is at 2.8 months. Measured of course at the present low sales levels. There is a slight acceleration of the ASP decline for the actives, on the other side, it's stability for the passives. Vishay in total has shown 1.1% price decline versus prior quarter and 2.8% price decline versus prior year. The passives had a price decline with the prior quarter of 0.3% but are up 0.5% versus prior year. The actives are down vis-a-vis prior quarter by 2% but down 6.0% versus prior year.

Let me look at reconciliation of our operating results vis-a-vis prior quarter. Based on $11 million higher sales, actually $6 million higher excluding exchange rate impacts, the adjusted operating margin increased by $14 million from minus $19 million to minus $5 million. The main elements of this development were selling prices with a negative effect of $5 million, very modest. Volume, approximately stable plus $1 million. Variable costs better by $10 million. And the fixed costs which I would like to highlight, better by $12 million for the quarter. There was a negative impact from inventories by $3 million.

Now, comparing the quarter with prior year, based on $314 million lower sales, actually $292 million excluding exchange rate impacts, the adjusted operating margin decreased by $64 million from $59 million to a negative of $5 million. Main elements were the selling prices with a negative impact of $13 million, a very big impact of the lower volume of $121 million, variable costs better by $9 million, fixed costs again I emphasized they're better by $54 million, and the exchange rates helped by $11 million.

Some comments on the operations. Our inventory reduction program is ahead of plan. Excluding exchange rate effects, inventories in the quarter decreased by $41 million, by $11 million in raw materials and by $30 million in finished goods and in process. The inventory turns improved to 3.0 and we continue to expect to come back to our historical levels of 3.5 to 4 turns in the course of 2009. Capital spending in the quarter remained on a dramatically reduced level of $7 million, versus $11 million in the prior quarter and $32 million in prior year. We continue to expect for 2009 spending of about $50 million versus the $152 million which we spent in 2008.

During the quarter, additional 740 employees were let go, equivalent to 3%, which includes 180 fixed people. Since September '08, this is when the crisis in our economy started, approximately 22% of all employees and more than 13% of all fixed heads have been reduced. More terminations are to come, mainly in the fixed area. But there is also some rehiring of direct in Asia with our actives business picking up nicely.

We announced the closing of our film capacitor plant in Shanghai and the volume will be produced on existing equipment in Loni in India. We expect annualized savings from this move of $4 million and a payback all together of about 1.2 years. We continue to consolidate our opto packaging in Asia. For restructuring, we continue to expect cash costs of $50 million in 2009. We generated $16 million cash from operations in the quarter, as compared to $53 million in prior quarter and $65 million in prior year. We generated $9 million free cash in the quarter, as compared to $42 million in prior quarter and to $37 million in prior year. For 2009, as Lior indicated, we continue to expect quite respectable generation of free cash of more than $100 million.

Let me comment on the status of our right-sizing and restructuring programs which I announced some time ago. First, we set ourselves a target to reduce inventories by $50 million to $100 million. Year-to-date June, we have reduced $68 million, and the outlook stays with $100 million and positive that we are going to achieve this target. Second target was to reduce capital spending to below $70 million. Year-to-date June we spent $18 million and the outlook is the same as before. We are going to spend approximately $50 million. Next target was to reduce all fixed costs by $150 million year-over-year. Actually, year-to-date June we reduced already $124 million. We are ahead of our plan. We at least expect to reduce our costs year-over-year by $200 million. We wanted to limit cash costs for restructuring to $50 million, as I said before. We spent $31 million year-to-date June and our outlook for the year remains at $50 million.

Let me come to the product lines and I start as usual with resisters and inductors. This traditional successful specialty business suffered substantially in volume. But, defense, a decent level of profitability. The sales volume in the meantime has stabilized. Sales in the quarter were $107 million, 4% below prior quarter and 37% below prior year. Book-to-bill ratio was 0.99 in the quarter. Backlog is at 2.7 months. And despite very low volume gross margins were at the satisfactory level of 21%. ASPs for resisters were virtually stable. Inventory turns improved to 3.8. We see some shortages for Specialty Products, predominantly in Asia.

Coming to capacitors, the business with capacitors now, like resisters, is impacted severely by the economic crisis. On the other hand, a good product mix, fixed cost reduction and selective price increases defend the profitability. Also in this case, also for capacitors, the volume seemingly has stabilized. Sales in the quarter were $92 million, down by 14% versus prior quarter and 30% versus prior year. The book-to-bill ratio was at 1.0. Backlog was at 3.6 months. Gross margin came in at 17% of sales, which is just a reflection of lower volume. ASPs are stable to slightly up, 0.5%, up vis-a-vis prior quarter, 1.9% versus prior year, plus. We continue to reduce inventories at capacitors by $15 million year-to-date. But due to lower cost of goods sold, inventory turns declined slightly to 2.6.

We announced the closing of the Shanghai film caps plant, as I mentioned before. Coming to measurements group, measurements group is impacted quite severely by the downturn. Sales in the quarter were $34 million. Backlog has been reduced to two months. Book-to-bill ratio of 0.84, indicates some further decline. Gross margin due to historically low volume and an unfavorable mix shift reduced to 25% of sales. The inventory turns are at 2.1 presently.

Let me come to the actives. And I start out with diodes and opto products. The business after a deep drop starts to recover in Asia. The European part of the business, mainly automotive and industrial, is still depressed. Sales in the quarter were $132 million. 14% above prior quarter and 43% below prior year. Book-to-bill in the quarter was 1.03. We see quite a few short-term orders coming in. The backlog is relatively low at 2.3 months. Gross margin improved to 15% of sales, mainly due to higher volume and quite a discipline in fixed costs. Good inventory turns of 3.7 are quite typical for this well-managed business. We see normal price decline, minus 1.3% versus prior quarter, minus 5% versus prior year.

We are currently expanding our new product platform of Trench diodes where we lead the market. We are really unique in that technology. And we see for this product unbroken growth despite the economic crisis.

Finally, Siliconix. Siliconix is the market leader in low voltage MOSFETS and sees currently the beginning of a strong recovery. The key markets for Siliconix are notebooks, netbooks and mobile phones. Sales in the quarter were $96 million, which is up by 13% versus prior quarter, down still by 45% versus prior year. The core business of Siliconix, the low voltage MOSFETS, is up by 23% versus prior quarter. There was a strong book-to-bill ratio in quarter two of Siliconix of 1.3 in quarter two, indicating an accelerating upturn. Backlog is at 3.3 months and we are bringing back capacity quickly. Gross margin due to volume and better efficiencies improved to 14% of sales. There is an increased but still, may I say, normal price decline for Siliconix products, 3% quarter-over-quarter, 7.3% down vis-a-vis prior year.

The inventory turns of 2.6 are not satisfactory, but they will improve the volume coming back. And we were the first to introduce the one gig cell, a new development, a new platform of MOSFETS, of low voltage MOSFETS. We see already strong orders. We are the first in the market, and quite strong sales.

Let me summarize. Vishay, like electronics in general, in the second quarter was affected by the worldwide economic crisis. During the quarter, some positive trends, which had started already in March, strengthened. We do believe in an upturn in Asia. At similar levels of sales, we improved operating margins substantially, having implemented restructuring measures ahead of plan. June in terms of operating margin already was positive and July all in all gives a better picture than June. The adjusted earnings per share of minus $0.10 per share for the quarter did not yet reflect the progress in operational profitability due to unusually high losses below the line, related to foreign exchange rate impacts, which offset very high foreign exchange gains of the first quarter. We continue to generate free cash and expect another year of strong free cash generation.

Going forward, we expect an even accelerated recovery at actives, which passives will follow in turn. For the third quarter, we guide to a sales level between $480 million and $520 million, at improved margins, supported by permanently reduced fixed costs. All in all, we, for the first time since nine months, I'm looking ahead quite optimistically.

Thank you very much and I pass on to Dr. Zandman.

Good morning. We are still in a deep recession for our industry and the world economy in general. However, the second quarter, as you heard, and the month of July show signs of recovery. There is a substantial improvement in the book-to-bill ratio for Siliconix and to a lesser degree in some other product lines. Our gross profit margin and operating margin are improving and we continue to focus on cost generation. We are on plan to generate $100 million in free cash in 2009 in addition to the $30 million received from IR as a settlement of our dispute due to our purchase of IR's BCS business.

Our liquidity is good. Cash on hand is $394 million, plus our newest credit lines of $168 million or a total of $562 million. Debt to be reimbursed within five years is only $244 million. So $562 million cash on hand, $244 million debt.

The R&D efforts are on target with special focus on immediate results. For example, Vishay Siliconix announced a new P-channel product with the lowest resistance and a cell density of one billion cells per square inch, 3.3 times higher than the previous record of 300 million cells per square inch. The lowest resistance and highest cell density are the main competition battle grounds for low voltage MOSFETS for Siliconix. The results of lower resistance is a more performing product in terms of power management. The result of higher cell density is a smaller product and a less costly to produce it. We are recording strong bookings for this product. This is but one example of intensive R&D activities at Vishay.

So far this year we have announced 58 new product groups including product platforms, which will generate in time many individual products. Nothing to report on acquisitions, except that we continue to look and evaluate potential targets. The remainder of the year should see quarter improvements in operational results as well as in our cash position. All in all we start to air of optimism. Thank you.

Operator?

Yes, sir.

We're open for questions now.

(Operator Instructions). Your first question comes from the line of Steve Smigie.

Great, thank you, good morning. I was just hoping you could comment a little bit on how you see the various end markets developing here in Q3. Obviously it sounds like computing's been fairly strong for you. Does that continue or do you see the industrial that was slower to fall off now also start to recover? And similarly, if you could talk about the other end markets. Thanks.

Okay. We see Asia developing friendly, and this is just the latest picture of July. So we understand, we expect that the upturn which we see in netbooks, notebooks, especially in Asia will continue also into the third and we think also into the fourth quarter. We see a real recovery there.

In terms of the industrial markets in the US and in Europe, this decline during the second quarter, this is our picture, but it seems to have stabilized. Now, in Europe, of course we are in summer. You see some seasonal effects on top of everything. But I would expect this important market for Vishay having stabilized and like is always the case, following the other markets, recovering as we go, slowly, I expect. It will take some time that it covers.

Automotive, especially Europe, I can comment on. Sees a small recovery. It was a deep trough, as we all know. There is a small recovery, which you can see for the total but if you look into the small cars, which are supported by governmental programs, really, we see a substantial increase. We now get pressure from our customers to make sure that our readiness to supply is okay. It's a good sign. We see a lot of short-term orders. Inventory has been reduced, as a matter of fact. Military especially has been strong all along and we expect this to continue. More or less my outlook.

So the pick-up in the auto sounds like it's more government-driven than real any sort of end demand?

This is something people discuss here. At the moment, we can state that there's a real upturn, but of course it has been supported by governmental programs, no question.

And do you feel that the demand you've been receiving, the orders that have been put on you have been below what the true demand levels are for auto? So do you expect some point in the future, Q4, whatever, that there's got to be some catch-up there?

There's no question that this has happened. Everybody reduced inventory and of course we as a supplier of components got to topple it. We got one hit from the economy itself and then from the attempt of our customers to reduce inventories. This second part is over, obviously, because people now have reduced inventories at OEMs, like Bosch for instance, substantially. So this portion for sure we will see, we, the components manufacturers, will see as an upturn. But you were asking about the situation of our customers, right?

Right. And the book-to-bill on distribution is 1.2 which is very strong. Any particular reason why distribution all of a sudden is making such a big pick-up versus OEMs?

Could imagine that they just anticipate business which is just midterm, especially in Asia. In Asia it was strong. These people have reduced the inventory tremendously and the product mix I think they have on stock is not ideal any more.

And last question is just you announced a couple weeks ago a new product in the driver MOS area. Can you talk a little bit about the market opportunity and competitive environment for that product.

You mean the gig cell?

No, not the gig cell. There was a driver MOS product released, I think it was on the 15th of July, maybe.

Could not comment in this detail.

Okay. All right. Thank you.

Your next question comes from the line of Jim Suva.

Great. Thanks very much, gentlemen. I'm just trying to get a feel for your breakeven point since you've done so much permanent cost reductions. I was thinking it was around the $2 billion annual run rate which would be about a $500 million quarterly rate which should put you there in the September quarter. Is that correct or am I off on that breakeven?

No, no, you are not. It's between 1.9 and 2.

So that would say that then the September quarter, you guys should start making money?

Well, I don't guide but I think it's not an untrue expectation.

Great. Thank you very much.

Your next question comes from the line of Matt Sheerin.

Yes, thanks and good morning. Just want to go back to your comments on distribution strength. Is that primarily in Asia, whether it be an inventory restocking or a sell-through? And how does it look in Europe and the US?

Asia was the first to see the crisis. Asia was the first to reduce its inventories substantially. Asia now sees positive POS. That's positive POS and also their orders are above the POS so you see a real recovery for distribution in Asia. For the US and Europe, this is not the case. Their turns are still very low. They were hit also later by the downturn, clearly, and I think what happened in distribution in Asia will now with a certain time lag also happen in Europe and the US. People are in the process of working down inventory. But their POS has not recovered to the same extent but this is just in conformity to what we see in general. Asia's picking up earlier than Europe and the US. But historically, it's not the first time that it happens like that.

That's right. But it sounds like you haven't yet seen the pick-up in the US and in Europe but just some stability at least.

Right. Exactly.

Okay. And I know Jim's question regarding profitability, but if you could look out maybe a a few quarters, given the significant cost reductions, what are some of the nearer and longer term operating margin goals that you have now, based on your new infrastructure?

As I said before, we brought down the breakeven point substantially and it's our intention to keep it there, approximately. That means, as you can calculate easily, that at a sales level of, say, $2.5 billion or something, $2.5 billion, $2.6 billion, Vishay would be at a 10% operating level, approximately. And then be above, it goes better. We are living in a different scenario now than we lived before the crisis.

And just my last question. Sounds like you're relatively encouraged by some economic signs. What is it that continues to concern you, whether it be structurally as an industry or broader economic issues?

I think all of us are concerned about the same thing. We see an upturn. The sequence is very normal. So under normal circumstances I would expect Europe and the US to follow Asia with a passives, we see Vishay's passives coming back which are more profitable actually than the actives, so it would be a nice picture. Questions of course like everybody asks themselves, I could imagine whether or not this upturn in Asia, this converts into products which still have to be sold, of course.

Fair enough. Thank you.

Your next question comes from the line of Shawn Harrison.

Hi, good morning. First question, just getting back to distribution, looking at Asia, it sounds like that's the only region where the sell-through is matching the sale end by you, but just to confirm, North America and Europe, you're still saying your sell-in trailing the eventual sell-through of the product; correct?

Yes.

Is there an expectation that that gap narrows in the September quarter where you get back to parity, or is it still more than 90 days down the road?

The United States have a better chance than Europe. As I said, Europe, the summer quarter in Europe is never strong, as a matter of fact. So just out of seasonal reasons I would expect better chances for the US to catch up. But this time there is a big gap between -- this is our perception, at least -- between Asia, America and Europe. But again, we are talking a quarter earlier, a quarter later. I cannot judge exactly when Europe and the US is going to catch up. But it's going to come, no question.

Okay. Second question on the restructuring savings, given that you're ahead of plan, the $200 million year-over-year reduction, should we see that now earlier than exiting the December quarter? Would that type of figure be mid December quarter or should we still use the -- ?

The $200 million, I said also carefully, we at least anticipate $200 million savings. But you understand, there is an offsetting momentum. We are adding back capacity in Siliconix in particular, like many people do in this business segment. So that means this part of the cost reduction which is closing down factories, completely, including the fixed costs will go away a little, to a degree, at least, you understand. So I'm careful in saying we are going to be around the $200 million but I admit it's more likely to be above than below.

Okay. And adding back capacity in Siliconix, is it equipment or is it more bringing headcount back on line?

Headcount. Really, headcount. Headcount. We had enough capacity before as you know, so as a matter of fact we are bringing back headcount.

Okay. And then just one final question on operating expenses. SG&A. As we look out in the back half of the year, should I expect the dollar run rate from the $84 million achieved this quarter to be significantly --

No, unfortunately not because this $84 million contains certain singularities to the tune of $5 million. So we will not lose that going forward but this was especially low, so as a matter of fact, so don't take this level to the end.

Okay. So it may be in the, more toward the $87 million range to exit the year?

Approximately, yes. Depends also on exchange rate.

Okay. And the singularities this quarter, is there a way to elaborate on?

There are quite a few. There are quite a few, as there always happens. It was a favorable combination of things.

That's it from me. Thank you very much.

(Operator Instructions). Your next question comes from the line of Steve Smigie.

Great. Thanks for allowing me to follow up. Could you talk a little bit about the mix at Siliconix in terms of computing versus handsets at this point? Let's go with that first.

As a matter of fact, these two are really the two major businesses of Siliconix. And what really picks up at the moment are the netbooks and the notebooks, as a matter of fact.

Okay. And in terms of --

Maybe I misunderstood your question. Approximately -- you said what is the mix between these two businesses, right?

Right. At Siliconix, is it 60%

It varies but it's the same order of magnitude.

Okay. Right. And then specifically on the handset side, a lot of interest on the smart phone side, obviously. Do you know what exposure there is specifically to smart phones? My sense is you're across multiple handsets, nothing specific about smart phones, but just curious.

I didn't understand the question. Could you repeat the question?

I'm sorry. So obviously there's been quite a bit of demand for smart phones so I'm just trying to understand your exposure to smart phones.

It's a proud exposure, really. We are also exposed to smart phones. I wouldn't say it's in particular to smart phones. It's across the board, so it is a fair share.

Okay. I think that's it from me. Thank you.

At this time, there are no further questions in queue. I'll turn the call back over to Dr. Lior Yahalomi for closing remarks.

Thank you, Crystal. I'd like to thank you for participating in our call. We appreciate the interest in Vishay and we look forward to your continued interest in the future. Thank you all.

This concludes today's conference call. You may now disconnect.