Good day, everyone. Welcome to this Microchip Technology Third Quarter and Fiscal Year 2012 Earnings Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Microchip's Chief Financial Officer, Mr. Eric Bjornholt. Please go ahead, sir.

Good afternoon, everyone. During the course of this conference call, we will be making projections and 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 and that actual events or results may differ materially. We refer you to our press release of today, as well as our recent filings with the SEC that identify important risk factors that may impact Microchip's business and results of operations. In attendance with me today are Steve Sanghi, Microchip's President and CEO; Ganesh Moorthy, Microchip's COO; and Gordon Parnell, Vice President Business Development and Investor Relations. I will comment on our third quarter of fiscal year 2012 financial performance, and Steve and Ganesh will then give their comments on the results, discuss the current business environment and discuss our guidance. We will then be available to respond to specific investor and analyst questions. We are including information in our press release in this conference call on various GAAP and non-GAAP measures. We have posted a full GAAP to non-GAAP reconciliation on the Investor Relations page of our website at www.microchip.com, which we believe you will find useful when comparing GAAP to non-GAAP results. I will now go through some of the operating results. I will be referring to gross margin and operating expense information on a non-GAAP basis prior to the effects of share base compensation and acquisition-related expenses. Net sales in December quarter were $329.2 million and were down sequentially 3.4% from net sales of $340.6 million in the immediately preceding quarter and were down 10.5% from net sales of $367.8 million in the December 2010 quarter. Looking at revenue by geography for the December quarter, Americas were down 3.4% sequentially, Europe was down 15.3% sequentially and Asia…

Thank you, Eric, and good afternoon, everyone. Let's now take a closer look at the performance of our product lines. Let's start with microcontrollers. Our microcontroller business was down 4.4% on a sequential basis, with both 8-bit and 16-bit product lines down sequentially. Our 16-bit business was down 5.4% sequentially as we experienced some short-term pushouts from customers in the computing segments who were affected by supply-chain issues stemming from the flooding in Thailand. For the first 9 months of fiscal year '12, our 16-bit business was 11.5% higher than the corresponding period in fiscal year '11, and we're expecting good growth in the March quarter as customer demand rebounds. We continue to retain the designs we had established, and we are securing many new design wins at new and existing customers. Our 32-bit microcontroller business had another strong quarter of growth, up 33.7% on a sequential basis and up 137.3% from the year-ago quarter to achieve a new record. For the 9 months of fiscal year '12, our 32-bit business was 134.1% higher than the corresponding period in fiscal year '11, and we're again expecting strong growth in the March quarter. Despite the challenging environment, this product line continues to demonstrate growth as many new designs continue to go into production. Our 32-bit results also reflect market confirmation of our belief that what customers care about is that if we -- is that we offer a PIC microcontroller solution with all the attendant brand promises, and that the choice of the core itself is not as important. The number of customers in volume production grew to 809, and we continue to build a broad base of customers to grow this business. Over the last 12 to 18 months, we have been investing and accelerating the pace of new microcontroller…

Thank you, Ganesh, and good afternoon, everyone. Today, I would like to first comment on the results of the December 2011 quarter and then provide guidance for the March 2012 quarter. Our December quarter results were consistent with what we had guided during our last earnings call. The thesis that we had described to the investors 2 quarters ago was that industry was going into a broad-based demand weakness and inventory correction. Our thesis has played out exactly as we have predicted. We explained to the investors and the analysts that we see the effect of industry events first. Microchip went into this correction a quarter before many of the others in the semiconductor industry. Since then, we have seen this sentiment get reflected in results coming from the early -- every semiconductor company to the earnings season. Then in the last earnings call, we said that we saw December as the bottoming out quarter for the current cycle for Microchip. We are reconfirming our belief that December was a bottom quarter for this cycle, and we will begin to see a sequential revenue growth starting in the March quarter. We went into this cycle one quarter earlier than most, and we will also come out of this cycle a quarter earlier than most. You have seen that many of the semiconductor companies missed their initial December quarter guidance, have guided down further for March quarter and have called the March quarter their bottom. For Microchip, the December quarter was our bottom, and we will grow in the March quarter. Now when you start to compare calendar year 2011 to calendar year 2010, Microchip's results look favorable to the industry's results, particularly if you adjust for the acquisitions made by the other companies. Ganesh has commented on the product lines.…

[Operator Instructions] We'll go first to Christopher Danely with JPMorgan. Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division: This is Venk Nathamuni for Chris Danely. My first question is how does -- you said you've lowered inventory, combined inventory of both the Microchip and the distributors. But how does inventory now compared to what it was during the 2008, 2009 downturn?

Eric, I think you have some data on that.

Yes. So I mean, inventory went higher in the last downturn. Then when recoveries spiked up, it went down pretty significantly from there. But this is definitely not the high we've seen in inventory. I think we were at 143 or 144 days before and we're at 137 now. Venkatesh Nathamuni - JP Morgan Chase & Co, Research Division: Okay. And then as my follow-up, you talked about recovery in orders. Is that in your opinion driven primarily by demand coming back, or is it more of an inventory restocking phenomenon that's going on?

It is always a combination. The downside was both weak demand as well as inventory correction, and the recovery would really have both elements in it.

We'll go next to James Schneider with Goldman Sachs.

Realizing it's still very early post the Chinese or Lunar New Year, can you give us any kind of sense of color from your customers in terms of bookings levels after the Chinese New Year holiday versus the ones you were seeing in the rates in January before the holiday?

I think Monday was the first day back from Chinese New Year, so we'll really get the first data point next week after one week is over. Right now, we basically have 2 or 3 days, so I don't really think there's any data yet.

Okay, understand. And then on the white goods market, I think some of your peers have talked about somewhat mixed results out of that market in terms of the demand that they're seeing. And I think the retail results over Chinese New Year were also somewhat mixed. Can you talk about that vertical in particular for you?

We can't break it down by vertical. Our customer mix is much, much broader than many other people who tend to sell into large verticals. We have 30,000, 40,000 plus customers in China, so we can't really break it down by vertical. But we do know, after looking at some large customers worldwide, our automotive business was slightly up last quarter, but all the others were down. And even the automotive was driven by really a couple of customers where we had some significant design wins during the tsunami period. But otherwise, there was really a broad-based weakness. As far as China or Asia was concerned, our business was up in Asia.

Yes. Our Far East business is up 1.9% sequentially.

We'll go next to Chris Caso with Susquehanna Financial Group.

I just wonder with respect to the gross margin and the gross margin improvement that you're expecting in the March quarter, what does that imply with respect to your own inventory levels and the channel inventory levels as we go forward? Do you plan to keep the inventory flattish from here? Or do you anticipate some replenishment going on going forward?

So I think we don't really know what the distributors will do. We take the revenue only on what the distribution sell-through. So the distribution activity in a given quarter, on a sell-in basis, doesn't really impact our revenue, and we don't really care. Lead times are short. If they want to build inventory, we have the product available. If they don't want to build inventory, so be it. So what's really important is the combination of distributor inventory plus ours. If they hold more, we'll have less; if they hold less, we'll have more. And the combined distribution plus our inventory will do roughly what?

We expect it will be about flat in the March quarter.

Okay. Great. And this is a follow-on, a clarification. I thought I heard you say back at the 61% gross margin rate by the end of the fiscal year. Just to confirm that my understanding is right. And if that's the case, what -- as you grow back to the 61% level, is that predicated on a certain revenue run rate level in order to get back to those level -- to that gross margin level?

Yes, of course, it is but we're not going to tell you that. We're not going to tell you the number.

Just for clarification. So Steve's comments were that by the end of fiscal 2013, we would expect to be back at about the 60% non-GAAP gross margin range, and our long-term model of 61% hasn't changed.

So 60% by the end of fiscal '13 non-GAAP and 61% eventually?

That's right.

Because he was trying to triangulate the 61% means what kind of gross margin. Obviously, internally, we have a model, but it also depends on the mix of the product lines and mix of where the demand comes in. So it has lots of moving pieces. It's not going to constrain because various product lines have various different gross margins, but we have a model internally. And yes, it does tie to a revenue number.

[Operator Instructions] We'll go next to Kevin Cassidy with Stifel, Nicolaus. Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: On the 32-bit results, can you say what applications were you winning the most with your 32-bit processor?

What we have said before is we have a broad set of customers. We're at over 800 customers and a broad set of applications. We don't really detect a particular application or segment that is driving the strength. It's pretty broad-based in terms of 32-bit wins as well as our 32-bit revenue growth. Kevin Cassidy - Stifel, Nicolaus & Co., Inc., Research Division: How about the analog being up quarter-over-quarter far exceeding the market? Are they being tied to the same 32-bit controllers, or is it just a general lift that you're getting in the new product?

A combination of both. Certainly, as we have strengthened our 32-bit, it does bring some analog alone. But the analog business is a larger business, and it clearly has strength in a number of areas that we have brought new products over the last 1 to 2 years that have gone to production. So it's also pretty broad-based in how it's driving growth.

We'll go next to Brendan Furlong with Miller Tabak. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: The inventory in the channel at 35 days, how does that compare to previous bottoms in the cycle?

So just the inventory over time is really ranged. It's had a broad range. It's been kind of low 30s to about 50 days. But if you look over the last 3 years, this is on the low end of where we've been at 35 days. So I would think that over time, distributors will do some restocking. But I don't know when that's going to happen, if that's going to be in March or quarters further out. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: Okay. Great. And then the other question I have, some of your peers have noted a particular weakness out of China in the December quarter and also in the March quarter. I'm just curious what you're seeing in the Chinese market in particular?

I think it's hard to talk about general. Some of the others, depending on what their revenue recognition is, was it the sell-in or the sell-through? And I've spoken about it in the last 2 or 3 conference calls. If the revenue recognition is sell-in, then it's happening what we told you, where the sell-in guys took a huge reduction of distribution inventory as the negative revenue. Microchip's distribution inventory went down significantly, but it doesn't affect our revenue because we are sell-through. That's why we went into this correction first, a quarter earlier than most, and we're coming out it before earlier than most. So our Asia business was up slightly while other people were down double digits because they were recognizing reduction in distribution inventory as the reduction in the revenue. Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division: Understood. And my last question, if I look at the tax rate for fiscal '13, should we consider it staying more or less the 13% level?

Yes. It'll be in the general range that we are in the March quarter.

We'll go next to Terence Whalen with Citi.

The first question relates to a higher level of thinking on the business. It's been a while since you've added to the analog business, and obviously, there's some activity in the M&A market. I was wondering, I don't anticipate you to comment directly on your strategy, but I wanted you to comment on the proportioning of the business. And to what degree would having a little bit of a larger analog business perhaps helps with cross-selling microcontroller or memory?

What activity are you talking about?

Activity in terms of potential sales of activity. Genon [ph] recently was purchased. There are other activities for proposed sales of companies.

So you're referring to the M&A activity in the market?

Correct, yes.

So if you lay out a chart of Microchip's analog growth over the last few years, you will see that we'll be nearly on the top of the list of analog company growth. You can compare that to the standalone analog companies which are in the $100 million to $300 million, $400 million, $600 million range, or you can even include the companies which have large analog business as part of the other large companies. So even at our size, we have done very well in introducing very good products, being able to acquire very good analog talent, having a pretty good strategic plan and executing it to really grow market share and do substantially better than the others. As far as the M&A is concerned, we continuously look at opportunities. As you know, in the analog business, we have acquired some companies in the past. If a good opportunity were to become available, we certainly would be interested. But we are not willing to pay the kind of premiums that you have seen in some recent M&A market. That's just not our style.

Okay. Very helpful. And then the second question I have is in regards to the timing of why Microchip sees either improvement or softness perhaps one quarter earlier than other companies. I know that you talk a lot about your operational excellence and lead times being so low that being a contributing factor. The question that I had is, to what degree does the programmability of your products enable distributors to more rapidly stock and destock your product? To what degree does that have a timing element versus other companies with fixed hardwire solutions that have much longer skew tails?

So I don't think that's a significant factor because the distribution stocking or destocking doesn't affect our revenue. We don't take that as revenue. The biggest effect, and I've seen this earlier, is because we are 100% sell-through around the world and our competitors are sell-in. So that's the largest difference. When the distributor stocks it, it makes the revenue higher. When they destocks it, it makes the other people's revenue lower. Stocking and destocking has no effect on Microchip's business. It only has the effect on the inventory. It has no effect on revenue. Our revenue is driven by demand creation and distributors selling out. Now programmability makes it easier, makes our products more desirable. It has many other positive effects on the market, but being able to see it early is probably not as much one of them.

[Operator Instructions] We'll go next to Harsh Kumar with Morgan Keegan. Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division: Steve, you talked about a fiscal gross margin target of 60% and on longer-term, 61%. I'm curious if you could elaborate on what the biggest factors are that would play into that thinking?

So I think some of the factors are obviously the factory utilization. We took a number of shutdown days last quarter because inventory levels were high and the business was weak and the distribution was destocking. So when the distribution was destocking, we were running our factories lower. But longer-term, there are a number of factors playing. So number one, the factories will go to full production as the factories ramp. That has probably the single largest effect on incremental gross margin. We're also continuing to shut off all the depreciation. So in our factories, with our business model, we use the equipment for many, many years after the equipment is fully depreciated. So that has a positive impact on gross margin. We're adding a low amount of new capital. So that, again, there's a less amount of incremental depreciation being added. And there are ongoing die shrinks as we take the products to more advanced technologies and other cost reductions and yields and all that. So those are really the main factors. The other factor is the product mix, but I think that's fairly slow moving, where you could have product lines which have better gross margin than the others. And over long term, you don't really know which one is going to grow more than the other, and they could have minor deviation in overall gross margin, the effect of those product mixes. So I think those are the number of factors which we're driving. Harsh N. Kumar - Morgan Keegan & Company, Inc., Research Division: Got it, Steve. And there's a lot of -- there's some fair bit of thinking that because communication and industrial businesses in general, not yours, but the industry as such got hammered last year towards the end, that they would spike back up a little bit better than most. I'm curious if you could, may be not give numbers, but if you could just give us your sense of exposure to those areas, that's comm and industrial?

We don't really have any breakout by segment -- by industry segment. So we don't really break our business internally by how much is industrial, how much is communication. In the kind of products we sell, it's exactly the same Microchip product that could go into industrial application, the same product could go into a commercial application. And same large customers may have divisions that are building industrial products and other divisions that are building commercial thermostats. And so it's impossible for us to track it. Sometimes we buy it as one-line item and use it in both, so therefore, we don't really break our business that way. We don't look at our business that way.

And ladies and gentlemen, that does conclude our question-and-answer session. I'd now like to turn the call back over to Steve Sanghi for any additional or closing remarks.

Okay. Thanks for attending the call. We are heading to a conference. I think Eric Bjornholt will be at the Stifel conference coming up, and we'll see some of you on the non-deal [ph] road shows that we often go from time to time and there are some planned this quarter. So thank you very much. Bye-bye.

And again, that does conclude today's call. We do appreciate everyone's participation.