Good afternoon. My name is David, and I will be your conference operator today. I would like to welcome everyone to the Xilinx First Quarter Fiscal Year 2012 Earnings Release Conference Call. [Operator Instructions] I would now like to turn the call over to Rick Muscha. Thank you. Mr. Muscha, you may begin your conference.

Thank you, and good afternoon. With me are Moshe Gavrielov, CEO; and Jon Olson, CFO. We'll provide a financial and business review of the June quarter, and then we'll open the call for questions. Let me remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. We refer you to the documents the company files with the SEC, including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This conference call is open to all and is being webcast live. It could be accessed from our Xilinx Investor Relations website. Let me now turn the call over to Jon Olson.

Thank you, Rick. During today's commentary, I will review our June quarter results. I will conclude my remarks by providing guidance for the September quarter. The Xilinx sales were $615.5 million in the June quarter, an increase of 5% sequentially. Sales were slightly better than guided due primarily to better than expected strength from Wired Communication, Industrial, Scientific and Medical and Data Processing applications. Wireless business on the other hand was weaker than anticipated due to non-PLD component constraints at a large customer following the Japan earthquake. Essentially, these constraints resulted in a push out of our PLD business to the September quarter. Offsetting the impact of the wireless push out were pull-ins from a few communications customers. Gross margin was 63.7%, slightly lower than guided due primarily to product mix, which was impacted by stronger than expected growth from our Virtex-6 and Spartan-6 families concurrent with declines from our Base and Mainstream Product families. Operating expenses were $204 million, $2 million less than guided due to lower than expected acquisition expense and lower share-based expense. Operating margin was $188 million or 30.6% for the quarter. New product sales increased 17% sequentially during the quarter, led by Virtex-6, Spartan-6 and Virtex-5 increases. Mainstream Products decreased 6% sequentially, and Base Products declined 5% sequentially. Sales from all geographies about Europe increased sequentially. North America sales, which represented 30% of total sales, increased 14% sequentially driven by strength from communications and defense applications. Asia-Pacific sales represented 35% of total sales and increased 6% sequentially due primarily to increased sales to communications and industrial customers. Japan sales increased 18% sequentially, representing 9% of total sales with strength driven by industrial and test and measurement applications. European sales decreased 8% sequentially due primarily to declines from Wireless Communications, which I mentioned previously. Let me…

Thank you, Jon, and good afternoon to you all. Our 5% increase in revenue in the June quarter was driven by the fact that 7 of our secondary end market segments grew sequentially by double digits. This very broad-based end market strength resulted in revenue growth that exceeded the high end of our revenue guidance and speaks to the continued displacement of ASICs and ASSPs by PLD. In the June quarter, new product sales drove our growth with a 17% increase. A portion of this is attributable to our 65-nanometer Virtex-5 family to increase 15% during the quarter. This is driven by applications in wired and wireless communications, image processing and storage. This family remains the industry's largest FPGA family, in terms of quarterly sales with ongoing design win momentum well beyond initial projection. Notwithstanding the unparalleled success of Virtex-5 in the market, it's worth -- it is worth noting that cumulative sales of Virtex-6 actually surpassed the cumulative sales of the Virtex-5 family the same point in its life cycle. I'm very pleased this combined sales for our 40-nanometer Virtex-6, 45-nanometer Spartan-6 products grew by more than 40% and now represent nearly 10% of total company revenue. We expect these families to experience significant growth in the September quarter as well based on customer forecasts. We continue to see strong design win momentum in our 40, 45-nanometer family. Virtex-6 family provides our customers with significantly lower power, lower costs and up to 12 gigabit per second transceivers. Spartan-6 family continues to be the only 40 and 45-nanometer low cost offering from major FPGA vendor enabling 40% lower power, 10% performance advantages with up to 3 gigabit per second integrated transceivers in a low cost device. Our 28-nanometer product family roll out continues at an accelerated pace. Last month, we…

[Operator Instructions] And your first question comes from the line of Christopher Danely of JPMorgan. Christopher Danely - JP Morgan Chase & Co: You talked about gross margins bouncing back in the December quarter. Can you give us any sense of what we should think about OpEx in the December quarter and beyond? And then what, if anything, should we be thinking of normal seasonality for the December quarter?

Yes, Chris. We are -- from an OpEx perspective, we're still sticking to the ranges -- full year ranges that we gave at the Analyst Day. The R&D number was $460 million to $475 million, and SG&A was $365 million to $375 million. Or it's probably attending towards the high end of those ranges. And so the -- it's hard for me to tie -- to be real precise on what's Q3 versus what's Q4 because of the alignment of the tape-out strategy, which has a lot of things sometimes towards the end of the quarter, so it might move from one quarter to the next quarter. But we're still confident we'll stay in those spending ranges that we gave. And with respect to seasonality, you know that I'm really bullish about the -- some of the segments, meaning, the Wireless segment, we still think is extremely strong and we think we've proven that our Industrial segment has a lot of legs and it's been -- grew 11% this last quarter and a lot of strength in the scientific and medical area as well as broad-based industrial. So from an end market perspective, I'm feeling pretty good about the second half of the year. But I don't think I want to venture giving a growth rate and with that little granularity for the second half.

And your next question comes from the line of James Schneider of Goldman Sachs.

Just returning to gross margins for a second. Given the strength you just mentioned, you saw that industrial -- I'm a little surprised that gross margins were that negatively impacted by the Virtex and Spartan-6 ramp in the quarter. Can you talk about the level of confidence you have in getting back to that 64% number in the December quarter? And what factors might swing that either way or might prevent you from getting that? Or, like, might provide the upside of that?

Sure, Jim. If you think about the factors that I talked about, there were actually 2 areas. One is the strength -- relative strength that we had in Virtex-6 and Spartan-6 over our expectations. And I think our Spartan-6 family, it's very clear that we're pretty unabated with the competition in that particular area. And we've been really racking up design wins, so we expect that to take off very strongly. But the second factor was around a precipitous drop of both our base and mainstream sectors, which I think if you look back at history, we haven't had both those drop at that level of percentage all at once. And I think that was one of the bigger factors that is kind of resetting us for this past quarter. And then the current quarter, which is still impacted by the fact that we built ahead a little bit on some of the 6 series products because of what we thought was tightness in the boundaries. And so we're kind of flushing through that more expensive Virtex-6 inventory that we purchased. So then the confidence comes from 2 things: One is the volume levels that we're now putting through the boundaries so, therefore, we get cost improvements and defect actually declines, a. And then b, overall, we have a variety of our cost-reduction programs kicking in and contributing in a bigger way in the second half. And so that's why we believe that the second half will have very much stronger gross margins.

And your next question comes from the line of Ambrish Srivastava of BMO.

Jon, just following up on the margin. What caused the precipitous decline in both the mainstream and the base? And then my quick follow up was, is there any unusual pricing activity going on? It's for 2 just -- or coincidental more that both you and Altera have guided lower for the coming quarter as in the reported quarter?

Yes. And so again, on the gross margin. The base and the mainstream, we declined more than we -- it's more than we had anticipated. Now some of that was contributed by the fact that there were some last time buys in the previous quarter, and we did some, I'll say, end of life of some older products, but then there was some additional downward mix. And there's no question that over time those 2 decay, and they have very high gross margins for us because they're very old products. But nonetheless, the applications that they're selling into are far from dead. So I think it was just a little bit of bigger impact than we thought for the last time buy in the previous quarter and then just a customer/product mix issue. Now with respect to the pricing competition, I really don't sense any stronger competition than normal, if you will, out there between the other FPGA supplier and us. I think we generally are -- it's an opportunistic thing for both of us where we bang heads and other places it's not a big deal. So I don't view this is as some sort of a decay of the segment from a profitability perspective on a long-term basis.

And your next question comes from the line of Ruben Roy of Mizuho Securities.

First question, Jon. On the wireless commentary, you're expecting some growth coming up here in the September quarter. If you x out kind of the push out that you saw in Q2 at your large customer, I think in Europe, if you x that out, would you still grow the Wireless business? And then secondly, on the R&Ds that appears, just reactionary at all to any feedback that you've received on the current shipping Kintex- or Virtex-7 products?

So on the wireless comment, if we didn't have strong European wireless sales, I suspect we would be a little bit down in the Wireless segment. So obviously, we're counting on that. And we've all -- and we made appropriate judgments there on that revenue account in that forecast. And the revenue coming out of that region is very significant for us. So it is important that those shipments happen in order for us to grow wireless. From an R&D perspective, no, there's really nothing in the dollars that's significant at all related to anything other than continuing our tape-out strategy or rapid roll-out of products. There isn't anything extra in there for any other reason.

And your next question comes from the line of Sandeep Shyamsukha of Auriga USA.

Your competitor mentioned yesterday that they are not seeing any quotes from you on the high end of the 28-nanometer family. Given your comment that you're already sampling a high-end family you started sampling last month, could you give us some indication of the competitive level there in terms of -- have you won design wins at the high end also? Or your 28-nanometer design wins are more concentrated in the midrange of the family?

So from our perspective, our midrange actually covers a lot of the high end, and our high end is actually higher end than their high. So we see a lot of activity there both on the Virtex side and on the high end of the Virtex side, which is the SSIT where there's a unique product, which actually has no competition. The 2000T and the 1500T are much larger than the monolithic dyes, which we have and anyone, any competitor has. So that's a place where we actually have no competition. The activity there is very high. It's driven by prototyping, by Wired Communications, by test and measurement equipment. All of these will typically stretch the edge of the envelope, and we're on schedule and we made the choice to address the midrange first and then within 2 months have the high end part out. It's out. It's working -- no, we're working on the tweaks that are necessary to bring it into production. We're very confident that we have a good footprint there.

Yes, I will just point that in Moshe's remarks, he talked about several hundred millions of dollars of design wins. And a significant amount of that is Virtex family, Virtex-7 design wins. So it's not like that all those are related to Kintex by far. That's not true by far, Kintex was very strong in that accounting of things, but Virtex has also got significant numbers.

Your next question is from the line of Shawn Webster of Macquarie.

It's Deepon for Shawn. I just have a question about order linearity to the quarter. And also, if you could talk about lead times, that'd be great.

Yes. We were actually pretty linear this quarter, even more linear than maybe I've ever seen it. We've had turns other than maybe a big bubble towards the beginning of the quarter. Turns were extremely level and within the average tolerance level of the average turns number after the big bubble, so it was pretty interesting from that perspective. And then the second question was related to -- I'm sorry, I missed that?

Lead times, please?

Oh, lead time -- oh to lead times. Yes, our lead times have all moved back to our stated goals which is to have 85% of our line items at 4 weeks or less, and we are at -- just at that level right now of 85%. And then there are -- if you go out to 6 weeks, then we actually cover up to like 90%, 95%. So we're in very good shape on lead times, even though our inventory is, on a days basis, has dropped quite a bit.

And your next question comes from the line of Hugh Orgy [ph] of UBS.

Moshe, I just wanted to ask you about the wireless ramp we've talked about in the emerging markets in the past. Can you give us any update as to what you're seeing in China, particularly as we start start to talk about it transition now to TD-LTE and also any update on what happened with the next phase of TD-SCDMA, that's one. And then also, if you can touch on India, just to recall that this is one of the areas that we are expecting to see growth for the wireless infrastructure sites. Any update on those 2 markets will be helpful.

So if you look at our Wireless business, there's tremendous strength in the end market in North America and there's tremendous strength in India. China is at a bit of a lull at this point and we expect it to grow somewhat. But most of the bounce we see at this point is driven by deployments in North America and India and less in China at this point.

Yes, I think our best Q2, Hugh, in China was that sometime in this quarter that we're in, some orders could be let overall and then we'll start to see some ramps. So it's been -- I think it's been pushed out a little bit from at least what I think our expectations were a quarter ago in this call. I think I was a little more bullish on what would happen in the June quarter and, in fact, it's pushed out.

[Operator Instructions] Your next question comes from Brendan Furlong of Miller Tabak. Brendan Furlong - Miller Tabak + Co., LLC: I'm going to return to the gross margin question, if you're seeing potentially better yields on your selling down the inventory of the expense -- the more expensive product in the next coming quarter and industrial and comps continue to hold up, should we expect the more to the mid- high range of your gross margin guidance as we go into fiscal 2013?

So yes. So our current statement is for the second half of this year be to the low end of the margin, and there's no doubt that we believe that we'll continue to work on that. And our goal is to operate 64% to 66%. It isn't just to be sitting at the bottom during the whole time. So I think there's a reasonable chance that based on the information we can see today is that we will be up at least in the midpart of that range in '13 based on what I see today.

Your next question is from the line of Glen Yeung of Citi.

This is Delos for Glen. you mentioned some acceleration of the design activity at 40- and 45-nanometer, I believe, on the Spartan product. Could you describe a little more about where you're seeing that activity? And is it enough to catch up in terms of market share at that node?

So it's really broad, and we clearly, in terms of introducing the product, we're behind the competition on the high end. But on the Spartan side, we are the only guys who have a solution, and it's a very good solution. And between the 2 of those, those 2 together, we expect to, at that node over time, reach the 50% point. I think that's our target, which sort of clips the fact that we -- it isn't where we traditionally have been just due to the lateness, but we target is to get 50%. And we have a very strong product offering on the Virtex-6 side now, which is out. Transceivers are working. We're told that they are the best in the industry on the Virtex-6 side. They beat anything else that the competition may have in terms of the quality of the signals and the I, et cetera and the [indiscernible] of those characters. So we're seeing increased design win at the high end. And obviously, it's still up and running at the low end. That will continue for some period of time best we can tell.

And your next question comes from the line of Sumit Dhanda of Citadel Securities.

This is Ian in for Sumit. Jon, I know you commented the backlog was up for the quarter, but were bookings also up?

Yes, well, the fact that our backlog was up, that would indicate bookings were equal or greater actually than our billings for the quarter. So if you look at our book to bill, I think that's a reasonable conclusion to draw from that, yes.

Okay, and then on the restructuring, did you quantify the timing or magnitude of any savings from that?

So the reserve will all be taken in the September quarter because the employees all been informed of their status, so that will occur in that quarter. And we expect to be able to save on an annual basis $1 million to $2 million. Some of that gets put back into some headcount and low-cost geographies. But generally, there will be some help on the R&D line over time.

And you have a follow-up question from Shawn Webster of Macquarie.

Just quick follow-up. For the defense market, you mentioned in your previous remarks that was strong for you. Your competition actually pointed as a sign of weakness. And ethanol also came out today and about some push out of military orders. Have you seen anything of that effect? Or is this something different?

No, I mean, I think certainly in the Defense business, there are designs that you win or designs that you win. We've continued to be able to grow our Defense business on an annual basis, and we're still very positive about that segment. We had a very strong quarter. We tend to have more strength towards the middle and the end of the calendar year because of the timing of things. And I would say we're pretty much on track, and I'll say seasonal from the standpoint of the Defense business in that area. So we're not seeing any pullback from any of the programs that we're associated with at this point in time. So everything's pretty much on track for us in the defense side of thing.

And you have a follow-up question from Hugh Orgy [ph] of UBS. [Technical difficulty]

Or not.

That's a bad signal.

[Operator Instructions] And there are no further questions in queue at this time.

Okay. Well, thanks for joining us today. We have a playback of this call beginning at 5:00 p.m. Pacific Time, 8:00 p.m. Eastern Time today. For a copy of our earnings release, please visit our IR website. Our next earnings release date for the second quarter fiscal year '12 will be Wednesday, October 9, after the market close. This quarter, we'll be presenting at the Deutsche Bank Securities 2011 Technology Conference in Las Vegas on September 13. This completes our call. Thank you very much for your participation.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.