conf call notes, long, fairly complete.
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q2 earnings release
many factors could change our outlook, reminder
bala iyer:
-industry down, we stayed ~flat, via spending control programs
-bs strengthen, book value increased ~$1 to 11.86
-bookings up from march quarter, from wireless bookings
-excellent design win quarter -- in wireless, networking and consumer biz
-expect revs up modestly up in 3rd qtr and further in 4th qtr
-bringing cost structure down, reduction in force..headcount down ~10%
-1 time charge 5-7 million, next q
financial results:
-wireless biz, sequential decline of ~20%.
-pickup of wireless bookings in latter part of q suggests inventory correction over
-visibillity into 2nd half, non-wireless, is limited, consistent w/industry trends
-gross margins were 38%, declining ~3%.
-operating expenses, were 10% lower than prior qtr, from cost reductions
-vlsi hold 2million shares of ARM ltd, worth 37.8 million, in cash balance
business segment
comm:
-~60% of revs over last 3 qtrs, this qtr ~50% of revenue
-wireless bookings strengthened significantly in latter part of qtr
-shipped samples of cdma product.., now offer products for all cellular standards
-addressing emerging 3rd generations standard IMT2000, combines cdma and gsm
-currrently shipping 1st generation bluetooth product
-very strong design win qtr in comm, w/multiple handset wins in cdma, gsm and ??dec?
-progress in base station area, securing 3 design wins
-in networking, several design wins w/gigabit m??ac product?? complex arm based asic for router application
computing and consumer biz (~50% of q2 rev)
-stb biz, up sequentially. ???tv in Japan, and DirecTV in US
-launch of PerfecTV in May, higher acceptance than anticipated, early follow on
-DirecTV bookings have returned after several week qtrs, w/improved market reaction
to a set top box w/vlsi content.
**very optimistic about team and offerings in stb area
-design wins in consumer biz include 2 DVD designs, mpeg2,....
-shipped security asics for divx program in q2, pilot release. look forward to
upcoming nationwide launch
-5 suppliers will produce divx?? for 4th q rollout, some will include additional
content from vlsi
computing
-demand continues to be weak, and weakness in arcade game biz
-design wins include follow on designs w/existing customers in high storage/computing apps, and new customer design in cptr peripheral apps
maunfacturing
-utilization dropped further -- trying to get inv turns back in line
- utilization picked up significantly in latter part of qtr
technology front
-0.25 micron in full production in san antonio fab, in prototype for 0.2
-0.15 optimistic to be in place by q3 1999
balance sheet
-bs strengthened, bv up a buck
-cash up, sale of portion of ARM
-inventory declined
-cap expenditure, expect, over the year, ~150million
outlook
-rev's up modestly in q3, to strengthen further in q4 due to wireless
-visibillity in non-wireless continues to be limited
-expect profit margins to improve
Q&A
-soundview
1. do you believe wireless revs will be up year over year?
**strengthening, s/be ~2nd half 97
2. design wins at major customers for 1cgsm solution
**several in previous q, several in last q, s/contribute 'reasonably' in 99
3. re: gross margin, was there any pricing pressure:
**didn't see anything beyond normal. didn't see asp's down in q2
-bt alex brown
1. do you believe gross margin in q3 return to q1?
**utilization levels s/be back
2. what are customer inventory levels
**believe in wireless back to normal. appears to be the case in consumer
**in networking haven't seen a bounce, suspect there are still issues
-gruntal
1. how does OE look going forward?
**q1-q2 result of spending controls. delayed merit increases, 5 shut down days during q
**going forward, ~5million reduction in expenses.
**in relation to q2, expect OE modestly up to flat in q3
-nationsbanc montgomery securities
1. color of wireless biz
**market share steady or increasing
2. what are expecations, next march q a problem?
**yes, it's seasonal, don't expect next year to be like this year
**expect q4 to q1 about 10% sequential decline, overall
3. in computing side, any 'more' known problems
**no, it's dropping substantially
-DLJ
1. breakout of consumer biz
**consumer ~30%
**communication ~50%
**computing ~20%
2. re gross margin, getting back to march q?
**yes, roughly (repeat)
3. when will design wins in networking biz show up as rev?
**s/see firmly in 99, coming on modestly now and thru this year
-sutro
1. s/we expect communications as % of rev to back up to 60% in q3-4
**expect 60-65% in back end of year, seasonaly stronger in 2nd half
2. when to expect volume shipment of CDMA
**in q1 and q2 in 1999
3. re: mfg, update on...??wafer tec? migrate to 8" wafers
**wafertec, malaysia, still going, concerns about slowness/raising money
**scheduled to come in in y2k
**8" wafers, implement 'as needed' probably second half next year
-pershing
1. why not get out of cptr biz?
**have to stay with customers, good margin biz
2. when will we 'really' be back on growth track?
**we see strength increasing..., anticipate 'real growth' in 1999
Rich Beyer closing remarks:
managing steadily thru tough times.., expect improved performance
thru end of year and into next year. remain committed to strategy
and 20/20 success model, confident we will return to steady progress
in 2nd half and beyond.
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