Greetings and welcome to the MaxLinear Q4 2016, Earnings Conference Call. At this time all participants are in a list only mode. [Operator Instructions]. I’d now like to turn the conference over to your host Mr. Gideon Massey, Investor Relations Specialist. Thank you, you may begin.

Thank you, operator. Good afternoon, everyone and thank you for joining us on today's conference call to discuss MaxLinear's fourth quarter 2016 financial results. And the announcement of its definite agreement acquire Marvell's G.hn business. Today's call is being hosted by Dr. Kishore Seendripu, CEO and Adam Spice, CFO. During the course of today's conference call, we will discuss our financial performance, review our business activities for the fourth quarter and the pending acquisition of Marvell's G.hn business. After our prepared comments we will take questions. Our comments today will include various forward-looking statements within the meaning of applicable security laws including without limitation, statements relating to our current projections, forecast and expectations with respect to first quarter 2017 revenue and revenue contribution from key product markets. Gross profit percentage and operating expenses on a GAAP and non-GAAP basis; the potential impacts on our business of recent acquisitions and the acquisitions we may pursue in the future and our current views regarding opportunities and trends in our market including our current views of potential for growth in each of our target markets. These projections, expectations, and other forward-looking statements involve substantial risks and uncertainties and our actual results may differ materially from currently forecasted results. Risks potentially affecting these statements and our business generally include substantial competition in particular from increasingly large players as our industry consolidates. Potential declines in average selling prices and factors that could adversely affect our operating expenses, such as litigation, asset impairment or restructuring. In addition our target markets including target markets we may pursue through future acquisitions including our pending acquisition of Marvell's G.hn business may not grow in the manner or at the rates we currently expect. We face risks associated with consolidation trends in our operator markets and we face integration risks…

Thank you, Gideon and good afternoon everyone. Thank you all for joining us today. Before delving into the financial results, we are excited to report Q4 2016 revenues of $87.1 million, which brings to close a very successful 2016. In 2016, we not only realized a record revenue of $387.8 million and strong cash flow generation from operations of $117 million, but we also made solid progress towards our strategic objective of expanding and diversifying our served addressable market. We achieved this goal, by expanding our CMOS, analog and mixed-signal product footprint in our existing broadband operative platforms and by successfully penetrating the large and growing optical and wireless infrastructure markets. Today’s announcement of our acquisition of Marvell's G.hn business is consistent with the stated strategic objective. The G.hn acquisition further expands the size and diversity of our multi gigabit access and connectivity footprint to include large telcos deploying XDSL G.fast and fiber broadband data delivery technologies for the home. 2017 will prove to be an exciting year for us, as multi-year product development will sample too or ramp to mass production at key Tier 1 customers in broadband, optical and wireless infrastructure markets. These product innovations include our next generation Multi-Gigabit MoCA 2.5 SOC, our 28 nanometer CMOS 5 gigahertz to 45 gigahertz single chip Microwave wireless Backhaul RF transceivers and an expanded line up of 32 gigabaud, 45 gigabaud and 64 gigabaud limiting and linear TIAs and laser drivers for the long haul metro and datacenter markets. In second half 2017 we will sample our first cable infrastructure SoC Solution, which addresses the emerging full Duplex DOCSIS 3.x Head-end and fiber node applications; it should in the future enable cable MSOs to deliver upto 10 gigabit data services to the home over the existing hybrid fiber-coaxial network. Our…

Thank you, Kishore. I’ll first review our Q4 2016 and full year 2016 results and then briefly discuss our outlook for Q1 2017. As Kishore noted our Q4 was $87.1 million consistent with our guidance. GAAP and non-GAAP gross margin for the fourth quarter were approximately 57.8% and 63.9% of revenue respectively. At the high end of our prior guidance of 57% to 58% for GAAP and 63% to 64% for non-GAAP gross margin. The delta to the midpoint of our guide is primarily driven by favorable mixed within our operator and infrastructure revenue. This compares to GAAP and non-GAAP gross margins of 57.6% and 63.1% respectively in the third quarter of 2016 and net GAAP and non-GAAP gross margins of 56.4% and 58.1% respectively in the year ago quarter. The delta between GAAP and non-GAAP gross margins in the fourth quarter was primarily acquisition related, reflecting the amortization of $5.2 million of purchased intangible assets and inventory step up and lesser $100,000 of stock-based compensation and stock based bonus accruals. Q4 GAAP operating expenses were approximately $42.1 million, $400,000 below guidance with the delta primary related to lower prototyping facilities and restructuring expenses, partially offset by higher payroll and patent related spending. GAAP operating expenses included the accruals related to stock-based compensation and stock based bonus and incentive plans of $5 million and $2 million respectively and $3 million for the amortization of purchase intangible assets. GAAP operating expenses also included $1.3 million of restructuring charges related to the closure of our Atlanta and Austin facilities commensurate with the rolling off of the Entropic Video SoC revenues and related support overhead, and $600,000 in acquisition and integration related expenses. Payouts under our second half 2016 performance bonus plan will be settled primarily in shares of MaxLinear stock, which are…

Ladies and gentlemen at this time we'll be conducting a question-and-answer session. [Operator Instructions]. The first question comes from the line of Tore Svanberg with Stifel. Please proceed with your question.

Yes, thank you. First question in the past you've given us targets for the year especially with some of your newer businesses, like last year you gave us the fiber optics target. If we look at '17 do you have targets at this point for the fiber optics business and also wireless infrastructure?

So, hi Tore, this is Kishore. The last year was we gave you targets which we exceeded to be closer to the high end of the range for the fiber optic business. This year I think as we were alluding it in the previous calls we expect the revenue to be somewhere between $20 million to $30 million hopefully closer to the $30 million range for the optical fiber. Within that context the revenue increases will be primarily driven by new product launches in linear TIAs and linear drivers for the 32 gigabaud, 45 gigabaud markets. And then for LR4 applications which we've got design wins we've started initial shipments across the broad range of customers. So as our TIA product portfolio expands and catch its momentum, later half of second -- of 2017 we expect the revenues to grow. And so that’s where we gave you the range today for the fiber optics business. On the wireless -- the wireless business as a whole, I think we have given we have -- I think we've earlier talked to you about correct me if I'm wrong Adam, we have given guidance somewhere in the $35 million to $40 million range of revenues for 2017. We reinforce the guidance on those as well.

Very good. And with the acquisition of Marvell G.hn business, first of all does it come with any revenues this year. And can you also talk a little bit about what this does as far as expanding your SAM?

Sure I'll take the finance question and Kishore can talk about the SAM expansion. So yes, it does come with the revenues. The business is coming with -- yes I would say call it nascent revenues, but certainly gave us a strong pipeline of design wins and platforms that are already ramping. So this is in the business where we have to wait for the revenue to start to develop it's already in place it's growing. It's de minimis to say for example in the Q1-Q2 timeframe, that we’re talking about the close will happen in Q2. It’s in the low single-digit millions of dollars of revenue and that’s when I mentioned in the prepared remarks that we expect it to be essentially neutral to non-GAAP earnings in 2017 and of course it assumes maybe could be a little bit dilutive in the first quarter and then kind of a little accretive in the Q4 period. But it’s kind of in the neutral boundary for 2017. And the margin profile of the business is very consistent with the rest of the MaxLinear business. So we’re pretty excited about adding this to the mix. And Kishore do you want to talk about SAM.

So, in connection with the G.hn platform, Marvell’s G.hn platform is the most advanced platform for the power line multi gigabit home connectivity using the power lines and twisted pair. And so this nicely complements our very, very strong position in MoCA and together we will be the undisputed technology leader for wireline connectivity. MoCA as a coaxial connectivity platform is prevalent primarily in North America, Europe and a few other parts of the world for distribution of data inside the home. However there are large telecom operators and especially those that serve database on XDSL or fiber and G.fast that would like to use a twisted pair or a power line wireline connectivity and today we don’t address those customers' platforms. So, if you really add up the major telecoms in China alone, on the telecom side China telecom alone has 200 million subscriber homes, but if you add up all of these countries and homes where there is no coax preinstalled inside the home, the subscriber base that we can address on the connectivity for broadband is quite substantial. So at this point I would say the wireline connectivity TAM has at least doubled from what it was before from let’s say 100 million subscriber homes to now anywhere between 200 million to 400 million subscriber homes. So that’s how I would characterize the expansion in the SAM. So is that okay, Tore for you?

Yes, no that’s great. And last question is on MoCA, so you mentioned you are already shipping the MoCA 2.5 solution, I am just wondering as we look at the whole year, does that mean MoCA could actually grow this year since you’re already starting shipments now or will it still be some puts and takes with the older version of the MoCA product.

I think MoCA is a very promising one, we expect that compared to 2016, we have -- we experience some growth and specially this particular design with the large wireless operator for the latest offering on MoCA is very promising and we expect to see some growth. Having said that, on the existing cable platforms the older Entropic MoCA solution 2.0 solution will be the substantial revenue driver for us and that will remain so until we get through 2017 on a run rate basis. However this is great news for us in terms of our product that we just launched getting good traction design win at a very, very large U.S. wireless operator and we are very excited about that.

Very good, thank you so much.

Thank you. Our next question comes from the line of Gary Mobley with the Benchmark Company. Please proceed with your question.

Hi, guys. Thanks for taking my question. Wanted to ask about 2017 growth, I am assuming that’s not to be a growth year for you guys, but maybe if we’re so lucky you can give us some general parameters to as far as growth considerations and if you’re not willing to give that maybe if you could speak to when we might see the first past of year-over-year comp, might it be in third quarter of 2017?

Yes, it’s pretty early in the year Gary. As far as kind of put a definitive line in the [indiscernible] when the sequential or when the year-on-year turn positive. I think to your point, we’re not right now, we’re not pointing to a positive full year-on-year increase I think that would be -- if we got there, that would be a huge accomplishment for us that’s not currently in our planning scenarios today. That said there are opportunities in the second half of the year certainly to reclaim a positive year-over-year comparison.

Okay. And 2017 OpEx, could you give some general -- some of your general budgeting considerations in why to think about OpEx.

Yes our view on OpEx really hasn't changed. Of course when we tuck-in the Marvell G.hn business we'll update you guys as far as what that means for spending, but right now I think we've said earlier that we expect to be able to roughly keep our OpEx flat year-on-year. And there will be movements in there for there is things in the mix and there is timing of tape outs that can make it little bit lumpy quarter-on-quarter. So for example this quarter it was a step up still in the range. I think last year when people were asking me similar question I would say that in 2017 we probably expect to see OpEx anywhere between call it a number would be $29 million plus to maybe as high as $32 million in any given quarter. So I think you've got about a $2 million or $3 million range within any quarter for OpEx. But I think we're going to be able to contain it to within that range. And hopefully get pretty close to flat 2016 to 2017 for the full year.

Okay. Given the geographical differences and used cases between MoCA and G.hn, I'm assuming there is perhaps limited customer overlap. But in those cases where you do have overlap or I guess ask differently, have you had any discussions with the different telcos queued up to deploy G.hn for Marvell and how you guys might benefit from this or augment if you drove that plans?

Gary it's a very, very good question and that's why I went fairly deep into explaining the differences between MoCA and G.hn. The general operator situation is quite separate, it's very complementary acquisition for this reason. The telecom operator that subscribe to the ITU standards do not use MoCA for the distribution inside the home. They like to use that twisted pair and that's why into the home they use G.fast or ex-DSL or fiber Ethernet into the home. So in those circumstances outside of North America there is no corruption between the G.hn MoCA situation, and it's a very, very large market. And for those telcos G.hn will primarily most likely prevail as a distribution standard. They will be slightly different in North America where coax is totally prevalent in the home. And there MoCA wins outside because if you comparable G.hn MoCA is still a far superior connectivity medium because you're sending data over a shielded copper line. So MoCA is far superior to G.hn however the G.hn wave two technology from Marvell accomplishes on twisted pair a gigabit plus data rates that otherwise was not possible in the past. So what it offers for us is now to go and sell the product to all the telcos that are deploying ex-DSL DSL, G.fast or fiber outside of North America where the ITU standards line up and offer them a connectivity solution called G.hn. And with that entry into that platforms we can now start cross-selling other technology portfolio IP elements that we have within the MaxLinear capabilities. So that's the game plan, you have to expand the TAM, enter the SAM and expand the SAM.

Okay alright. Thank you guys.

Thank you. Our next question comes from the line of Ross Seymore with Deutsche Bank. Please proceed with your question.

Hi guys. Thanks for all the end market color that you give. I guess looking back on the other side of legacy, you talked about the $2.1 million in the fourth quarter from the legacy video SoC. Can you size for us where the analog channel stacking was and give us an idea of how you expect that to fall off as we go forward?

Yes Ross this is Adam. Look on the Analog channel stacking we were telling people that they should expect somewhere in the range of call it $7 million in Q4 and that's exactly where we landed. So I think it was very consistent with our expectations and the expectations for Q1 we were telling folks to expect somewhere between say $4 million and $5 million in the first quarter and I think we will actually do better than that. So I think the fall off sequentially Q4 to Q1 is probably a little less or a little more subdued than we were thinking a month or so ago. But it's still very much in that for the year it's nothing what we changed it seems like just a little bit more gradual decline Q4 to Q1 and maybe even Q1 to Q2. But when you look at the year in its entirety nothing has really changed.

And then as we look into the guidance for the March quarter and you talked a little bit about what the gross margin puts and takes were, can you go into a little bit more color about that terrestrial business, I assume that must be in the operator side of the equation to get you to your $80 million or 80% of sales, but I’m surprised it has that much of an impact on the business so talk a little bit about the leverage on that gross margin line if you could please?

It actually it’s a fairly stark step up because really, the revenue really wasn’t there in Q4 at all, it’s really kind of a Q1 and Q2 and it’s very operator specific deployment cadence that’s really again first half of 2017 focused. So it’s kind of a [burstee], happen for a couple of quarters and then go away it’s kind of a onetime revenue event. It’s leveraging a very old product that we have in our portfolio, it’s our ISDB-T to the demod SoC that we’ve been shipping since I think what about 2011. And so I’d say it’s for this particular opportunity it was a fairly comparative process because again it’s lagging technology and other people could throw their hat in the ring, we threw our hat in the ring and we were pretty aggressive to try to drive the remaining contribution margin dollars from those old products on our side of the ledger and we were successfully in doing that, but it did come at a cost as far as overall gross margin optics or mix for the company.

And it’s really not that much of a mystery because if you look at the HD-DTA deployments that Brazil was promising to deploy before the Olympics and then the World Cup and then just kept delaying and then their political issues and then the currency issues, and finally they have pulled the trigger and they have placed for the year above 4 million to 5 million units of HD-DTA box with their government subsidize through the operators and the bulk of that is going to be shipped in the first half of 2017. And so if you look at a product that's got no COGS optimization for the last six, seven years and we are not going to do anything about it. And so it was perishable revenue and we decided to take it basically.

The overall margin, Ross to give you an idea I mean it’s actually from a Kishore’s point there is not a lot of support or other overhead kind of tied to this particular product, but it’s quite a bit lower than many times lower than our corporate average, it is that’s why it has such a dilutive impact, it’s pretty poor gross margin but it’s not bad when you look at it purely on contribution margin dollars.

And -- but the good news is that so the margin will bounce back higher once these shipments have happened through Q1 and maybe early part of Q2. So we are not overly concerned, it was tough for us to not walk away from the contribution margin.

And then I guess the final question I would have is the it sounds like the majority of it is that business going up, but it also has the wireless infrastructure and the high speed interconnect businesses sound they are going down sequentially. So talk a little bit about the reason for those fallowing off and I assume that that's negative mix implication for the gross margin as well that that might reverse when those two businesses start growing again?

Absolutely on the wireless business this is our first year in it really speaking the beginning of the last year at this time of business we didn’t have a business in wireless. So if you really look at that from that prospective we are experiencing what maybe a seasonal or CapEx spending step down in preparation for budget outlays by telecom operators. But we had a very strong Q4 for both our wireless access and wireless backhaul, which we are very, very pleased because at the time of these two acquisitions we got a little anxious about maybe there was some pull we have estimated things wrongly, so we are very happy about that. On the second piece on optical side once again it’s our first real Q1 with no distortion, we are being cautious China went to the Chinese New Year and we had a little bit of backlog coverage issues it goes through the distributor. And so we are taking a cautious approach but generally we think we’ve consolidated our market share in the laser driver market with the two main Chinese Tier 1 OEM while our TIAs are just beginning to RAM. So still the bulk of the revenues in the laser driver is with the two Chinese Tier 1 OEM. And so we are waiting to see if the promised increase in the market size of 30% to 35% that we are told by our customers materializes. So we’re just begin careful about it as well and obviously there is some forward pricing of the products as well in preparation for taking the big share of the market that they expect it will increase.

Great. Thanks guys.

Yes.

Thank you. Our next question comes from the line of Anil Doradla with William Blair Investment Management. Please proceed with your question.

Hi guys, just a couple of clarifications. So, on building up on Ross’s question, were there some strategic reasons beyond just the contribution margin or getting that top line for pursuing these terrestrial sales and going forward would this be could we see such events these one-off events playing out in the course of 2017? And I have follow-up.

Okay Anil, I think you ask a very, very good question. If you recall what Adam said, it is an operator business. So these are major operators in Brazil, we have our satellite front end, satellite digital outdoor unit shipments, these designs one believe it or not three to four years ago, if you look at our earnings transcripts from that point of time we keep talking about this and finally it happen when you had completely given up. So there was no way to walk off from that because these designs were done and our base band partners on that side for the M-Tek decoders they are committed. So you don’t walk away from the situation, so you call it strategic, yes the actions were strategic to remain in the socket, but the business itself is not strategic for us and we have continuously emphasized that, but to the extent there is a broadband operator and it is on our broadband platforms, we will support them. And secondly, none of the other businesses outside of the terrestrial DTA stuff are these well below corporate margin products for us. So, hopefully these are one time blip and you have noticed that last year we have steadily over every quarter improved our gross margin, in fact Q4 was around 64% and we hope to get back there as rapidly as possible. So I wouldn’t look it as a systematic pattern at all, it’s a onetime blip and as far as I am aware there are no more [DDP] operator businesses out there that we are now serving.

So, it’s fair to say, I am sure what you’re saying, if this opportunity would have being presented to you today, you would not have -- you would have walked away from it.

Absolutely.

Wonderful. And on the channel breakdown for cable, can you help us understand the breakdown between 16, 32, 24 today and as you exit the year 2017 how should we be looking at that?

Yes, I guess that’s quite a bit of detail. I think that if you look at certainly that the trend has been to consolidate around 24 channel. So the bulk of our volumes now are 24 channel in the cable data DOCSIS market, there is an increasing amount of 32 channel there as well. So you are really seeing the -- we never had much of a 16 channel presence there is really 8 channel and the market moved on this pretty quickly where we got share in 24, and now on 32 and of course now we are facing the DOCSIS 3.1 ramp, which we’ve talked before is really more of a second half phenomenon. So I would say that it’s moved to our favor that we have got higher ASP volume transitions to the higher channel count, and I don’t see anything kind of offsetting it the next wave is just coming going than from 24, and 32 to operators that are being kind of the earlier ones to deploy DOCSIS 3.1, which right now of course we have been talking about Comcast being tip of the sphere for DOCSIS 3.1 deployments.

Okay. And just a clarification Adam, did you quantify the impacts of this terrestrial revenue, was this 100 bps or 150 bps on the gross margin? I missed that I think.

We haven’t broken that out, but I would say it was based on the guidance for our Q1 guidance had it not been for this particular thing, it probably cost us I would say probably around 100 -- I’d say it’s probably 100 basis points is probably a reasonable estimate for that.

Okay, wonderful and looking forward to 2017. Thanks.

Great, thank you.

Thank you. Our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed.

Hey Adam and Kishore, just wanted to follow-up maybe you just answer it, did you say that the impact from this the terrestrial satellite business in Brazil was about 100 basis points of the sequential decline in gross margin?

It’s about right.

That’s correct.

Okay, so I mean these are ISDB-T, 200 demod I mean it’s there you see actually higher price for it in that market, you said something about 4 million or 5 million units, should we be thinking price of about box so it’s maybe $2 million to $2.5 million spread across those two quarters, is that about the right?

You could have been our sales or marketing in-charge.

Okay.

You’re pretty close, you are in the right ballpark.

Okay great. Second question on the G.hn you said I think Kishore over sort of twisted [indiscernible] the Marvel Solution team get a gigabit per second surprised they didn’t realized that G.hn was up that faster I guess what’s your thought on the competitive outlook versus Wi-Fi in those markets today that are served by power liner twister pair?

You ask a very complicated question, when I talk of gigabit plus G.hn every standard and every connectivity standard talks about gigabit plus as the Holy Grail. But actually what is really the most important criteria is whether it’s Wi-Fi or G.hn or MoCA is like how much reliably the bandwidth you get at a particular distance per user reliably right? These are all peak data rate statements and that’s really a few hundred megabits right so and that too in speed too that means it’s really they’re doing that by adding more bandwidth on G.hn. And likewise it is true for Wi-Fi as well, Wi-Fi is even worse with coverage and the robustness as you move out of the home. So what it’s playing out into is that and you have seen announcement for example of retail products where they’re improving Wi-Fi coverage by using G.hn or powerline connectivity as the backbone, but in the operator side they are augmenting their Wi-Fi coverage by using these wired powerline connectivity as the backbone and have local adapters between the power line connectivity and the Wi-Fi so that you can use Wi-Fi locally at the distribution point. In the United States MoCA is the preferred one by all the cable operators and because it’s the most robust medium of connectivity maybe the coaxial cable which is shielded and so nothing comes close to it. So I think that G.hn is really going to be more a non-U.S., non-North America parts of Europe phenomenon and it’s going to be complementary in terms of just like MoCA will be in the United States for Wi-Fi coverage.

Okay, great thanks for that color. And then just lastly in the prepared comments I think you said you have now expanded the high-speed or optical customer based to 12 different customers. I know your two lead customers in China were kind of China long haul. Of those 12 that you start to ship to this year could you give us some sense how many of those would be coherent applications, how many of those would be datacenter applications and perhaps importantly how many those are outside of China just to give us some sense of the geographic diversification of that customer base.

I would say out of the 12 about 8 will be outside of China and the one new one in the China will be a small player. And then two will be in Japan and the rest of them will be both Japan and North America combine. So they’re in both locations so put it differently all the diversification is coming outside of China. However most of this diversification is coming at least half or more in the TIA space and the shipments into China for TIAs happen through outside of China. China does not do rose sourcing from their suppliers inside China they are really non-Chinese players who supply roses into the Chinese market, because of the software security technology in terms of photo detector and alignments with the TIA to ensure that you’ve got maximum sensitivity. So put it simply the end market maybe China, but all the customers are primarily non-Chinese.

Okay any sense data centers versus coherent?

Okay. The datacenter piece obviously on the -- I would say, I do not have a breakdown with that but I would say that the same players that are there in the coherent are also in the data center. And those are two or three of those big module guys and there is one guy was pure datacenter.

Great, thank you.

Thank you. Our next question comes from the line of Brian Alger with Roth Capital Partners. Please proceed with your question.

Hi guys thanks for squeezing me in. All my questions have been asked just a couple of follow ups, I think you mentioned that the satellite digital outdoor was actually up double-digit, I'm just wondering if that was an excepted growth or if that was better than expected?

So I would say it was an expected growth though it’s lumpy and as we've always struggled with these broadband operators cable and satellite, their behavior is quite sporadic in the Q4-Q1 window, some will order more in Q1, some will not ordering in Q1 and will order in Q4. So it’s really we're going through the what I call the vacillations in order patterns from these satellite and cable operators. So really I wouldn’t read much into that as more than expected if you integrate it over the -- over a two quarter window it’s probably is expected.

Okay. And as we make the transition away from the analog stacking and move towards digital, do we expect that volatility in the order pattern to dissipate?

I don’t think you should expect when it involves operators, the -- certain seasonality in the year to dissipate now whether you can call it volatility or seasonality, I don’t know, but generally these operators pace as we have noticed Q2 is strong, if we just go with the cable operators and Q3 is reasonable, Q4 they may go all the way down and then Q1 to come back up or they pick up in a hurry at the end of Q4 and they go down in Q1. So really there is a two quarters window of good nice healthy order fulfillment and after that it sort of so, so. So I think that that kind of a behavioral pattern I expect it to remain.

Okay. And just a quick I guess enquiry, with regards to this G.hn business, I think you guys mentioned the development teams out of Valencia, curious as to how many people are part of that team, and what kind of OpEx level we're looking at obviously you described it a little bit as being earnings mutual plus or minus, personnel wise what are we looking at?

So the team today is a team of about 77 people in Valencia and then there is a handful of people outside of Valencia in the U.S. So I think one of the benefits that we're seeing from picking up a team in Valencia actually is the cost is actually pretty reasonable compared to U.S. development efforts. So it’s actually just helps us to give a broader kind of diversification of resourcing across now we have Burnaby, British Columbia, we've got a very big design center in India. We've got a nice size design center in Herzliya, Israel and in addition to Irvine and Carlsbad and also Hsinchu, Taiwan. So we're getting a pretty global footprint and this is just kind of expands that actually gives us one of our lower cost locations. So we're not at the point yet, but we’ll give you more colors as we get close to the deal close, because we've really just -- we've not really completed our integration planning for the entity quite yet.

I mean, it’s very interesting, right. Certainly doubt on me, as I was thinking about this question is that, we'll have close to about 200 R&D design engineering base with Valencia’s addition to MaxLinear’s already big R&D team and that’s quite exciting because it means they were optimizing our R&D OpEx quite nicely across the best talent in the world geographically, while taking advantage of the differences in cost structure.

All right, good. Well I appreciate all the detail today guys, appreciate your answer on all the new answers of the business. Thank you.

Thank you.

Thank you. Our next question comes from the line of Erik Rasmussen with Stifel Nicolaus. Please proceed.

Yes. Thanks guys for allowing me to get a follow-up here. Just on the tax rate Adam, what should we be modeling for 2017?

I think most if I look at where your colleagues are at and kind of where we've been directionally pointing people, we've said that tax rate will kind of migrate its way up towards 20%, as we progress through the year and I don’t think anything has really changed off of that. You should be getting to it overall, right now based on everything we know and of course your tax is a very difficult thing to predict right now given all the noise that’s coming out of Washington. But right now nothing is causing us to change our outlook. And I would say that if you’ve got a blended tax rate that’s in the mid-teens on a non-GAAP basis, or for 2017, I think you’re in pretty good spot really no need to change where you’re at.

Okay thanks. And just one last one, and it’s on the DOCSIS 3.1, it sounds like things are on track for more of a bigger ramp in the second half of the year. Two things, anything that could potentially push that out a little bit that you might foresee now? And then also any sort of size of how big that business could be whether it’s in revenue or penetration or those sort of things?

So, Eric. I think you asked a very, very good question and if you recall even in last year, beginning of the last year in the first half I was saying that having set the patterns of DOCSIS 3.0 deployment. I expect the revenue ramp for DOCSIS 3.1 to happen in the second half of 2017. And it seems that that's all its playing out is there a risk for the rollout, yes sure in a sense that it's not as big as they wanted to be at this stage. But it's indisputable that by Q4, Q1 the following year is going to have massive one. So I think that it is going to be a ramp in second half, but how it starts in Q3 versus Q4 I cannot speak for there will be a big ramp. And I do expect that there will be more growth in data subscribers for at least the big player like Comcast and with the way things are playing out you have heard about syndication of Comcast X1 platform to other cable operators. The uptick in DOCSIS 3.1 will happen much faster because it would spread to multiple operators very rapidly. So it could be yet be one of the biggest ramps for the DOCSIS platform. Secondly for us there is an increase in the BOM. And as always where a new standard deploys and we should benefit from that. So we expect growth coming out of the DOCSIS 3.1 for sure.

Thanks so much.

Thank you. Our last question is a follow-up from Ross Seymore with Deutsche Bank. Please proceed.

Hi guys. One housekeeping item and one more real question I guess. Adam the stock-based comp and share count. I know this is when you compensate people and bonuses with shares not money. So what is the answer to those two for the first quarter please?

We've been running about $5 million a quarter in stock-based comp and little over $5 million a quarter in stock-based comp and about around $2 million per quarter in stock based bonus. As I don't think you should assume any real deviations from that. And then on the share count I think on a fully diluted basis we've been I think we're modeling around probably around 69 million shares?

Got it. And then the less housekeeping related question. If you go into your high speed interconnect business, Kishore you talked a lot about the number customers increasing in the geographies increasing as well. If my math is right it sounds like you ended the year at about a $5 million quarterly run rate and you talked about potentially getting to a $30 million number. When the first quarter is down that kind of imply there is going to be a big pop somewhere. And I know that business is always lumpy, but any help you can provide on either seasonality or timing of new product ramps or new customer launches that gives you confidence in that hockey stick at some point during the later three quarters of this year.

I mean the clear answer is that I just want to make this kind of clear, there is a lot of attention to these higher gigabaud, 32 gigabaud, 45 gigabaud, 64 gigabaud linear products. But really that's the small percentage of the big deployments that are happening in China. And that will be the case for them because they want cost to be low and for the next two years the 100 gigabit NRZ is going to be the big hugest portion of the deployments. So having said that we are launching the TIAs and the ramp of these TIAs is what is going to drive the growth and that will the second -- and I expect the pops to start happening in the second half of the year sometime. Now the good thing about the TIAs is that they tend to margin rich. Unlike drivers which tend to be modules. But the negative thing about them is that it take a longer time to qualify. Because people will roses that have got very good complicated optical alignment issues. And then people buy roses directly into the main boxes. So you have this dichotomy between the two. So if the qualification cycle stay on track the ramps happen in second half. And can get pushed around a little bit, yes. Therefore I'm being cautious when I give you the range of $25 million to $30 million of guidance for optical revenues for 2017. And at the OFC which is in March sometime we will be announcing a bunch of new products and there will be demos. And I think from that point there will be a good visibility of all the new products in the linear market that coherent market that we will be launching, which is primarily the 32 gigabaud, 45 gigabaud and 64 gigabaud products. But the 45 and 64 gigabaud products will not generate any meaningful revenue until 2018 or beyond and that is just the fact for the industry.

Great, thanks for the detail.

Yes.

Thank you. Ladies and gentlemen that does conclude our question-and-answer session. At this time, I will turn it back to management for closing remarks.