Amphenol Corporation (APH) Q4 2013 Earnings Report, Transcript and Summary

Hello, and welcome to the Fourth Quarter Earnings Conference Call for Amphenol Corporation. [Operator Instructions] At the request of the company, today's conference is being recorded. If anyone has objections, you may disconnect at this time. I would now like to introduce today's conference host, Ms. Diana Reardon. Ma'am, you may begin.

Thank you. My name's Diana Reardon, and I'm Amphenol's CFO. I'm here together with Adam Norwitt, our CEO, and we'd like to welcome everyone to our fourth quarter earnings call. Q4 results were released this morning. I'll provide some financial commentary on the quarter, and Adam will give an overview of the business and current trends. We'll then have a question-and-answer session. The company closed the fourth quarter with sales of $1.246 billion and EPS of $1.05 before onetime items, exceeding the high end of our guidance and achieving new sales and EPS records. Sales were up 9% in U.S. dollars and 8% in local currencies compared to Q4 of 2012. From an organic standpoint, excluding both acquisition and foreign exchange impacts, sales were up 5%. Sequentially, sales were up 8% in U.S. dollars and 6% organically. Compared to the high end of our prior guidance, sales were up about 6% in Q4 due primarily to strong demand in the mobile device market. Breaking down sales into our 2 major components. Our Cable business, which comprised 7% of our sales in the quarter, was down 5% from last year. The Interconnect business, which comprised 93% of our sales, was up 10% from last year as a result of both increased demand and acquisitions. Adam will comment further on trends by market in a few minutes. For the full year 2013, sales were $4.615 billion, up 8% in U.S. dollars and 4% organically over 2012, a strong performance. Operating income, excluding onetime items, was $245 million in the quarter compared to prior year operating income of $223 million. Operating margin, excluding onetime items, was 19.7% in Q4, up 20 basis points from 19.5% last year, a good conversion margin on incremental sales of approximately 22% from last year. From a segment standpoint, in the Cable business, margins were 12.2%, down from 13.2% last year, primarily due to lower volume, the impact of market pricing and some impact from product mix. The Interconnect business margins were 21.8%, up from 21.7% last year. The year-over-year Interconnect operating margin improvement primarily reflects the positive impacts of higher volume and cost reduction actions. For the full year 2013, the company achieved operating income margins, excluding onetime items, of 19.6%, up 30 basis points from 2012, achieving year-over-year conversion margins on incremental sales of approximately 23%. We're very pleased with the company's operating margin achievement in 2013, and we continue to believe that the company's entrepreneurial operating structure and culture of cost control allows us to react in a fast and flexible manner, thereby constantly adjusting the business to maximize profitability in what certainly continues to be a dynamic environment. Through the deployment of these strategies, the management team has achieved industry-leading operating margins and remains fully committed to driving enhanced performance. The company has recorded acquisition costs in the quarter of approximately $3.4 million, $2.4 million after-tax or $0.01 a share. These costs include professional fees, transaction taxes and other expenses relating primarily to the acquisitions in December disclosed in the press release. In accordance with current accounting rules, these costs are expensed as incurred. Interest expense for the quarter was $16.4 million compared to 16 point -- compared to $15.6 million, excuse me, last year, primarily due to higher average debt levels from the company's acquisition and stock buyback programs. Other income was $3.9 million in the quarter, up from $2.7 million last year, primarily as a result of higher interest income on higher levels of cash and short-term cash investments. Our effective tax rate, excluding onetime items, was 26.3% in the fourth quarter of 2013 compared to 26.4% in the fourth quarter of 2012. For the full year, excluding the impact of onetime items, the rates were approximately 26.3% and 26.6% in the full year 2013 and 2012, respectively. On an as-reported basis, the company's effective tax rate was 26.2% in the fourth quarter of 2013 and 24.6% for the full year 2013, compared to 32% and 28.2% for the respective 2012 periods. The full year 2013 rate included the impact of a net income tax benefit of $4 million or $0.02 per share, relating primarily to the completion of prior year audits. In addition, the full year 2013 rate included an income tax benefit of approximately $11 million or $0.07 per share resulting from the reinstatement on January 2, 2013, of certain federal income tax provisions relating primarily to research and development credits and certain U.S. taxes on foreign income with retroactive effect to 2012. The reinstatement of these provisions was delayed by the U.S. government in 2012, and as such, in the fourth quarter of 2012, there were related income tax costs of approximately $11 million or $0.07 per share. Between the 2 quarters, Q4 2012 and Q1 2013, there was no net impact on the company from an income statement perspective. Net income, excluding onetime items, was about 13.7% of sales in the fourth quarter and 13.5% of sales for the full year 2013, compared to 13.4% in Q4 of last year and 13.2% for the full year 2012. EPS, excluding onetime items, increased 12% to $1.05 in the quarter, up from $0.94 last year. EPS for the full year 2013 was $3.85, up 11% over 2012, a very strong performance. On an as-reported basis, earnings per share was $1.04 and $0.86 in the fourth quarter of 2013 and 2012, respectively, and included certain onetime items. The 2013 item -- 2013 earnings includes the cost of $0.01 per share relating to the acquisition costs I previously described. The 2012 period includes onetime charges of $0.08 per share, $0.01 relating to prior year acquisition costs and $0.07 relating to the tax items I just talked about. Orders for the quarter were $1.237 billion, resulting in a book-to-bill ratio of 0.99:1 for the quarter. For the full year 2013, orders were $4.679 billion, resulting in a book-to-bill ratio of 1.01:1. The company continues to be an excellent generator of cash and cash flow, and the fourth quarter was quite strong at $211 million or 125% of net income. The company continues to target cash flow from operations in excess of net income. For the year, cash flow from operations was $769 million or 120% of net income, very strong. The company had good working capital performance in the quarter. Inventory was $793 million at the end of the year. Compared to September, inventory was up 8% on an as-reported basis and up about 2% excluding the impact of acquisitions. Inventory days were 80 days at year end, down 3 days from prior year levels. Accounts receivable was just over $1 billion at the end of December. Compared to September, it was up 8% on an as-reported basis and up approximately 3% excluding the impact of acquisitions. Days sales outstanding was 70 days, down 2 days from prior year-end levels. And accounts payable was $550 million at the end of the year. Compared to September, up 14% on an as-reported basis and up 8% excluding the impact of acquisitions. From a days perspective, it was comparable to prior year-end levels. A strong cash flow from operations of $211 million, along with $91 million of cash, $18 million of stock option proceeds and $258 million of borrowings under the company's credit facilities, were used to fund $441 million of acquisition payments, $53 million in net capital expenditures, the purchase of 329,000 shares of the company's stock for $28 million, and $63 million of dividend payments. At the end of the quarter, we had 5.7 million shares remaining under the 10 million share buyback program, which expires in January of 2015. Our cash and short-term investments balance stood at $1.192 billion, the majority of which is held outside the U.S. Total debt at the end of December was $2.1 billion and net debt was approximately $941 million. At the end of the quarter, borrowings and availability under the company's $1.5 billion revolving credit facility were $927 million and $573 million, respectively. And the company's leverage and interest coverage ratios remain strong at 1.9x and 18x. The fourth quarter EBITDA was approximately $293 million, bringing full year EBITDA to $1.1 billion or 24% of sales. From a financial performance, this was an excellent quarter. Before I turn the call over to Adam, I wanted to make a few comments relative to our 2014 sales and earnings per share guidance. The guidance is based on current foreign exchange rates and includes the acquisitions closed in December. From a tax rate perspective, there is currently some uncertainties surrounding the direction of U.S. tax policy. However, assuming a continuation of the policies in effect in 2013, the guidance includes an effective tax rate of 26.5%. From a sales perspective, guidance for the full year 2014 of $5 billion to $5.1 billion represents a growth of 8% to 11% over 2013 on a U.S. dollar basis and a growth of approximately 1% to 4% on an organic basis, excluding the impact of acquisitions. Guidance for the first quarter of 2014 of $1.18 billion to $1.21 billion represents a growth of 9% to 12% on a U.S. dollar basis and a growth of approximately 1% to 4% on an organic basis. Sequentially, in Q1, we expect a decline of 3% to 5% on a U.S. dollar basis and a decline of 8% to 10% from an organic perspective, driven primarily by a larger-than-normal sequential decline in the mobile device market after a very strong fourth quarter of 2013. Adam will comment further on growth expectations by market in just a moment. Our guidance excludes any onetime expenses. At this point, we do anticipate approximately $2 million in onetime acquisition-related charges in Q1 2014 relating to the valuation of acquired backlog for the Advanced Sensors Business as is required under U.S. GAAP. While the December acquisitions are accretive on an earnings-per-share basis, from an operating income margin standpoint, the Advanced Sensors Business currently operates at a lower level of profitability than the average of the company. And as a result, operating income margin for the first quarter is impacted by about 0.5% and is expected on a consolidated basis to be about 18.8% in the quarter. Operating income margin for the full year 2014 is expected to be at about the same rate as 2013 at 19.6%, with ROS expansion in the base business offset by the lower ROS levels relating to the Advanced Sensors Business. We're very excited about the potential of the Advanced Sensors acquisition, and expect their operating income margins to improve over time, based on the combination of their excellent management team, their leading technology and Amphenol's strong operating policies. Adam will now provide an overview of the business and current trends.

Thank you very much, Diana, and I'd like to add my welcome to all of you here on the call today, and thank you very much for your time. And I also hope that it's not too late to wish all of you a Happy New Year. As Diana mentioned, I'm going to highlight some of our achievements in the fourth quarter, as well as in the full year for 2013. I'll specifically discuss some of the trends and progress across our served end markets, and then finally, I'll make a few comments on the outlook for the first quarter and the full year for 2014, and then certainly leave time at the end for questions. We're very pleased in the fourth quarter to report that the company achieved record results, as we reached new highs in orders, sales and earnings, exceeding the high end of our guidance. As Diana mentioned, revenues increased a strong 9% from prior year and 8% sequentially, reaching a new record $1,246,000,000 in sales. And we also booked a record $1,237,000,000 in orders, which represent a book-to-bill of 0.99:1. We're very proud that the company continues to generate strong profitability, with our margins expanding by 20 basis points from prior year to 19.7%. This quarter, once again, we're extremely proud of our team. Our results this quarter confirm the true value of the discipline and agility of the Amphenol entrepreneurial organization through continuing to capitalize on the many available opportunities for growth, while also driving superior operating performance. We're particularly pleased to report strong progress in our acquisition program in the fourth quarter. Our ability to identify and execute upon acquisitions remain the core competitive advantage of the Amphenol organization. As I've always said, the timing of acquisitions is impossible to predict, yet our ability to execute on all these transactions in such a short time period is yet another confirmation of the agility and capability of our lean organization. First, we're very pleased to have completed the previously announced acquisition of the Advanced Sensors Business of GE. Advanced Sensors, as we call it, is a global manufacturer of sensors and sensor-based instruments, primarily for the industrial and automotive market, with annual sales of approximately $225 million. We are extremely excited by the potential created by the addition of the Advanced Sensors Business to Amphenol. The company is a leading provider of a wide array of sensor technologies and creates the opportunities to offer customers end-to-end technology solutions, which incorporate both our leading interconnect solutions together with sensor products. The proliferation of electronics across many of our end markets is creating further demands for these high-technology sensor and interconnect solutions. With the addition of the Advanced Sensors capabilities, we're going to be very strongly positioned to expand our participation with customers globally. The sensors market is a roughly $50 billion market, essentially the same size as the global interconnect market, thereby creating an excellent long-term growth opportunity for Amphenol. In addition, in the quarter, we acquired Tecvox LLC, a U.S.-based provider of value-added components and assemblies to the automotive infotainment market, with annual sales of approximately $45 million. Tecvox has an excellent offering of complex datacom interconnect products, which are increasingly being adopted in infotainment systems for cars. In addition, the company has supplier relationships with many important vehicle manufacturers around the world. We're very hopeful and confident that this acquisition strengthens our position in what is a very high growth segment within the automotive electronics market, and it will serve as a tremendous complement to our fast-growing automotive interconnect business. Finally in the quarter, we acquired Hangzhou Jet Interconnect Technology, a China-based manufacturer and supplier to Amphenol of high-precision interconnect components. Jet is a real manufacturing leader in high-technology, fine-pitch connector component manufacturing and strengthens our ability to quickly launch new high-tech interconnect products at a lower cost, in particular for next-generation high-speed products used in the very dynamic IT-Datacom market. All of these acquisitions that we announced today are consistent with our ongoing and successful strategy to acquire complementary companies with strong management, leading technology and excellent market presence. And as we welcome these outstanding new teams to Amphenol, we remain very confident that our successful acquisition program will continue to create value for Amphenol in the future. Before turning to our served markets, I'd just like to reflect briefly on 2013 in its totality. 2013 was clearly an excellent year for the company. We established new records in sales and earnings per share. We achieved revenues of $4,614,000,000 and EPS of $3.85, with leading operating margins of 19.6%. We're especially pleased that we have continued to expand our position in the overall market, growing our sales by approximately 8% in 2013, well above industry growth rates. And in 2013, we again successfully executed upon our acquisition program, adding in total 5 exciting new family members to Amphenol in the automotive, industrial, Commercial Air and IT-Datacom markets, thereby creating excellent platforms for future expansion. I'd like to note that now in the last 2 years, we have acquired 10 companies. Throughout 2013, it's been our consistent focus on technology innovation and customer support through all phases of the economic cycle which have resulted in Amphenol strengthening our position across each of our end markets. In addition, our organization has accelerated the development of innovative interconnect technologies in support of our clear long-term mission, which is to be the enabler of the electronics revolution. These developments have allowed Amphenol to capitalize on exciting new areas of the ever-expanding electronics market, thereby broadening the opportunity for our future growth. So as we close 2013, we find it extremely rewarding that our organization has built yet another new platform of strength, thereby creating optimism and confidence for our future performance. Now turning to our served markets. I'd just like to note that there continues to be uncertainty across many of the end markets in the electronics industry. And this confirms again for our team that diversification that we worked so hard at achieving is a significant asset for the company. Turning first to the military market. Sales in the military market represented 11% of our total in the fourth quarter, and sales decreased slightly from prior year, as growth in rotary-wing aircraft, ordnance and airframe applications was offset by lower sales of products used in military vehicles and communication-related applications. We were very pleased to realize the sequential revenue increase in the military market in the fourth quarter, as our sales grew by 5% from the third quarter, driven especially by strengthening demand in avionics and ordnance. For the full year of 2013, sales declined slightly, essentially by about 2%. While recent U.S. government actions may have provided some clarity around sequestration, there remains great uncertainty surrounding overall military spending levels in 2014 and beyond. Nevertheless, we're very confident that the increasing electronic content in military equipment, together with our broad program participation and our strong position in high-growth emerging markets, will drive growth in the future. Accordingly, in the first quarter, we expect sales to remain essentially at these levels, and for 2014, we do expect a moderate increase in sales in the military market as our new technology developments drive growth, despite the overall muted spending environment. The Commercial Aerospace market represented 6% of our sales in the quarter. Sales increased a very strong 30% from prior year as we continued to capitalize on increased demand resulting from higher levels of jet liner production, as well as from the launch of new airplane platforms, altogether with the benefits from our Ionix acquisition that we announced last quarter. Sequentially, our sales in this market grew by 14%, finishing the year with strong momentum in this very exciting market. For the full year of 2013, again, we had very strong sales growth, rising by 24% from 2012. We're extremely pleased with our continued progress in the Commercial Air market as we have taken full advantage of the proliferation of new electronics on next-generation jetliners, which we are enabling with our high-technology interconnect products. Looking forward, we expect sales to increase sequentially in the first quarter, and we continue to have a strong outlook for the Commercial Air market in 2014 and beyond, as production volumes continue to ramp up and new platforms launch. The industrial market represented 14% of our sales in the quarter, and sales in this market grew also by a very strong 21%, driven in particular by growth in instrumentation, rail mass transit, heavy equipment and medical segments, together with the contribution from our acquisitions completed throughout the year. Sequentially, our sales in the industrial market increased by 4% and for the full year of 2013, sales grew by 7%. We continue to make excellent progress, broadening our technology offering and increasing our penetration of the many exciting growth segments of the industrial market. These include, in particular, alternative energy, oil and gas, heavy equipment, factory automation and medical markets. In addition, we are in particular especially excited by the tremendous opportunities created by the Advanced Sensors acquisition in the industrial market, as there are truly a rich array of applications which require advanced solutions that are incorporating both sensors and interconnect products. We expect strong growth in the industrial market in the first quarter and for the full year of 2014, as we benefit from the addition of Advanced Sensors, together with our expanding range of new interconnect technologies, across a very diverse range of industrial segments. The automotive market represented 12% of our sales in the quarter. Sales in this market increased a very strong 40% from prior year and 10% sequentially. This significant year-over-year growth was driven by our new technology programs, as well as by the impact of higher vehicle volumes, together with some degree of benefit from the acquisitions completed just here at the end of the fourth quarter. For the full year, we're very pleased to have achieved excellent growth of 23%, resulting in the automotive market now representing 12% of total Amphenol for the full year of 2013. We're very excited by the continued expansion of our high-technology product offering, and look forward to opportunities to leverage our expanded interconnect and our new sensor technologies to gain a broader participation in the rapidly-expanding market for automotive electronics. Our product offering now extends to many exciting areas of the automotive market, from hybrid and electric drives to safety and security, telematics and infotainment, exhaust management and engine control, and electronic transmission and breaking. Looking ahead, we expect a strong increase in sales in the first quarter and for the full year 2014, as we realize the benefits from our exciting acquisitions, together with our organically-developed new products. The mobile devices market represented 22% of our sales in the quarter. Sales were down slightly from prior year and increased a much stronger-than-expected 31% sequentially, as our organization was able to quickly react to unexpected increases in demand for certain mobile computing devices. For the full year, sales were up slightly, which represented better performance than we'd anticipated coming into the second half of 2013. We're very confident that our highly reactive and agile organization will continue to secure a strong position in the ever-dynamic mobile device market, and continue to be encouraged by our excellent technology position across a wide range of new mobile computing platforms. Looking forward, we expect again this year a more significant-than-normal seasonal reduction of demand in the first quarter, driven especially by reduced volumes for mobile computing devices. And while our current expectations are for some moderation of sales levels in 2014, the mobile device market remains a highly volatile demand environment, but one with significant opportunities for Amphenol. The mobile networks market represented 9% of our sales in the quarter. Sales were down slightly on both a year-over-year and sequential basis, as higher spending in Asia was offset by reduced investments by operators in other geographies. For the full year 2013, we were pleased that our sales increased by 5%, a positive indication of the strength of our position with both operators and equipment manufacturers around the world. We expect demand to increase slightly in the first quarter and to remain essentially stable throughout 2014, as operators around the world continue their next-generation network build-outs. We remain very well-positioned in this market due to our broad design-in positions on new base station platforms, as well as our strengthening presence with a diverse range of global wireless operators. The Information Technology and Data Communications market represented 19% of our sales in the quarter. Sales in this market increased 10% from prior year, with broad-based strength across servers, storage and networking hardware, and were down just slightly from our third quarter sales levels. We're very pleased to have had another strong year in the IT-Datacom market, with our sales growing by 7% from 2012, clearly stronger than the broader IT market, as we have continued to capitalize on our many new design-ins of high-speed and power products that are going onto next-generation data center equipment. Our ongoing next-generation product development efforts, together with the enhanced development and manufacturing capabilities that come with the addition of Jet, further expand our future growth opportunities. While we expect a normal seasonal moderation of IT-Datacom demand in the first quarter, as we look forward to 2014 and beyond, we remain very excited by the potential created by our ongoing new program wins with many new advanced technology platforms. Our customers continue to push their data center equipment to new levels of performance in order to handle the rapid expansion of data, driven in particular by the spread of new mobile devices, as well as by the continuing proliferation of video on the Internet. The broadband market represented 7% of our sales in the quarter. Sales decreased slightly from prior year and by about 5% sequentially, as build-out activities slowed due to traditional seasonality. For the full year, our sales in this market grew by 15%, supported particularly by last year's acquisition of Holland Electronics, as well as by the wide range of new products this new company has allowed us to offer to broadband customers around the world. We expect some improvement in demand levels in both the first quarter and the full year 2014 and look forward to continuing to realize the benefits of our expanded offering of cable and interconnect products. So just in summary of the fourth quarter and the full year of 2013, we're extremely proud of the dynamic Amphenol organization, as we have continued to execute very well in what is still a very challenging market environment. Our new record results in both the fourth quarter and the full year of 2013 confirm once again the strength of the Amphenol team. Our company's superior performance is a direct reflection of our distinct competitive advantages, our leading technologies, a growing and increasing position with customers across a diverse range of end markets, a worldwide presence essentially at every corner of the globe, a lean and flexible cost structure, and most importantly, an agile and entrepreneurial management team. Now turning to the outlook, I'd like to just make a few comments. Our outlook is based on a continuation of the current global economic environment, as well as constant exchange rates. Based on those assumptions, we now expect in the first quarter and full year 2014 the following results. For the first quarter, we expect sales in the range of $1,180,000,000 to $1,210,000,000 and earnings per share in the range of $0.93 to $0.96, respectively. For the full year 2014, we expect sales in the range of $5 billion to $5,120,000,000, and EPS in the range of $4.15 to $4.27, respectively. For the full year, this represents both sales and EPS growth, excluding onetime items, of 8% to 11%. We're very encouraged by this strong outlook in sales and earnings, especially given the many ongoing uncertainties in the global economy. And as we launch and begin into 2014, as I mentioned, we believe we're in the strongest position that we have ever been in as a company, and I am confident in the ability of our outstanding management team to build upon these new record levels of revenues and EPS established in 2013, and to capitalize on the many opportunities to grow our market position and expand our profitability. Thank you very much, and we'd be happy to take any questions at this time.

[Operator Instructions] Our first question comes from Wamsi Mohan with Bank of America Merrill Lynch.

It seems as though the margin profile of the sensor business is fairly low relative to the rest of your businesses. Typically, you don't integrate your acquisitions in a more traditional way, but do you think you will be handling this acquisition in a somewhat different way, given your comments around the margin structure? And I have a follow-up.

Yes, Wamsi, thank you very much for that question. I mean, look, we don't intend to handle that differently from the standpoint of we have a wonderful organization that is very well-prepared to take on the task to improve the performance of that company long term. Certainly, we have great experience in the past of dealing with companies that we have acquired who have some further profit potential than was reflected in their results. And we see no reason why, in this case, that applying some of those principles across Amphenol that we have honed for many years won't also have some potential here. Clearly, we're not guiding to that, and as Diana mentioned in detail in her analysis, this is at somewhat lower margin levels than in the past. But we feel that we have a great team here, we have a great technology, great customer positions, and there is certainly a lot of potential in that company for the long term.

And just a big picture question here. Why does the sensor market makes sense for Amphenol? I mean, what expertise do you think Amphenol brings to the sensor market that it should fit better in your portfolio?

Wamsi, thanks very much, that's an excellent question. The sensor market is something that is not brand new to us. Let me tell you that in certain of our segments and, in particular, automotive and industrial, we have seen, for a number of years now, increasing integration between sensor products as well as interconnect products, to the extent we have even had products which we sell that incorporate sensors to them. As sensors have grown in many applications, that continues to drive also the interconnect to grow along the same time. And so many of the challenges that go along with sensors, aside from the core sensor element, are really the packaging of those products and how do those products integrate into the overall electronics systems that they are working with in either a car or a tractor or a piece of medical equipment or on a plane, and that's an area where we have tremendous expertise and experience. And so we see that the sensor market has a lot of similarities, in fact, to the connector market. It's a product that applies across a very, very diverse range of applications. It is certainly a low-value component in a very -- ultimately, in high-value systems, but one which has tremendous technology embedded in it and has a real mission-critical function. And it is ultimately being integrated together with those interconnect systems more and more as packaging size becomes more critical, as environmental considerations become more acute, and so on. It's something that we have seen evolving in our core business, in our Interconnect business. And in fact, even in some of the acquisitions that we've made in the automotive industry, there was even some tangential sensor products that were being supplied there. And so we certainly have had our eye out onto this market. We believe it has tremendous growth opportunities for the future, as I mentioned. It is really a market of similar size to the interconnect market and one with similar growth dynamics and similar diversification, and a similar degree of fragmentation in the market to what we have experienced in the interconnect market for many, many years. The core sensor element, certainly, there are different manufacturing techniques around some of that, but the ultimate packaging of the product and the ultimate application has a tremendous amount of similarities, where we see tremendous potential for driving collaboration across our organization, together with that sensors business, to ultimately solve challenging problems for our customers. And that's ultimately where we create our value.

Our next question comes from Jim Suva with Citi.

A quick question. When we think about the acquisition of Amphenol and the machine really kicking in here as part of this long-term strategy we're used to, it kind of reminds me of -- a little bit of positive déjà vu of when you acquired TCS years ago, a very large acquisition, you saw opportunity to improve margins. Is this similar to what we're talking about here for your ability to improve margins and, specifically, kind of like what do you have to do? Is it re-costing the manufacturing or tapping into your supply chain or low-cost manufacturing or closing factories? Just trying to get a sense on how much visibility you have in the timeline. Are we talking kind of a timeline of kind of 12 to 18 months, similar to how, then, TCS was performing to corporate average?

Sure, Jim, thanks very much for the question. And again, we're not guiding here towards any step function, but we certainly believe that there is potential in the operating profitability of the company. We're not going to get into, in this forum, specific details of what we would normally do. But basically, profit equals selling price minus cost. And so you can imagine that somewhere in both of those categories, we're going to approach and work with the management team to identify areas where you can either positively impact the former or negatively impact the latter. And that is -- at the end of the day, will drive the improved profitability. It is a fabulous organization, and that's something that we also did find with TCS. And I think the analogy is certainly true in the -- to the extent that you had with TCS a company with great people and great technology that was part of a broader enterprise, where maybe that wasn't such a focus. And I think here, you have great people, you have great technology, and it was part of an even bigger enterprise, in the case of GE, which is a fine company, but it was not necessarily the focus of that company. I'd tell you, it's going to be the focus of Amphenol and of our management team.

Great. And then a quick follow-up. With 4 acquisitions in 1 quarter, does your acquisition team, integration team, kind of -- pretty busy here for the next few quarters or you still have even more room to do? I just don't know if those are different teams of identifying acquisitions versus different teams of integrations.

Thanks again for the question, Jim. I mean, look, teams is kind of a big-sounding word for what -- our Amphenol lean organization. I just want to tell you how proud I am of our team to have accomplished so much here in the fourth quarter. I have said for a long time -- I mean, we get lots of questions. I think, Jim, you have asked some, and others as well. Well, when are we going to make more acquisitions, how is the pipeline. And one consistent thing that I have always said, which remains the case, is you can't predict when these acquisitions are going to come, you can't predict when they're going to close. You continue to work them opportunistically, as well as you do that in a very methodical fashion. But the timing is tremendously opportunistic. And I think the fact that our organization was able to execute on all of this in a real concurrent fashion is just a testament to the drive and the reactivity of the Amphenol organization. And as it relates to "integration," we have a lot of people in the company who are involved in working with the local management team of these new companies to investigate, to identify and to execute upon where the opportunities that they see for growth and improved performance are in the company. And we have in Amphenol a tremendous amount of bandwidth with our small, little team. And we're very confident that if we can close what was essentially 4 acquisitions in the quarter, to the extent that more opportunities come along, we have no doubt that we can execute on that as well.

Our next question comes from Sherri Scribner with Deutsche Bank.

I was hoping you could give a little more detail on the upside to the mobile piece of the business. Was that in the tablet business? Was that more on the smartphone side? What surprised you there?

Sherri, no, I think that we saw probably more upside coming out of the mobile computing devices, which included, of course, tablets, in the quarter. The demand was a lot higher than what we had anticipated, than what our customers had told us. We certainly had a significant change to guidance at midyear, and we reinforced that guidance going into the fourth quarter, and that was all guidance based essentially on what our customers tell us. And then our customers had a much bigger increase. And you can't understate how challenging that is for our organization when they go from one mode to a totally opposite mode in an extremely short time period. And I'm just so proud of them, the reactivity. It's a little bit like the acquisition from the last question. It all came at once, it came a little bit unexpectedly, and our team was there to really capitalize upon that opportunity as it was there. In a volatile market like the mobile devices market, this is so critical to success. And we don't know. At the end of the day, is there going to be some change in that market long term, and in the short term, it's a very hard market to predict. But being able to capitalize upon that, being able to react when it goes down and capitalize upon it when it goes up, this is a tremendous competitive advantage to Amphenol. It allows us to expand our position. It allows us to keep the strong financial performance of the company regardless of the cycle in that very volatile market.

And then I just wanted to get a little detail in terms of the acquisitions, how much they add to the first quarter. I think you said total revenue for those 4 was $455 million, or maybe that's how much you spent. So much should we think of acquisitions adding to the first quarter and how much should we think about SG&A being added to the first quarter?

Yes, sure. I think that, that was the price that we paid for them, not the sales. But the first quarter, I think I said in the prepared remarks, at the high end of guidance, it's about a 4% organic growth. So that should give you some estimation of the impact of the acquisitions from a sales perspective. In terms of the elements of the P&L, there probably will be some increase in SG&A as a percentage of sales, because the acquisitions, in aggregate, do have a somewhat higher SG&A level than what the company has on an average basis. So I would expect that there could be some uptick in SG&A as a percentage of sales as we go into the first quarter.

Our next question comes from Shawn Harrison with Longbow Research.

Just on the GE business, could you break down what percentage is auto and industrial? In addition, as you integrate that business, Diana, will you be running those charges through the P&L or would we see them called out here through 2014?

Sure. From a sales-by-market perspective, the business is roughly 2/3 industrial, which includes medical and the other industrial markets; and about 1/3 auto, just roughly speaking. From an integration standpoint, Shawn, I think we don't so much integrate in a traditional sense. And I think that most of the work that we would be doing with the team, as Adam I think said in response to an earlier question, would be really more geared around trying to minimize their total cost structure and trying to maximize the value that they receive for the great technology that they have. To the extent that there were purchase-accounting-related items like the backlog that I mentioned in the prepared remarks, where we have to value certain intangibles and so on that would be onetime in nature, we will call those out. To the extent that there was some other large charge that was unusual in nature, which we wouldn't anticipate at this point in time, we would perhaps call that out. But for the most part, the work that we will be doing will -- wouldn't result in a charge that we would expect that would hit the P&L.

Okay. And then Adam, just on the mobile networks market, your tone in that maybe was a little bit more cautious than I would have anticipated. I know kind of the mature market spending is declining but you're seeing supposedly, at least, an increase in emerging markets. So maybe if you could talk about how you see 2014 progressing for mobile networks?

Sure, thanks very much, Shawn. Yes, look, the mobile networks market has, for a number of years here, been a very uncertain environment. And in fact, I think we had 2 years in a row up until 2013 where, essentially, our sales were down in that market and overall capital spending was down. There were changes in the nature of the equipment. There was different volatility in different geographies. We're very pleased this year to have seen, for the full year, growth. We grew roughly 5% on a year-over-year basis and that 5% growth really was driven by the progress that we've made interacting directly with operators on a global basis. Relative to the coming year, I would tell you that we're cautious in our outlook. We -- I think my guidance and the comments that I made would tell you that it's roughly going to be kind of at these levels or flat for the year. We continue to pursue opportunities to expand our position. The dynamic that we see is that there is a cadence to the buildout on a global basis that essentially would lead one to believe that there is kind of one pool of equipment and there is one pool of kind of the crews and the service providers that install those new systems. Thus, one operator's spending goes up, another goes down. One region goes up, another region goes down. And I -- it makes some sense at the end of the day, because the OEMs, they don't want to have also that deep volatility and, thus, the pricing dynamics around the ultimate equipment going to the operators. If they all bought them at the same time, they'd all overpay for the equipment. And I think that's kind of a well understood cadence in that market, that even when you have strength in Asia, in particular in China in the fourth quarter, which we did see, you have then a slightly more relaxed spending environment or more modest spending environment in places like North America. We don't see any reason to think that, that will necessarily change in the coming year. However, we have a tremendous position, I'd tell you, a much stronger position than we had a year ago. And so to the extent those opportunities do arise, we will be very quick to pounce upon them.

Our next question comes from Amit Daryanani with RBC Capital Markets.

Two questions for me. One, maybe to start with, you guys are looking at about 2.5% organic growth in 2014. I think that's about what you guys did, maybe slightly better, in 2013. I'm just curious, given the fact that the macro is better, it seems like it's better this year versus last, you guys seem to be better positioned and hopefully, you don't get a mobile devices headwind the way you got in the back half of last year. Why do you think organic growth is not going to be better in 2014 versus what you guys saw in 2013?

Sure, I'll let Adam talk about overall organic growth. But just to mention the numbers, at least the ones that we have, we had about 4% organic growth in 2013, and then the guidance is a range of 1% to 4%. So Adam?

Yes, and look, I know that there are many indications of what the market is going to grow and has grown. Just to give you one example, if we look back over 2013, there's a couple of analysts who follow -- industry analysts who follow the interconnect industry. I think one of them has the industry up about 2%, 2.5%. The other has the industry down by 2.5%, 3%. So I don't know what the industry grow. I knew that we grow 4% organically in 2013, and we grew by 8% in total, which is clearly above the industry averages in this year. What the forecasts are for next year remains to be seen. What the credibility of those forecasts is remains to be seen. We think this is very strong guidance. It's prudent guidance, there's no doubt about that. And we're not going to get out ahead of our skis here in terms of that guidance. But there's no question that if we look at our total overall guidance that both Diana and I have discussed, we think it is strong guidance and we continue to have confidence, and we continue to have a goal that we're confident in achieving of beating the industry in growth. It's something that we've done for more than a dozen years, and we certainly don't have any -- we don't have any intention of changing that pattern going into 2014.

All right, and then if I look at the GE assets you guys acquired, maybe talk about, structurally, do you think that asset can sustain and achieve operating margins that are comparable to Amphenol's Interconnect business? Are you comfortable with that sort of assumption for that segment?

Yes, I mean look, we're not, again, going to talk about future forecasts for what the Advanced Sensors Business is going to do in Amphenol. We certainly acquire it not with the intention of keeping it stagnant, and we certainly believe there is tremendous potential in the technology. We know that there are companies in that industry who have good, strong margins. And any company that we acquire, any new member of the Amphenol family, we certainly have aspirations for them not to be below our corporate average. But what that will be, ultimately, when that will come, what the actions are to do that, I mean, this is a very new member of the family, and we're not going to get into a lot of details about the steps and how that's going to come and what the ultimate goals are going to be for that. But rest assured that our team is working extremely hard to identify opportunities to drive the performance. And at the end of the day, as I mentioned earlier, what is the recipe for good margins and great margins like we achieve as a company? Comes down to people, comes down to technology and then it comes down to discipline. And that discipline that you have on spending, combined with technology and great people to execute it, those are all things that we believe very strongly we have in this company.

The next question comes from Matt Sheerin with Stifel. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Just question again on the mobility or the mobile device segment. Adam, I know you're talking it could be down more pronounced than seasonal. But just backing into the -- based on your overall guidance in the Other numbers, it looks like it's going to be down 40-plus percent sequentially. Does that sound about right?

Yes, Matt, we would say about 30%-or-so, which is about the same, actually, as what we experienced in the first quarter of 2013 after a very strong fourth quarter 2012, so... Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: Got you. And Adam I think you said it was going to be sort of moderate. So you expect that to be a drag in terms of that organic growth that you talked about, that 1% to 4%. Sounds like this is going to be one of the -- it's not going to grow, and you're going to have to offset that with growth from some of the other segments. Is that correct?

Yes, that's our expectation that I described, and that's what we see today. Matthew Sheerin - Stifel, Nicolaus & Co., Inc., Research Division: And just with -- I know one of the headwinds you saw in the summer, in addition to demand, Adam, was the fact that you saw some negative content trends in terms of fewer antennas in tablets and other devices. Is that a trend that you saw continue and the growth that you see come primarily from volumes? Or are you seeing any mix shift there?

No, look, I mean, I think as I mentioned before, the strength that we saw in the fourth quarter was largely around mobile computing devices, in particular, tablets. So one can imagine that the sequential fall-off going into the first quarter that Diana just mentioned is roughly in that same 30% ballpark as what we experienced last year. It is also very much concentrated around those same products. I mean -- so as it relates to the full year, we continue to have a strong position across ultrabooks, across smartphones, across the mobile computing devices like tablets and e-readers and whatnot. But I think that we would see, in particular, with this fall-off in the first quarter, that on a comparable basis going to the year, probably those mobile computing devices would be a little less strong. Maybe we'd see a little slightly better performance coming out of the ultrabooks. And our phone business continues to be a strong business, and that's one where we certainly have no intention of giving up, even if it hasn't been the driver of growth. But we see also in the phone market that there are increasingly new players, including players outside of normal geographies, where the feature set of the product is a compelling selling proposition for them. When that happens, that's when our technology finds the -- creates the value that ultimately allows us to participate in the market with the returns that we want to achieve.

Our next question comes from Mark Delaney with Goldman Sachs.

I was hoping you could better describe the types of sensor products that you now have in your portfolio from the Advanced Sensors Business in terms of pressure sensors or force sensors or what exactly the portfolio there is. And then, as you talk about that, maybe you can describe, within the $50 billion TAM that you talked about for sensors, how much of that total market you guys are actually addressing? So your served market within the $50-billion TAM.

Yes, no, that's an excellent question. I mean, they have a very broad array of sensor products and those would go into several categories, which would include temperature sensors; which would include pressure sensors, as you mentioned; includes also gas, moisture and chemical sensors; as well as certain validation-related products. But the sensor market, the $50 billion, I'm not going to proclaim to be an expert. We haven't engaged the huge strategic consulting firms to go make a big analysis of that market. I couldn't tell you specific breakdowns of what is where. But I know that our -- the market that we are approaching is significant within that. Certainly, we have no intention to have this be the last stop for us in the sensor market, and we'll continue to look for other opportunities to grow that market, both organically as well as through acquisitions. And it's a very, very diverse market. Again, it is reminiscent, to me, very much of the connector market. One talks about connectors, and you have RF, you have power, you have harsh environment, you have fiber optics, you have high speed. Within each of those categories, you have tremendous arrays of different interconnect products, different applications, circular, rectangular, cable assemblies, more value-add solutions. And this is really a very, very common description, very common nature of what we see in the sensor market. So we are just dabbling here so far. I mean, this $225 million in sales, as we described, in a huge market, we are still a little fish in that big pond, but certainly one where we believe that there's a lot of opportunity for our growth, long-term, through a wide variety of means and across a wide variety of product types, including some which maybe we don't even know about today. But I can certainly assure you that we're going to get very, very well acquainted with this market over the coming quarters and years and decades. And that will be a great new growth platform for Amphenol.

That's helpful. Following up on that, can you give any sort of rough quantification of how often you think you're going to be able to cross-sell a sensor with a connector?

No, I mean, that's impossible, I think, to put a number onto it, Mark. But, I mean, I think what we do see is that more and more applications today, because of where sensors are going. They're going into harsh environments, things like wingtips and engine blocks and into wherever, in the heavy equipment. More and more, the packaging of those products and the integration with them with the interconnect becomes important. Because ultimately, if you get back to basics here, what does a connector do? A connector takes a signal and it transmits that signal, it carries it from place to place. And the goal of a connector is, ultimately, to transmit that signal without impacting it in a negative or positive fashion. We're just passive. We just let that signal go through. Well, what does a sensor do differently from a connector is it takes a physical phenomenon, and then it translates that into a digital signal that then has to be carried effectively through an interconnect product at some level. And so it is really one and the same, very much reminiscent of when we, a dozen years ago, got into the antenna business. The antenna is not a connector per se, but in many ways, it is a connector because it is taking a certain signal which carries a certain amount of data or voice or whatever that is, and it transmits it without impacting it into the chain, taking it from the air and putting that then into kind of a physical chain, which there is the interconnect. And it's kind of the beachhead of the connector, if you will. And the sensor is very much the same thing. And so as that beachhead of the signal gets more and more into harsh environments, the packaging around that becomes more and more critical, more and more of a selling proposition, more value that you can create for the ultimate customers. And that's where we really see the opportunity here in that collaboration. And whether you want to call it cross-selling or technology development, whatever it is, that's really where we see the opportunity on a collective basis.

If I could sneak one last one in. Now that automotive is growing as a percentage of the total business, I was hoping you could help us better understand what your regional exposure is between the different auto OEMs. So maybe exposure between the Americas, Europe and Asia Pac?

Sure, and I appreciate that question. It is actually getting more and more diverse. I'll tell you that in the fourth quarter, and really for the full year of 2013, essentially Europe was about half our sales, and then the rest of that half was split roughly evenly between North America and Asia. But we're seeing tremendous growth, actually, in all those regions. If you go back 5 years ago when it was a much smaller business for us, I would have told you that Europe was maybe 2/3 of our position in that market. So with both our organic efforts that we've made, together with the fine acquisitions that we've made over the last kind of 3, 4 years in the automotive market, we have built not only a very broad product offering across a much wider range of new automotive electronics, but we've done that while also getting a much broader geographical spread in the business, which benefits us as different macroeconomic trends impact different regions. And most importantly, technology innovation sometimes comes from one region or another. It's not just -- there's not one region that has a monopoly on technology innovation. We're very pleased to be present when that innovation happens in all these geographies.

Our next question comes from Amitabh Passi with UBS.

Adam, my first question was on the IT & Datacom market. You sounded quite bullish on the market for 2014, yet, if I look at a couple of the larger OEMs: Cisco gave a very cautious guidance a quarter ago; IBM, last night. The hardware business was extremely weak. Just trying to understand, is your customer exposure diversifying? Are opportunities like white box switches and servers interesting to you? Does that move the needle from a content perspective? Just any incremental insight you can give us to sort of bridge the disconnect with what we're hearing from some of your OEMs.

Yes, no, Amitabh, thank you very much for the question. I mean, we're very proud of our IT & Datacom performance in 2013. I mentioned we grew in the quarter 10%. We grew for the year 7%. Certainly we have seen the recent earnings releases. And it's not the first quarter in a row where our results don't jive necessarily with what one is seeing in the market of the OEMs. What I can tell you is that we've had just tremendous growth and tremendous progress that we've made designing in new technologies on next-generation systems. And whether that is our leading high-speed products, whether that's the expansion of our power products, or also participation with, let me call that, nontraditional areas of the market. You mentioned white box, but I would also talk about data centers, I'd also talk about service providers in that market, where we continue to make more progress there as opposed to in the traditional OEMs. Looking into next year, as I mentioned in my original remarks, we do expect sales to be down in the first quarter, and we expect in -- for the full year, some moderate growth for the full year. What that ultimately will be, we certainly believe we have the continued opportunity to outperform the market, whether that's reflected in -- however anyone wants to say what is the market, we believe that we are outperforming that, and we're taking share in that market through our new product technologies.

That was very helpful. Just on the telecom market, any updated thoughts? You talked about slightly better trends in China in the fourth quarter. Again, I think there's a lot of expectation building for 4G rollouts in China. Do you plan to participate in that market? Do you think it will be an important market, an important driver this year? And what are your expectations for that market?

Yes, I mean it was, for us, in the fourth quarter, Asia was very strong in that market. I mean, that was -- we had in Asia and the wireless infrastructure market really strong double-digit growth. It was offset by some declines in other markets. And the thing about the 4G LTE in China is that has been a phenomenon. It's not a phenomenon to come. It's a phenomenon that we're in the middle of, if not even coming more towards the tail end of that, in terms of the buildout of the equipment in preparation for the ultimate installation in the field. And the way it works in China is people tend to build a lot of base stations, and then they have the tenders, and then they ship them on several days' notice out of inventory. And so we've been participating strongly with both global and local OEMs on that, and that is -- that was certainly a contribution to us in the fourth quarter in the wireless infrastructure market. What it will be in 2014, again, it's hard to say. I wouldn't get as granular as to give kind of guidance in that market on a region-by-region basis, but to the extent that there is further strength, further equipment buildout, as well as the installation that follows that in Asia, we certainly are going to be there to participate in it.

Our next question comes from Mike Wood with Macquarie.

Adam, I'd appreciate it if you can give us your perspective in terms of why so many of the recent deals have been in automotive in terms of part of Advanced Sensors, FEP and Syntomi [ph]. Is this where the innovation is currently kind of most cutting-edge? Or is it just where the buyers and sellers are meeting with kind of the current outlook in the sector?

Yes, no, Mike, thank you very much for the question. We have talked about now, for the better part of I think, 3, 3.5 years, that we saw a lot of opportunity to grow what was, for us, always a relatively smaller position in the automotive market as we saw this kind of expansion of electronics into the car, which, thereby created an opportunity for us to embed more technology in the products and to realize the returns, the financial returns that we like to get in our business. And so we embarked on over, really, a 5-year time period, a significant expansion organically, together with identifying unique companies that had unique technology offerings that deliver those returns, and made acquisitions. I mean, if we look at the acquisitions we've made over the last 2 years, I would tell you that out of 10 acquisitions, I think it's 3 or maybe 4 of those have been automotive. So yes, that's certainly more than the other markets. But we've made acquisitions across virtually every one of our market segments. In 2012, we added companies in industrial, we added companies in IT & Datacom, we added automotive, we added Commercial Air. The same again this year with the sensor company which, as Diana mentioned, has a significant industrial component to it. We have industrial, again, automotive, Commercial Air, IT & Datacom. So we don't focus all of our acquisition resources just on one or another market. We continue to believe that the best strategy for Amphenol is to have, really, our presence across a wide array of end markets. That being said, when automotive has that growth potential in it, and when it did represent a smaller proportion of Amphenol, no doubt about it, we've been very, let's say, very sensitive to looking for the right acquisitions, and we've been great at executing upon them when they've come about. So if there's more that's there, we will continue to not shy away from that, to the extent that these are companies with great technology that allow us to make those returns that we value so much in Amphenol.

Great, and as a follow-up, I noticed sequentially a little bit share buyback then you've done in prior quarters. Is this just timing or is there any kind of leverage that you're looking at to consider the size of the buybacks?

Sure, I mean, that is true that we did buy back a little less stock in the fourth quarter. But I think that if you look at the company's strategy over many years, that strategy hasn't changed. If you look at the full year 2013, I think you see a good balance between that prioritization we have with deploying capital between the acquisition program, and then returning capital to shareholders. Over the last 5 years or so, I think we funded about $1.5 billion in acquisitions, and we returned about the same amount to shareholders, either through stock buyback or the dividend program. So we, as a management team, feel that maintaining that flexibility on a quarter-by-quarter basis allows us to react, as Adam described, to take advantage of short-term periods of time where we are able to execute more from an acquisition perspective. We continue to believe that the acquisition program is clearly the best strategic and return potential for the company. And so I think you will see us, as we go forward, err on the side of being able to do more from an acquisition standpoint if the right opportunities present themselves. But clearly, there's been no change in the company of -- in the strategy of the company. We try to be thoughtful, and we try to have a balanced way of really deploying the capital with both a balance of acquisitions and return of capital to shareholders.

Our next question comes from Steven Fox with Cross Research.

Just one question for me. Just on your margin targets for the quarter, the 18.8% and then for the full year, the 19.6%. If you hit those targets, especially for the full year, does that imply that the recent acquisitions are sort of at the optimal level from an operating standpoint? Or would there still be more room to improve efficiencies from there?

Sure, I think consistent with what Adam described earlier on a few questions, on the Advanced Sensors acquisition in particular, the guidance does not assume that the acquisitions would reach what we would consider their full potential to be. And so we certainly will continue very diligently to work with those teams, as Adam described, and we're very excited and feel good about the fact that there will be future potential to come from an ROS perspective.

Our next question comes from Brian White, Cantor Fitzgerald. Brian John White - Cantor Fitzgerald & Co., Research Division: Adam, I'm curious what drove the Sensor acquisition? Is that something you've been looking at for a while? Is that something customers are asking for? What drove it?

Yes, Brian, I appreciate the question. I think I mentioned earlier that this is not a new concept to us, the sensor, and it's something that we've been thinking about for quite some time. It's something that we have, for lack of a better term, dipped our toe in the water with, and in certain other acquisitions that we've made. And so again, just to reiterate, it is a market where we have seen more and more value placed upon that kind of total solution that comes with the interconnect product, and whereby we can create value and where it doesn't make sense to our customers. Any acquisition that we make, ultimately, we make those acquisitions not just to add an adjunct to Amphenol, but we do that in a very strategic fashion. We do that, in a sense, to broaden our position in the market, to allow us to create more solutions to our customers, to bring in place strong people and an excellent management organization and ultimately, to create the value for the company that we believe that our acquisition program has done for many, many, many years. And we think this will be another in a long line of successful acquisitions for Amphenol. But it's not something that just sort of popped in out of the blue, if that's your question. I mean, it is certainly an area that we have been thinking long and hard about, across many of the end markets that we participate in. Brian John White - Cantor Fitzgerald & Co., Research Division: Okay, and you're familiar with the Internet of Things. The Internet of Everything, as Cisco calls it. A lot of the industrial market is going toward a major transformation, especially GE connecting things to the Internet. Are those capabilities these sensors have or how far are you going to take it?

Now look, I mean, that opens up a whole topic here. We could spend hours together to talk about what the Internet of Things is and what are the ramifications for Amphenol. It's clearly a very positive ramification, because when one talks about the Internet of Things, you're not anymore talking about 5 billion connected devices or whatever it is. You're talking about tens and tens of billions of essentially nodes, wherever there may be, and a lot of those nodes are sensors. And so whether those sensors are interacting with each other wirelessly, whether those sensors are interacting through some system where, ultimately, they have to be connected, whether the connector systems are antennas or whether they are harsh environment packaging of a circular connector, whatever that may be, there's no doubt about it that as things become more interconnected, as they communicate more, you drive a greater potential for us to really participate across that whole range of applications. And that's not to mention, Brian, the whole architecture and the underlying network where, as that Internet of Things expands, that Internet of Things is creating data. And it's creating 1s and 0s that are going across the network. And a lot of the work that we're doing and where we're winning in the IT & Datacom market, growing like I said 10% in the quarter, 7% for the year, a lot of that is around building that ultimate architecture, which can deal with an Internet of Things. And again, whether those things are a temperature sensor, whether those things are a video monitor or whatever it's going to be, there's going to have to be a backbone there to support the data that comes through it. So we participate in this Internet of Things, really, on the front end, as well as in the backhaul and the back end of how that works, and it's a very, very exciting trend for the company.

Our next question comes from James Kisner with Jefferies LLC.

I was wondering if you could talk about gross margin. I know you managed the bottom line, but your gross margin was a little light this quarter. I'm just wondering what we should kind of think about the year-over-year change in gross margin 2014, if you have a point of view.

Sure, I think as you said in your question, we absolutely do manage the bottom line. We just feel that this makes the most sense. We've done this for a very long, long time frame. We feel it's very important to focus all of our operational teams on all elements of cost. And the only way to do that is not just to try to manage margin or SG&A on a discrete basis. That being said, certainly, when you look at the individual components that lead to operating income margin, there can be some impact from mix within the various markets. If you look at the third quarter of 2013 and the fourth quarter of 2014 -- '13, sorry, we have some -- a large part of the sequential sales growth that comes from the mobile device market, as an example, and that's a market that just by its nature tends to have lower gross margins, it also has lower SG&A costs. So I think you will, from time to time, see some fluctuation on either the gross margin line or on the SG&A line. But I think what you do see on the bottom line is a consistently strong industry-leading operating income margin that has been expanding. And we have had very, very strong performance this year, with about a 23% conversion margin on incremental sales for the year. So we feel very good about the profitability of the company, and we do feel it's important for us to continue to manage the bottom line, because that, at the end of the day, is what we want to maximize.

Our final question comes from William Stein with SunTrust Robinson Humphrey.

I'm hoping you'd be willing to comment on the material content, metals and plastics and such, in the sensor business relative to the connector business. Is there a big difference between those 2 in that regard?

Yes, I mean look, they're ultimately -- as I mentioned before, sensors have a sensor element, and then they have some packaging to them, and the packaging, oftentimes, is an interconnect product. So I think to the extent that they have the packaging of an interconnect product, they would not be so different. But the underlying elements of the sensors are very different. They're made of different things, and we're certainly getting our hands around what all those different things are. But it's not necessarily a tremendously material-intensive business from that standpoint. I wouldn't say that it's characteristically so much different than our business, and if anything, there's probably a little bit less of things like gold and a little bit less of things like copper in the core elements. But when you have the final packaging of that, this would not be so different from a connector.

Great, and one follow-up, if I can. I think historically, you've been consistent about talking about a 25% drop-through or incremental margin on the operating line. And with these acquisitions running lower, do we think about the 25% as the aggregate number? Or is that on top of and kind of separate from the cost savings you're going to get from the acquired businesses?

Sure. I mean, I think I've given some information on 2014 in terms of the operating income margins we're expecting in 2014, with the acquisitions coming in newly. And embedded in that guidance, relative to the base business, is that sort of normal target that you're describing. But clearly, because the acquisitions, primarily the Advanced Sensors Business, is somewhat lower, that does result in a lower conversion margin for the 2014 year. I think as we would look out beyond that, there isn't any reason why our goal would change on an ongoing basis, once the acquisitions get up to what we would consider to be our average operating margin level. When exactly that happens and as we work through it with them, we wouldn't exactly say at this point in time. But we do feel that there is more potential from an ROS perspective for the combined total than necessarily what you would see in the 2014 guidance.

Very good. Well, I think that this was our last question. And once again, we very much appreciate all of your attention here in I know what is a busy day for many of you on the call here. Let me just reiterate, we're very, very pleased with our strong finish to 2013, and we have great confidence in 2014, which will be another excellent year for Amphenol. Thank you, all, very much, and we look forward to speaking to you again soon.

Thank you for attending today's conference, and have a nice day.