Please standby, we're about to begin. Good day. And welcome to the Fairchild Semiconductor Third Quarter 2012 Earnings Conference Call. Just a reminder, that today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Dan Janson. Please go ahead, sir.

Thank you and good morning. And thank you for dialing into Fairchild Semiconductor's third quarter 2012 financial results conference call. With me today is Mark Thompson, Fairchild's Chairman and CEO; Mark Frey, our Executive Vice President and CFO. Let me begin by mentioning that we'll be attending the UBS Global Technology Conference on November 14th in New York and the Credit Suisse Technology Conference in Scottsdale on November 27th. We'll start today's call with Mark Frey, who will review our third quarter financial results and discuss the current status of fourth quarter business. Mark Thompson will then discuss our product lines -- product line results, end markets and operational performance in more detail. Finally, we'll reserve time for questions-and-answers. This call is scheduled to last approximately 60 minutes and being -- is being simultaneously webcast from the Investor Relations section of our website at fairchildsemi.com. A replay for this call will be publicly available for approximately 30 days. Fairchild's management will be making forward-looking statements in this conference call. These statements, including all statements about future results and performance, are made based on assumptions and estimates that involve risk and uncertainty. Many factors could cause actual results to differ materially from those expressed in forward-looking statements. A discussion of this risk factors are provided in the quarterly and annual reports we filed with the SEC. In addition, during this call, we may refer to adjusted or other financial measures that are not prepared according to generally accepted accounting principals. We use non-GAAP measures because we believe they provide useful information about the operating performance of our businesses and should be considered by investors in conjunction with GAAP measures that we also provide. You can find the reconciliation of non-GAAP to comparable GAAP measures at the Investor Relations section of our website at investor.fairchildsemi.com. The website also contains a variety of useful information for investors, including an extensive financial section to facilitate your investment analysis. Now, I'll turn the discussion over to Mark Frey.

Mr. Janson, I think Mr. Frey has discounted. We'll get him right back on the line.

Okay. Thanks.

And ladies and gentlemen, we do apologies. It will be just another moment. And Mark Frey has rejoined.

Hi.

Okay, Mark. You are live now.

Okay. Thanks, Dan. Good morning and thank you for joining us. I'm sure most of you have had a chance to review our earnings release, so I'll focus on the key points in my comments. Third quarter sales were lower than expected due primarily to incrementally weaker demand in computing, industrial and appliance end markets. Sales would have actually grown sequentially had we shipped in line with distribution sell through but instead we proactively reduced channel inventory again in Q3 and our clients do the same in Q4. We are managing inventories and costs very closely as we navigate through the current business cycle. So let's review some of our detail starting with the income statement. For the third quarter of 2012, Fairchild reported sales of $359 million, down 1% sequentially and 11% lower than the third quarter of 2011. Gross margin was 33.5%, up a point from the prior quarter due to a richer product mix and lower variable compensation. Although we reduced our factory loadings during the quarter, we were able to offset financial impact of lower utilization with spending decreases and other internal improvements. R&D and SG&A expenses were $86 million in the third quarter, down 11% sequentially and well below guidance due primarily to cost reduction program and lower variable compensation expense that is tied to adjusted EBIT dollars generated. Roughly $4 million of the reduction in OpEx was due to one prime reversal of variable compensation expense accrued in entire quarters which will not recur in Q4. Third quarter adjusted net income was $32 million and adjusted EPS was $0.25. Our adjusted tax expense was $1 million, which benefited from some exchange rate related adjustments in deferred tax assets. Adjusted EPS would have been $0.22 if the tax rate had been at the guidance, midpoint…

Thank you, Mark, and good morning, everyone. I'll start today with an assessment of current business environment and discuss our approach in managing through this period of economic uncertainty. I'll wrap up with the brief review of some operational highlights from the third quarter. We grew mobile sales significantly in the third quarter to now 29% of total sales, up from 23% last quarter and 16% two years ago. The strength in mobile more than offset weaknesses in other market and we would oppose to the modest increase and total company sales that we now elected to reduce channel inventory. In other end markets, demand was incrementally weaker especially in computing. We were also more selective in accepting lower margin commodity notebook-related business, which costs us a few points in sales but benefited gross margins. Our exposure to the commodity notebook segment in computing is now only 3% to 4% of sales and we will likely reduce this further. Bookings were weaker than expected in the third quarter and while we began Q4 with a sequentially lower scheduled backlog, the incoming order -- rate of orders has increased. We believe customers are being cautious in reordering given the macro economic uncertainty coupled -- coupled and short lead times -- coupled to short lead times. We reduced our distribution channel inventory by $8 million in the third quarter and we plan to cut a similar amount in the fourth quarter, primarily in our high voltage business, so that we can enter 2013 well-positioned to grow. While it is possible, customers will continue to reduce inventories we know that at some point this will be come a tailwind to us as they reach unsustainably low levels. So looking forward, we are confident in our ability to grow our mobile business in Q4…

Thanks, Mark. We'll now open the call to questions. I would ask that in order to allow more of you ask questions, if you limit each person to one question and one follow-up. Anne, let's take the first question please.

Thank you. (Operator Instructions) We'll take our first question from Ross Seymore with Deutsche Bank. Please go ahead.

Hi, guys. Just a couple of questions. The first one on the revenue side of your business in general. Mark Thompson, how are you looking at the fourth quarter of this year versus the fourth quarter of last year and specifically, is the problem more on the supply side of the equation, the demand side of the equation and just generally how would you compare this year versus last?

So, I'll see this. It's a bit of a challenge. If I were to look at our, for example our exposure to mobile is higher than it was at that point. Certainly computer -- computing and mobile I would say is comparably strong to where it was last year. Computing is in general substantially weaker, standard computing than it was at that time. Probably the biggest difference is, if we look at the industrial and appliance side in particular, those were still -- the demand profile was still declining fairly rapidly last Q4, whereas this Q4 they look to be fairly stable and so while I wouldn't call a formal inflection as they haven't started to go up in a substantial way. They are no longer in decline and so those would be some of the big points. Automotive, I would say has been pretty steady. It doesn't typically move up or down that rapidly. And so is relatively steady compared to that. So that would be sort of puts and takes of this quarter versus then.

Then I guess, switching over to Mark Frey, one question on the gross margin. Can you tell us what levels generally utilization is going to go to in the fourth quarter of this year and then remind us how the startup charge is for the 8-inch conversion flow through as we get into 2013?

Yes. So, we will take our loadings down, so Dan, said what the Utilizations were in Q3, and we'll go incrementally lower from that, because in addition to planning to lower our channel, we're also planning to lower our internal inventory. So we're really trying to get ahead of that curve in Q4. In terms of the 8 inch staff startup costs, that costs related to qualifying all of our processes in new wafers. Essentially get immediately expensed. So about -- that's about $3 million in Q4. And would go up a little bit from that in Q1 and Q2 and then we would plan to actually turn the fab on around the midpoint of the year. Then the period expense of qualification would taper off. But obviously new fabs will take a couple of quarters to get down the learning curves and to get filled up again.

So one thing to add to Mark's comment is that because the utilizations will be lower than 80% we'll be periodic expensing the majority of the variance associated with that in the fourth quarter so it will occur at the same time, so it won't -- don't expect that to flow through to Q1 as some times that occurs -- it should overwhelming be taken in the fourth quarter.

As is reflected in the numbers. But take—

Rob, the other point I would make on that is, that the $3 million of market stock, about the incremental increase from Q3 to Q4 that we're guiding, really it's already a big startup cost there. So all in we were taking up by the two point headwind to gross margin assumed in our Q4 guidance from the startup cost. And as Mark said, we'd expect that to continue to through the first half of next year.

Perfect. Thank you.

We'll take our next question from Terence Whalen with -- Citi. Please go ahead. Mr. Whalen, your line is open, please check your mute button. And again, Mr. Whalen, your line is open. And there is no response. We'll take our next caller from, Parag Agarwal with UBS. Please go ahead.

Hi, guys. Thanks for taking my question. Just wanted to get a feel for the endmarkets in the fourth quarter. Just wondering if you could -- brand, order them in order of their strength. I think mobile would be the strongest part, just wanted to get a feel for the remainder of the markets.

Yes. For I would say is in general, mobile is the strongest, however I think you have to partition it a little bit, and that there is a two dominant players that are substantially stronger than the rest, then everything else is probably still at the top but not by such a large increment. The next increment from there is automotive. At least as our exposure, around efficiency, solutions small engines direct injection and so forth are steering conversion that would be next in line. Next in line would be appliance and industrial and then bringing up the rear would be computing.

Okay. That's very helpful. Now if you look at your mobile market and if we look into 2013, so the increase in your mobile revenue is it going to come from units, or it is going to come from increased [contracts] or from both?

From both.

Okay. And did you have any 10% customers this quarter, do you expect any one in next quarter?

Not quite yet. So we are very close on two customers but, they have not tipped the 10% level.

Thank you very much.

And we'll take our next caller, we'll go back to Terence Whalen with Citi. Please go ahead Mr. Whalen.

Hi, can you hear me.

I can.

Thank you. Two questions. The one is a little bit of a higher level principled question and that is as we do see increasing customer concentration in the mobile supply chain and this is somewhat unprecedented. What are the challenges in your view in sort of maintaining independence and pricing power as high valued supplier given that we can see continued increasing customer concentration. How you balance those things out and to the participating and the growth of those supply chain, while also maintaining independence and also the providing some security in terms of the road map of your own independence Thank you.

Terence, that's a great question. And it's one that could lead to a very very long answer. And I'll try to avoid that. It's something that we have thought a lot about. And I would say at this point, we haven't reached the point of concern. But as you look ahead. I think, and as you get substantially north of 10% exposure, to any customer I think that they could begin to have undue sway over. How you deploy your dollars and so forth. And pricing and some other kind of things. So, there's a couple of things that we're trying to do in that. So first, our first goal is to get to the point where it becomes a problem. And that's the phase I would say that we're in today. I think the other one is a clear partitioning between how you engage one customer and how you engage the other, because you do have to carefully manage IT and so forth. And I think the other one is that you have to make sure that you stay, appropriately engaged in advanced innovative solutions. Because if you don't then if you -- you could wind up having a high exposure to something that you don't have much pricing power in. And that could become a big risk, so those are the three, kind of big categories that we focus a lot on. Now, I think some of the mitigations are that while architectures varies say from lead maker one to lead maker two. The elements in the block are fungible. So I think it's the case where some of the -- gap right. So there's a bunch of these blocks that can be standardized. And captive libraries. So that they can be redeployed in the events of market shifts and so forth. But we -- so those are some of the de-risking elements. But it is something that has to be to your point, expressly baked into the strategy.

And then Mark, a quick follow-up I would ask is what portion of a new product, blocks or sort of cold from redesigned library, versus designs independently? Thanks.

It's the more -- the larger the chip and the more blocks on the chip, the more it will tend to recycle standards thing simply because if you're talking about a lot of new blocks and a new integration architecture then the risks are to compound. So we're you know, typically if you go to relatively small chips. That's where you deploy new features and then the integration is typically well recycled existing features. So that's and our products really spends that spectrum from relatively simple where we're trying new things to stop where we're integrating existing deployments.

I appreciate the insight. Thanks, Mark.

We'll take our next question from Craig Berger with FBR Capital Markets.

Hey, guys. Thanks for taking my question. I guess within in -- MC cubed I kind of expected to see better results in September, can you help us understand how much of that is the handset business? Within the handset how much of that is sort of a leading proprietary products versus legacy products if any? And just what you're seeing with respect to the tier two customers that you mentioned, thank you.

So, if we take the math, 29% of the company is in mobile. And our exposure in mobile is overwhelmingly, vast majority what I'll call privileged positions stuff. Which is to say mostly single and dual sourced and so it's 29% of the company which would make it, in the range of half of the MC cubed business. So that's -- that would be -- that piece. If we look at then the balance, we -- as commented -- we consciously took core computing down substantially in the quarter. And that was -- we simply don't see the opportunity to create, value added sockets there and so we consciously minimized that. So again if you use the similar multiplier so MC cubed core -- traditional core Wintel style computing is down to about 10% of MC cubed. And then the balance is made up by server data communications et cetera in the mid voltage arena which is -- doesn't grow as fast as mobile, but the design cycles are also longer and they tend to be stickier and higher valued. So that's -- those are the puts and takes. So a fairly fast moving -- fairly privileged, positions that's growing rapidly, one in the -- the piece in the middle that is positioned but moves more slowly and then layer at the bottom which moves fast but is very unattractive and we have chosen to aggressively minimize it. I think that should be largely gone, I would say by the end of the fourth quarter. You know, we're at 3% to 4% today -- and it's kind of 9% or 10% on MC cubed we're going to take it down another increment in the fourth quarter. So by the time we exit the year, so we didn't highlight it, but one of the headwinds to moving the top line has been, our selective posture in computing and, you know, the blood is just about out of that patient right now so it will be up by the end of the fourth quarter.

Okay, thanks for that detail. Just as a follow-up, can you just remind us all why you're investing so much into capacity, the 8 inch upgrade, how much of that is capacity versus next generation tool sets and whether the risks that you're overinvesting here in a weak demand environment? Thank you.

So, I think the risks that we are overinvesting in a weak demand environment is relatively low. If we look at the opportunity that if presents us to consolidate our manufacturing footprint, it -- it's quite heavily de-risked. Others two -- [paths] that, if things really heat up again and -- the thing to point out is that the 8 inch capability that we put into Korea supports all of our MOSFET family products so it supports low-voltage solutions of the kind that go into mobile handsets, it supports mid voltage solution of the kind that go into some of the datacom kind of application so I just described. And it support high voltage that go into things like adaptors for mobile phones and automotive and power supply solutions and smart power modules. So we have a fully adaptable path on that. One would be to minimize our footprint in some other places up to an including eliminating our footprint other places or alternatively if the opportunities present themselves to grow. So, on the low demand picture what we would see is his improvement in cost position as we consolidate our footprint and if the demand environment supports it, it could support a higher top line. So I believe that there is very little risk that we will be standing there in three years time, regretting that we did the upgrade.

Thank you.

We'll go the next caller Tristan Gerra with Baird. Please go ahead.

Hi, good morning. What types of inventory based projects do you have by end of this quarter embedded in your gross margin guidance?

For the end of Q4 is to get it down below 90. Remember that days sales obviously get as both the numerator and the denominator, and so it's a little dangerous to track the weeks of inventory at a time like that because, we're hoping that Q4 would represent trough we don't one way or the other but -- obviously, we are trying to get the dollars of inventory down significantly. And from a long-term standpoint we would more target to get closer to 80 but we're very comfortable in the round the 90, I think we're still on the low end of our peer group at that level. And it also gives us added flexibility if we do get a resurgence of demand in the next couple quarters.

So Tristan, I think if you look at the mid case for the trends that we see in the market. I think we will be very comfortable with our -- in general our inventory position is good now, and I think the correction that we've been applying in the second half of this year will be essentially complete. And so would not expect those to continue into next year, again assuming the trajectory of the markets doesn't deteriorate. So as long as it stays the same or it gets better we're in good shape.

Tristan, the other point I would make is that we are working to take some customers direct that used to go to distribution and that won't necessitate us how we having little bit more internal inventory. So keep that in mind too as we go forward.

Okay, that was very useful. Also what are the inventory days at distributors currently and given your commentary that you pen on shifting again by about $80 million in Q4, what does that imply in terms of point of sale sequentially change specifically in distributors in Q4.

So the current on point of sale is flat to sale is flat to slightly down in the fourth quarter that has been supported by the first few weeks of data, and it's also statistically very typical. And so that's the current planning assumption and the revenue estimates, that we've provided a assume taking $5 million to $10million out of that. So our current inventory level is in the 10 weeks in the mid 10 weeks range and so this would then take that another leg down. So something in the high 9s or of very low tens. On a pretty low revenue base, so at that point as we would look forward as I said its becomes market continue we would have, we would not want to take inventory lower as I think it creates the supply challenges in the face of modest, even modest recoveries in certain markets and that why we want to avoid.

Great. Thanks a lot

Okay the next question from Chris Danely from JPMorgan

Thanks guys. Just the follow up on last question on this inventory, last time that ten week It was well below ten weeks in 2010. I mean in fact in 2010 we had some significant supply challenges because of an entire systems inventory badly deleted, depleted as we you know 2009 was the as recovered and so far so I take it low as a 8 weeks and you know in many of the . If we have to look at the profile of supporting if the very low mix then you can support at with the smaller or be a low mix or only a few customers you can support much much lower total numbers, but where the demand is carried down its high mix it actually have challenged even if 10 weeks to have really good customers service so if it wants being a bit of a blend so you actually look inside. We have some products that we maintain and four and five week range and others that we keep in the twelve we would like keep twelve and fourteen. So it's not it makes markets dependent as were we set the target, so you know we would say we obviously we're taking it down, so we think it's a little bit high relative to where an ideal would be but only a little bit.

Got it and then assuming we stay in this flattish environment for Q1, and with all the puts and takes on your gross margin and utilization rates et cetera would -- gross margins can be expected to remain flat or could they go up a little bit in Q1, if we say flattish?

So if we use those assumptions and they're all -- there were typical markets, in other words Q1 is usually not a big leg up from Q4, traditionally. But we've taken a number of onetime things. We've taken inventory down on both internal and external and fully reflected in the number. So in a flat demand environment, we would expect the gross margins to then be trending to the up as we move into the first quarter.

Modestly up.

Great. Thanks guys.

We'll take the next question from John Pitzer with Credit Suisse.

Yeah, thanks guys, couple of questions. Mark, just to finish up on the PC business, how much of the decision to get out -- do you think it's just because volumes are low and if we were to see some sort of PC recovery there's some revenue there for you? And how much of it do you think is just perhaps architectural changes, that just make that market less intersecting to you?

So I think it's the question I don't have definitive answer to yet right. So I mean at some point, we need you get your exposure gets small enough it slides down the hierarchy of how much of your day is, kind of thinking about it. And I guess we're probably there in computing. If you look at the trends in computing the jury ultrabook is the one and the ultrabook flavors are the ones that potentially could stay interesting because they do have some incremental value on things where we have some strength and capability and therefore could get paid for. I think it's fair to say so far the ultrabook has been hasn't really been that important in terms of the total lines. If you look at sort of iterations on standard notebook architectures, I see nothing that would suggest that they would become interesting to us again. And so I think what we will probably do for 2013 is maintain enough exposure in key sockets to those to allow us to flex in and out somewhat to manage utilization, but make sure that we would never capitalize to those.

And then Mark as my follow-on on the mobile sector. I guess can you help me understand what -- when you look at the high end of the market and your privileged position relative to your dollar content today where could it go, as those top two guys and then conversely given that there's no middle market anymore for smartphones, can you help me understand whether not the low end of the smartphone market is one that where you guys have strategy, is it worthwhile to have a strategy there? Can you participate there with a margin kind of profile you'd like for the overall company? Thanks.

So in terms of content that's the top two; is we have I would not -- and we would certainly would target to at least double our content in dollars terms that's the both the top two over the next, I'll say one to three years because there's a very large [year] bar on those things. And so I think, very comfortable with our ability to grow there. And if I then move to the everything else tier there are definitely continued good opportunities there. And among other things as when you can very -- there's some attractive business to be taken selectively there especially when people get small they don't have very good pricing power anymore. And so you can make good -- some very good money in some of the second tier businesses. The other thing we know from this is that leads change right, and so while the top two look very very well positioned, one would have said that the top one look very very well positioned five or six years ago. So I think it's fair to say that we will continue to see challengers in the space and so I think you can never is this -- and it's very risky to only pay attention to the top two. I think you have to pay attention to the whole chain, you have to pay attention to if where things are, where emerging players are coming from and really anticipate share shifts that could occur.

Mark, on that point, can you help me to understand what's your [revenues] with the Chinese low end smartphone OEMs today and whether or not that end market specifically is one that that's interesting from a margin perspective for you?

So, our approach to that is heavily in the reference design category. And that -- so again there's -- it's similar to the corollary to this is the tablet question right, these tablet architectures are more or less scaled up phone architectures. And there's -- to your point there's a lot of design activity impossible for you to track of via direct sales methodologies. And so you go to market there to the chipset reference designs. And so that's our approach to that.

Okay, thanks guys.

We'll go next to Steve Smigie with Raymond James. Please go ahead.

Great, thanks a lot and I just want to follow up on number of questions, that have been asked already but you mentioned Q1 gross margin being up, potentially. And I think you referenced Q1 sometimes being a leg up from Q4 so and it's up and this is but so would you be suggesting at this point that given that inventory work down there's reasonable chance that in the flat environment Q1 revenue would be up sequentially?

So, well first of all let me go on record and say we are not guiding Q1 at this point. But let me offer some the input that could cause one thing or the other to happen. So we are -- as we look at Q4 to Q1, so traditionally the big negative increment in Q1 is driven by computing which in Q1 is always much weaker than Q4. So Q1 our computing exposure is substantially lower therefore that negative should be certainly substantially mitigated. We are consciously taking down channel inventory and internal inventory in the fourth quarter. Our expectation is that that we'll cease, and that we'll ship to demand in the first quarter. And that we are taking all of the -- all the negatives associated with the inventory reduction reduced et cetera into our financials in the fourth quarter in every way that we can legitimately. So if you look at all those I would expect from an end market point of view that both the inventory reductions and the reduction in computing exposure should favor Q1 that could be better than historical in terms of the ways the seasonality normally flexes. So that would be the way I would look at it today but there is a lot of things are going to happen between now and then and so we'll know better when we get to it.

The other point that I would add is that the other element that was largely absent before the industry this year was appliances and then to a lesser extent I guess the industrial market usually that has a pretty strong first quarter. We know that we have worked hard to reduce our inventory in the channel, in fact the inventory reduction we've been talking about the channel in Q3, were largely in our appliance -- high voltage product line. So we think we're going to be well positioned going in the first quarter, so we have the potential of having the tailwind of not having to reduce channel inventory further in Q1 if the demand looks like it's going to be there and if we do see anything that looks like seasonal demand that's going to be a nice change of events going into 2013 versus what we've seen in 2013 -- 2012.

Okay, great, thank you for the answers. Next, you gave some dollar content discussion on the previous call about you're going from $0.25 to $0.50 of content on actual phones from your privilege customers. Similarly, you talked about adding charger of about $0.50 for those folks as well. Can you talk about how successful you were in terms of hitting that dollar content on phones Q3 and Q4 here, and is that relative to the couple of extra dollars you talked about gaining would that be -- so the couple of dollars you're talking about getting to in addition to this?

No, Steve, I would say that our trajectory of gains in mobile is occurring in a way that's completely consistent with our past communications. So it's neither ahead of nor behind what our expectations have been.

Okay. And then could you give some sense with regard to the share of those handsets that you were targeting, let's say you're expecting to get 70% share [foreign] customers. Where are you in terms of that I mean after Q4 would you be halfway through gaining the share that you can gain. I think you're gaining share at both customer -- privileged customers so, how far you're along in that process. And I apologize, [I am going to] sneak one more in separately Mark you guys in the past have may be this big tradition of working down your standard products, now you're working down your MOSFETs, 18 months from now you're going to start working down some other business? I guess can you speak to what's your -- in a sense intermediate growth because it seems like as you move up to food chain also I think other business so quickly seem like it's becoming a little bit of challenge at top line growth any commentary would be great. Thanks.

Okay. So I will try to keep a catalog of portfolio of questions, so with that…

Sorry about that.

I'll go backwards on that. So if you look at the forces there are strong forces of commoditization that exist in the industry and everyone has to wrestle with them. What I would say is at the outset, standard products are and always have been a commodity. And so that's not a change. Computing, I would say there was a time when we thought maybe couldn't -- wouldn't be a pure commodity but I think the entry of tablets basically cemented its fate as a commodity, and so we're basically acknowledging that in our departure from that marketplace. If I look at the rest of our portfolio, I think they will all face certain amount of commoditization but if you look at force of commoditization in standard computing it's very high. And certainly the dominant microprocessor producer has an explicit strategy to sort of [dominate] all the componentry around the microprocessor and it's very hard to impossible to overwhelm that. So what I would say is I think that we've acknowledge that and we've sort of dealt with it. Now the big question I think embedded in what you've asked is could smartphones become like computing, and I think the answer of that is I don't know. But I think it's much less likely to end up like computing in large part because there isn't there was a collaborative overwhelming force to standardize architectures and commoditize around between Microsoft and Intel. And that's not the case and the architectures are driven by the OEM and in turn they are taking very unique value positions for themselves which require ongoing innovation. So what I would say is to the extent the hence sets remaining and innovative, features continue to migrate and proliferate and it's driven by the OEM then I think that it will remain attractive and there will be opportunities for them to be great businesses. To the extent that one or two next layer players like if once chipset player became dominant for example in handsets and the OEMs stopped innovating then I think it will turn in to computing all over then. Right now I would say that's a likelihood of that occurring is quite low. And increasingly, we're proliferating our approach into more segments that may move slower in some of the industrial and some of the mid voltage areas. But the forces of commoditization of those are much much lower where you're offering a lot of value the designs tend to stick around for a long time, I mean value --unique capabilities. So I think, as we stand here today verses 5 years ago our exposure to things that could commoditize has never been lower, is what I would say.

If I could extend that also in SPG it obviously was both from a market and a product standpoint, a commodity orientated operations you can't generalize that to MOSFETs. MOSFETs have many markets they differentiated at power levels and markets and so we're not disinvesting in MOSFETs, we are deemphasizing commodity computing. But there are a lot of exciting integration opportunities within cell phones that utilize our power density et cetera. So from a product line standpoint, we're actually very pleased with the trajectory of MOSFETs. And don't expect that has a total product segment to be overall commoditized, it's just adapting to its different markets. And the same is true of many of our PCIAs where let's say old plain or MOSFETs designs are pretty standard but we moved up towards smart power modules et cetera. So you can't take at FPG logic and begin to apply to our product and product sets.

Great thanks. And just the share gains on your how far have you got in terms of getting the wings relative to the -- getting volume relative to the design wins.

So the, where if I take us a freeze frame of Q4 and look at what important gains could be at the top guides in $ per and cent. Our target would be to at least double at both of them over to 1 to 3 year time frame. That would be per that would be our opportunity. Great thank you. He said that's partly gain share was we already have on a natural trajectory and that's a new ends Great thank you.

We'll hear next from Kevin Cassidy, Stifel Nicolaus.

Thank you. Covered to lot of that question I had an it shows that's just the idea in computing as architecture and goes to the 14 powered management has lower able can get more difficult and neither than market it's more interesting to you again. Can you just say what your point of view on that is?

I would not want to create impression on that we will ignore computing that is in the case, so I think if we see the opportunity to create a sustainable privilege position we'll take, but if again you will look at the history of is that, if we see just that any position you can take that will be shortlisted and your base what we see today is there a better places to stand on our new to them.

Okay. Great thanks.

Okay next turn is from Shawn Harrison with Longbow Research.

Good morning. I had two clarifications I am just as follow up the mobility's as percentage sales is clear what will be the other end markets is the percentages sales and then within then what will last quarter kind of the that's 3% to s4% this quarter.

So get that from mark sure. Our motto was around 10% of the company and computing was about 13 as far as our website and down to 7 this quarter our communications has gone from 23% in 2012 29% degree and consumer is kind in the 18% and 19% respectively. And our total industrial is also clattered about 35%.

Okay. And the commodity that was last quarter

I don't have that the commodity notebooks of total notebooks. Okay are we says we talked about mixing

Okay, final question just answer the along the free cash generation it was negative as could I think that was that was unexpected we've be taking that internal inventories may be where we do expect free cash to this to the fourth quarter.

We expect that could of as positive for the year, so we have working capital shifts that were all against us. In the it moves up 4 days to the low 40 level I actually expect that we stay as we begin to take more customers direct will jump of this but our inventory and our DPO in fact you know the foliation of the and when those payments land we'll move back towards more capable. So, I see in 2014 you know one more CapEx in the 40 range that will be kind of our last of our main and clear investments and that has we've said we expect CapEx to be in the 100 range so significantly lowered on average starting next year. So and the positive and will take we'll shoot up for strong free cash flow next year.

I guess with that I mean in the dynamic in the any way of fact that you're dealing in the potential to consider dividend.

We've already said that's potentially to clear dividends. We have a balance sheet criteria it's a guide line as supposed to our rule of net cash of $250 million obviously that gives us some balance sheet provisions to make sure that nobody will ever be worry about the dividend and obviously also the felling that our ongoing cash generation ability will be grow fast. As we getting through this investment we fear as sustain level being back in the 6% to 8% range which gives us confidence of really enhance cash generation going forward. So I think that continues to support our desire to put gives an emplaced but we don't have the balance sheet criteria emplaced just yet.

Okay, thank you so much.

Our next question comes from Bill Ong with B. Reilly.

Yes. Good morning gentlemen. Some fact in you guide it September $317million as of 2 and half %. But capably what were your growth expectations from only verses everything else back in July. And also there $8million dollars that's under ship what the mix stream verses everything else.

So if our to try the construct the big differences between the 317 midpoint and 359 actual the two biggest deltas in the ours the expenses which we decided to minimize computing what as a big was almost $ 10 million related to what our expectation was. Because the pricing was sufficiently attracting just implanting take the shares that we thought we would.

And the weakness to those were the two biggest increments between what our planning assumptions were go into the quarter and what actually played out across the quarter.

Thank you so much gentlemen. And we have one more question please

We actually have no questions remaining in the queue

Okay perfect. Well thank you attending today's call.

Once again ladies and gentlemen now that's included today's conference and we thank you for your participation