Good morning. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Silicon Labs’ Second Quarter 2014 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions) I would now like to turn the call over to Ms. Jalene Hoover. Thank you.

Thank you, Stephanie, and good morning, everyone. This is Jalene Hoover, Director of International Finance and Investor Relations here at Silicon Labs. I supported Silicon Labs business unit as a financial controller for approximately 10 years and has been working closely with Deborah Stapleton over the past year. Going forward, I will be assuming full responsibility for Investor Relations as we return this function in-house. We would all like to thank Deborah and Alexis of Deborah Stapleton Communications for their many contributions over the past 15 months. They will remain on Board through the end of August. I look forward to being your primary contact and getting to know each of you better. As a reminder, this call is being webcast and will be archived for two weeks. The financial press release, reconciliation of GAAP to non-GAAP financial measures and other financial measurement tables are now available on the Investor page of our website at www.silabs.com. I'm joined today by Tyson Tuttle, Chief Executive Officer; Bill Bock, President; and John Hollister, Chief Financial Officer. We will discuss our financial results and review our business activities for the first quarter and then take questions. Our comments today will include forward-looking statements or projections that involve substantial risks and uncertainties. We base these forward-looking statements on information available to us as of the date of this conference call and that information will likely change over time. By discussing our current perception of our markets, the future performance of Silicon Labs and our products with you today, we are not undertaking any obligation to provide updates in the future. There are a variety of factors that we may not be able to accurately predict or control that could have a material adverse effect on our business, operating results and financial condition. We encourage you to review our SEC filings, which identify important factors that could cause actual results to differ materially from those contained in any forward-looking statements. Also, the non-GAAP financial measures that are discussed today are not intended to replace the presentation of Silicon Labs GAAP financial results. We are providing this information because it may enable investors to perform meaningful comparisons of operating results and more clearly highlight the results of core ongoing operations. I would now like to turn the call over to Silicon Labs, Chief Executive Officer, Tyson Tuttle.

Thanks, Jalene, and good morning, everyone. I am pleased to report a very strong second quarter and I am excited about our near-term outlook and strategic positioning for long-term growth. In Q2, we saw record revenue in broad based products, where timing, microcontroller, wireless and sensor products all reach new highs and we expect this trend to continue. I’ll talk more about our results and our latest product developments and business trend shortly. For now, I would like to turn the call over to John, who will review our second quarter financial results and third quarter guidance. John?

Thank you, Tyson. Revenue for Q2 was a record at $155 million, which included an incremental $5 million related to a patent sale. First, let me take a few momentums to explain this patent sale. Several years ago we transferred certain CMOS power amplifier patents to Black Sand Technologies, an Austin based start-up that used the technology to productize PAs for the cell phone market. This arrangement provided for royalty income to Silicon Labs that would have been realized over a number of years. With Qualcomm’s recent acquisition of Black Sand, the parties agreed to accelerate the payment of that income resulting in an incremental $5 million of unforecasted revenue in Q2. Excluding the patent sale revenue, broad product based revenue for Q2 was $150 million, which was above the mid-point of our guidance and driven by record performance from our broad based portfolio. Broad based products grew 10% sequentially to a record $80 million, exceeding our expectations. We saw continued adoption of our MCU, wireless and sensor products, and Internet of Things applications. Overall, MCU, wireless and sensor revenue grew to a record 31% of total product revenue. We also achieved a record quarter in timing, exceeding expectations and resulting from increase volume at our Tier 1 telecom customers. In the second quarter, timing generated 15% of total product revenue. Revenue from broadcast was $50 million in the quarter, which included the $5 million patent sale. During Q2, we enjoyed good growth in broadcast automotive products, with strong ramps at Tier 1 customers. Overall, automotive represented 6% of total Q2 product revenue. As anticipated, the 2014 ordering pattern for the video market has been more front-end loaded then usual due to accelerated demand for TVs ahead of the World Cup. As a result, video was down in Q2 from…

Thanks, John. We are very pleased with our strong second quarter results, including record revenue in our broad based products. This is the fastest growth in most strategic part of our business representing 53% of second quarter product revenue. Over last several years we have diversified our broad based revenue and strengthened our portfolio, both organically and through acquisitions. We are benefiting from a multiyear investment strategy for the Internet of Things and Internet infrastructure. Collectively, these are large and growing markets where we offer leading technology, continue to gain share and see exciting prospect for growth. Our sales channel is an important building block and our strong positioning in the IoT market and vital to our broad based strategy. Over the past decade, we have made significant investments, growing our sales and field application engineering teams, while expanding our global distribution and catalog partnerships. We’re also increasing our investment in web infrastructure and content marketing to help our customers quickly go from design idea to final product. Since 2007, we quadrupled the number of unit products in our broad-based portfolio, increased our served customer count by more than a factor of five and grow our channel revenue by a factor of six. Our microcontroller, wireless and sensor products are gaining traction in connected device applications for the Internet of Things. These products grew 10% from Q1 and 27% year-on-year, establishing record revenue in the second quarter. Design wins also set a new record, with an approximate 20% sequential increase and we expect this trend to continue. The competitive strength of our IoT product portfolio includes energy-friendly solutions to help our customers reduce system cost and complexity. Our ongoing investment in our Simplicity Studio development platform as further strengthened our competitive advantage. Available to our customers with no charge, Simplicity…

Thank you, Tyson. Before we open the call for the question-and-answer session, I would like to review the investor conferences we will participate in this quarter, including the Pacific Crest Global Technology Leadership Forum in Vail on August 12th, the Canaccord Genuity Growth Conference in Boston on August 14th and the Citi Global Technology Conference in New York on September 2nd. For those of you who were unable to attend our first Analyst Day at the NASDAQ MarketSite in Times Square in May, you may have seen copy of our presentation and listen to the webcast in the investor section of our website at www.silabs.com under Events and Presentation. And nor for Q&A, to accommodate questions from as many people as possible before the market open, we ask that you please limit your question to one with one follow-up. Operator?

Thank you. (Operator Instruction) Your first question comes from the line of Blayne Curtis with Barclays. Your line is open.

Hey, guys. Thanks for taking my question. I was wondering, if you think, I know, you don’t want to guide for December, but I was wondering, if you could think about the different puts and takes, video had earlier correction. That's been really no seasonal pattern? I was just wondering if you just think about what businesses will see seasonality and what businesses could you actually have some drivers that could offset seasonality? Thanks.

Yeah. Thanks, Blayne. This is Tyson. If we look at Q4, we typically have a little bit of seasonality on broadcast side, the consumer portion of broadcast is typically down in the Q4 quarter a bit. And we are cautious going into Q4 in terms of planning market, book -- our bookings and all that are quite solid right now, but we see some of the stuff going out there in the market and are little bit cautious about timing as well. So I would say that going into Q4, if you look across the broad based product lines, we have great traction and great momentum in MCU, wireless and sensors for IoT. We also have good traction in the automotive market but that is going to be offset somewhat with broadcast and potentially something in timing, but it’s really a little bit too early to talk, so we are just being a little cautious on that side.

Thanks. And then maybe on the OpEx side, clearly, legal costs $3 million a quarter again in September? Can you think about as the timeline, as you approach the milestones for the trial? Is this the right run rate going forward or does it accelerate as you get towards the trial and then it's been a good offset to have the IT sales, does that -- that's the last bit of it in September?

So, this is Bill. Blayne, I think, the expense level of $3 million a quarter is appropriate to assume for both 3Q and 4Q. We are in the discovery process in the litigations activity and so we will not comment in significant detail about that case. But we do expect first action from the courts at the end of the year, these will certainly rollover into 2015, but the activity level will probably not accelerate above what we are seeing currently.

Blayne just to follow up on the other part of your question, yes, the patent that we talked about for Q3 is what’s in the pipeline right now. Again, we’ll continue to be opportunistic in that area, but that’s what we can talk about right now.

Okay. And if I can squeeze in one more Tyson, I was just curious that you mentioned the Thread opportunity, if you can talk about your positioning there and competitively and whether are there other semi guys also participating here and what -- where that can really translate into revenue and when that could translate into revenue?

Yeah. So we’ve been partnered with Nest really since we acquired Ember in 2012. And so our partnership with them extends to not just silicon and working with existing products, but also we’ve been working on this Thread stack with them and then brought an additional partners ARM is on the Group as well as Freescale and Samsung. So we’ve got some industry leaders standing behind us and it was really that the Ember team has I would say probably seven years of expertise and experience on low-power wireless mesh networking. So Nest chose us as really the leading stack and IP technology for low-power wireless mesh networking. So our team has been working with them really taking all the best-in-class standards around low-power mesh networking at 802.15.4 base. So it’s based on the same fundamental technology as ZigBee, but it adds IP. So you have an Internet address for each node. You are able to use multiple gateways and it really simplifies the entire software setup. So we believe that this is really the evolution of that ZigBee technology. You can run the stack on our existing silicon and we believe that we are quite well-positioned to roll this out more broadly into the market and to realize revenue. It is going to be still in development right now. We’ve announced that we’re bringing in additional partners. I mean, the goal is to make this an open standard, but we do believe that that will solidify our leadership position in this area and continue momentum both near term and long term.

Thanks.

Thanks.

Your next question comes from the line of Suji De Silva with Topeka. Your line is open.

Hi, guys, nice job on the quarter. Can you talk about the sensor business? You announced the capacity to touch product there. And maybe as a percent of revenue or really how important that is standalone and what sensor areas you think are most important for you going forward?

Yes, Suji, we actually break our sensors up kind of two different ways. If you look at the capacity of touch sensors, which are really used for human interfaces, we integrate that functionality onto a large number of our MCUs. So we actually count that really along with our MCUs and it’s an integrated function that allows customers to add buttons and sliders and wheels and even touchscreen functionality into these broad-based applications very cost effectively and we believe that our performance there is best-in-class on those types of devices. The other types of sensors that we’re working on and had out into the market that we are seeing traction with, we have an optic -- a set of optical sensors for proximity, ultraviolet to detect some intensity and also ambient black. And so those are applicable to a wide range of applications both in the home automation space as well as wearables as well as in industrial various applications. Some of those devices are also used to detect pulse oximetry so it detects pulse rate and blood oxygen content and that’s again very popular in the wearable space. And then we’ve also introduced a number of sensors really looking at environmental conditions, so like -- things like temperature and humidity, and those go into a variety of home automation applications as well as a variety of medical and industrial applications. So these are really sensors targeted at a broad range of applications. We call them our smart sensors and that continues to be a very interesting area of investment for us in terms of R&D. We believe that our CMOS mix signal capability in our ability long-term to integrate these sensors into our IoT platform to integrate with microcontrollers and wireless a really unique opportunity for us. So in terms of revenues, it’s still small. We put that in with our NCU wireless and sensor products, so those are all combined together as a revenue category, but it is one of our fastest growing areas and we are seeing significant traction.

Maybe a quick follow-up IoT market more broadly. Is this a case where rising tide is lifting all boats or is this something differentiating you guys or do you think you are growing and are these consortiums such as Thread really getting factors for the growth there? Thanks.

Yeah, I mean, I think that having open standards and having ways of connecting all the various devices together is one of the important aspects of the growth of IoT. The usefulness of these networks really is proportional to the -- or really proportional to the square of the number of devices that are connected. So as you can connect various devices together, as you can connect the data together and cloud and through applications these IoT application areas become more and more useful for the various markets that you are looking at. Our view is that we are quite well-positioned here. We have leading wireless technology. We have the leading low-power MCU technology. We have a growing portfolio of sensors targeted at these applications. We have about half R&D focused developing the next generation platforms where we can integrate all these together and gain significant benefits in terms of performance, in terms of integration, in terms of costs, and in terms of energy consumption. So I think right now we are gaining share. I mean, this is the fastest growing and most strategic part of our business and quite well-positioned going forward with our roadmap. So I believe that Silicon Labs has got great future potential in this area.

I would add point back to Tyson’s prepared remarks on our sales channel. It’s significant that we have a sales organization that is set up to deal with really broadly diversified customer set. So our distribution channel and our ability to support customers online are both key enablers of the Internet of Things market and something that not every semiconductor company can boast. Suji De Silva – Topeka: Great. Thanks, guys.

Your next question comes from the line of Ruben Roy with Piper Jaffray. Your line is open.

Thanks. First on for John on the access revenue, it seems like the first half of the year performed a little bit better. Are you still looking at potentially a 10% decline on a year-over-year basis for that segment?

We will see how that plays out, you are right. We had a good first half and a good Q2 in particular and we think less than 10% decline is a reasonable view there.

Okay. Thanks, John. And then on the patent revenue for Q3, the $2 million that’s coming in, is that -- I might have missed this, but is that related to the CMOS patents as well or is that different and do you expect that to continue into Q4?

So those all will be classified in the broadcast categories, an area that we will continue to be opportunistic on and we don’t have anything else to report on that right now. So the $2 million is the one item to comment on at this point.

Ruben, this is Tyson. Just to note that is not related to the Q2 sale of the CMOS power amplifiers, it’s a completely separate item.

Okay. Got it. Thank you, guys.

Your next question comes from the line of Vernon Essi with Needham & Company. Your line is open. Vernon Essi - Needham & Company: Thank you very much. Just wanted to clarify, I guess following on Blayne’s question about seasonality. I guess I think we’re talking about the broad-based business, I mean historically it’s been flattish to down a little bit. You commented on some momentum there. Do you feel you’ve got enough sort of escape velocity to get out of that seasonality this time around? It seems like you’ve got a lot of momentum. Just wondering where you’re at on that.

The seasonality that we’re seeing, we typically see consumer seasonality on the broadcast side. The access piece is also somewhat seasonal there. And on the broad-based side, we are cautious right now about timing market and a little bit of what we saw last year and also a little bit of some of the indications out in the market that we’ve seen from some of the operators and network equipment vendors. In terms of overall momentum into Q4, I think it’s a little bit too early to say whether the momentum that we’ve got in IoT and automotive tuners and in other areas of broad-based would be able to offset those. Vernon Essi - Needham & Company: Okay. Thanks for that. And then just a follow-up here. Didn’t here much prepared comments on the audio side for tuner, and I think I read somewhere about maybe I misunderstood the share losses possibly in the lower end. Could you just elaborate on what’s going on in that market?

Our consumer radio market and really that’s I believe what you’re talking about in terms of audio. So this goes into a broad range of applications in places like boomboxes, iPod docks, home theater systems, clock radios and we’ve got a fairly substantial share of that market, it’s a long-term market and it has been quite stable. So I would say that our audio revenue while it follows typical seasonal patterns had been stable both in terms of market share and then in terms of revenue over the last number of years.

Vern, I would add that the FM tuner in handset product category has virtually gone at this point. So it no longer represents a material portion of our revenue even in the audio category. The automotive audio in contrast is doing extremely well and had another record quarter in Q2 and we expect to see continued growth in that automotive audio category. Vernon Essi - Needham & Company: Again I appreciate all that. I guess the question no more is on the consumer side. You’re obviously always coming in at the more cost competitive solution and you’re feeling that your market share is basically holding on sort of a market that I assume continues to get price competitive every year.

That’s correct. Vernon Essi - Needham & Company: Okay. Thanks.

If you look at the consumer audio revenue outside of handsets, the revenue is about flat year-on-year and is actually up a little bit quarter-on-quarter. So the consumer audio revenue is I believe quite solid. Vernon Essi - Needham & Company: Okay. Great, thank you.

Your next question comes from the line of Craig Ellis from B. Riley. Your line is open.

Thanks for taking my question and good morning guys. Just a couple of clarifications on the income statement starting with gross margin. So a lot of gives and takes given the differences in the royalty revenue quarter to quarter but it looks like excluding that from both quarters, the core business gross margins are down about 150 basis points quarter-on-quarter. So one, John, is that flat and two, if so what are gives and takes within the portfolio that are causing that?

Sure, Craig. This is John. It was a very strong quarter in terms of our gross margin performance. We had 64.1% non-GAAP all-in excluding the patent sale. We were about 1.2%. So still well above 62% excluding the patent sale revenue. So it’s a very strong outcome and that’s really due to product mix as a primary driver. We had the record quarter and timing, good growth in the MCU, Wireless and sensor portfolio and a down quarter in video which we had anticipated. So those are kind of major drivers there.

And the question is really looking at the third quarter, John, which is I think down 150 basis points off of that. Are you saying that it’s really just video bouncing back a little bit and flattish network and timing and continued growth in microcontroller that’s causing the decrease in gross margin or is there something that’s happening on an intrasegment basis that’s causing the stepdown?

Yeah. Okay. Yes, primarily product mix and of course within these product lines, there is mix down to the individual part number level that we saw some favorable -- favorability in Q2 as well. But it’s mainly broadcast coming back up in product revenue and we’ll see where we end up on the timing side. MCU and Wireless should continue to be a strong growth quarter.

Okay. And then the second question is on operating expense, it looks like operating expense sequentially is $1.5 million to $2 million at the midpoint. And the question is so much on that although I’d like to understand underlying drivers there. It’s more about that rate of increase and whether or not that should be expected as we look out further into the back half of 2014 into December quarter. And how are you thinking about the growth in OpEx as you look at 2015, given what we’re seeing midyear?

Yeah. You know we have fair number of takeouts coming out this quarter in Q3. We talked about the new product development activity. We also have our new college graduate program continuing. So we’re continuing to invest in the various growth areas in the business. So we have some seasonal fluctuations up or down based on the level of takeouts. But in general, we see that as continuing through Q4 as well.

Thank you.

Our next question comes from the line of Anil Doradla with William Blair. Your line is open.

Hey guys. Couple of questions on the patent sale, is that something that we can expect going forward or is this quarter or next was kind of a one-off event in terms of sources of revenue?

So Anil, this is Bill. These are somewhat one-off events but we certainly have the opportunity to engage in additional IT licensing or sales over the course of the multiyear time period. While unrelated to the litigation that is going on today, it is certainly attractive that these IP related sales have helped offset the substantial portion of the legal expenses that we’re incurring this year. But do not expect this to be a regular every quarter kind of activity.

Okay. And Bill, kind of big picture when I look at your results over the past several quarters, I mean you see some level of volatility. We have some very strong beats and then we got some outlooks that sometimes get reset. I think I’m just trying to understand as we progress over the next couple of years, is this, as IoT picks up and some of these fragmented large-end market starts coming into the revenue. Are we going to see better visibility in your business or do you think visibility actually declines further. So in other words the volatility that we see, is that -- isn't getting enhanced or not?

No, I think the visibility improves over time. What you have observed is the broad-based category growing from a minority of the companies, business several years ago to 50% at the fourth quarter last year now up to 53% and that increased concentration in the broad-based category. We’ll provide more stability and predictability to the business over time. It is classically the vertical businesses with the smaller customer set that are more volatile. And as we continue to transform this business increasingly to IoT and broad-based product, the visibility and the predictability will improve.

Okay. Thanks.

Your next question comes from the line of Srini Pajjuri with CLSA Research. Your line is open.

Thank you. Tyson, you talked about being somewhat cautious on the timing heading into Q4. Can you elaborate on that please as to what’s giving you that caution?

So Srini, let me kind of add a couple of points here. We’ve had a really good second quarter in timing. I commented last quarter that I probably would see record performance return in the back half of the year and I’m delighted that it actually occurred in Q2. We think that third quarter performance and timing will be slightly down to perhaps flat with this outstanding second quarter. Our caution on the fourth quarter is really driven by what we’re seeing in the current earnings season, both from telecom equipment vendors and from some of our peers in the semiconductor space who are all talking about issues related to this business that could unfold by the time the year is out, including some major M&A activity in the telecom equipment space. So while right now our order patterns and our forecast for the third quarter are very solid. All we’re trying to do is to suggest to you given everything we’ve heard in the last two weeks, we’re taking a bit more cautious stands for 4Q.

Yeah. Srini, I also just want to -- I want to just point out that in the timing space, we’ve been investing very significantly in our portfolio in terms of new product development and our design win activity in this area has been particularly strong. I think last quarter we were up 20% quarter-on-quarter. It was year-on-year. I’m not sure exactly but it was very, very strong record design win activity and our multi-year advancement in the product portfolio with our clocks or oscillators, our Siemens Technology are all paying off in terms of design wins. So the -- overall long-term trajectory of the timing and our ability to gain share against our competitors, I think, is quite significant.

Okay. Tyson, how big is Siemens today for you and as we look forward what kind of end-markets are you seeing the most traction for that product?

The first Siemens product that we have is targeted at lower end type of applications. It’s quite broad. It’s -- if you look at the number of applications that we’re engaged in, it is really all over the matter, everything from consumer to lower end network equipment to IT cameras and even some consumer type applications. So the first product is quite broad. So the -- I can’t point to specific one. But also working on a number of products on the road map which takes the performance level up, more at the enterprise space and also the integration up and integrating that technology with additional functionality which will open up new market opportunities. We’re quite excited about the potential for this technology and we’re also quite excited about our ability to prove that up with this initial product. And we’re seeing modest levels of revenue. We’re not breaking that up separately from the timing revenue overall but we are beginning to see the ramp of those products here in the second half at the modest level.

Great. And then Tyson, as we look out to 2015, how should we think about the broadcast business and then how does your design pipeline look. And should we expect no seasonal patterns or do you expect to outgrow the market or inline with the market? Thank you.

Let’s break the broadcast business really into two pieces. If you look at the automotive radio business where we had tremendous traction and are seeing ramps with our tier 1 customers. We believe that that is a very strong growth area for us. I mean, just a point of reference year-on-year the broadcast automotive area was up 50% year-on-year. So we are seeing a very interesting ramp and we believe that’s going to just continue as we move into 2015. So again that’s a fairly small percentage of our overall revenue. Over automotive which includes some other products that we sell in that area was about 6% of revenue in Q2. If you look at the consumer piece of the market, we talked earlier in the call about the automotive or the audio business and that is a stable piece of our business in the consumer area. We do have some growth factors there with our digital radio products. But overall, let’s say that the audio and the video are probably stable at the level that you see them right now. On the video side, we have -- this year we’re moving out our penetration of the TV market out from 45% last year to over 50% this year and that’s on track. And we believe that our market share will be able to hold or increase that share of the TV market next year. We also had exciting opportunities with our demodulators. We have opportunities for expansion into set-top box market. So there’s a number of areas in video where we’ve invested and continue to see very good traction but our market share is quite high. And you do have that year-on-year ASP declines. So overall, let’s say, both the audio and the video business in broadcast consumer would be stable going into 2015 with a growth factor in automotive.

Great. Thank you.

Your next question comes from the line of Tore Svanberg with Stifel. Your line is open.

Yes. Thank you. I was hoping you could elaborate a little bit on your last point there. Tyson, you mentioned maybe some potential expansion into the set-top box market. I’m just trying to understand if that’s a near-term opportunity, is it something you’re very serious about? Just trying to understand your diversification efforts in your video business?

The video business, we’ve maintained a regular pace of introductions to maintain our share and grow our share on the TV side and that includes our demodulator where we enjoy quite significant share with our advanced demodulators in Tier 1 TV makers. And that -- so the demodulators are also applicable to terrestrial set-top boxes. Our latest tuner introduces features which are very interesting for the set-top box market and we are garnering design wins today that will be driving additional revenue in 2015. So, if you look overall, we believe that our investments in video are sufficient to continue that business at a stable revenue level in the long term. These are functions that are not going to be integrated into other SoC’s because the performance level requirement or because of the regional variations. And we have sufficient investment and sufficient market traction in these additional areas to offset any annual ASP declines, which we also believe will -- as we really achieve market dominance here that those will subside over time. I mean, if you look just overall at the video business, it is a solid long-term cash generating business for us that we are -- and we’re very proud of the achievement that we’ve been able to make in terms of the market share and the technology that we developed.

Sounds good and on IoT, I don’t know if you care to update us on what your percentage there. I think you’ve talked about 15% before. Obviously, home networking has been the main sort of vertical application there. Are there any other areas within the IoT that are starting to spend out as far as revenue contribution?

So Tony, we’re enjoying good IoT performance in several categories. The historical strength in smart metering simply continues. We’re also seeing good momentum this year in home connectivity and new emerging area and variables. I commented at Analyst Day that we thought for 2014, our IoT revenue share of the total company would go up from 15% in 2013 to 20% in 2014. With the strength we’re seeing in our MCU, Wireless and sensor business, that forecast looks to be slightly conservative.

Very good. Just one last question if I may. The litigation, I understand the expenses there but could you talk about in a little bit more details the process there, is there going to be a trial in Q1 and that’s why you expect expense to come down? If you could update us on that, that would be great? Thanks.

Sure. There are actually multiple actions that are all related to this same basic case. But the principle case is what the ITC, with a hearing that is currently scheduled for December. So the activity that is going on now is in preparation for that event. The hearing will not conclude the action so we will have rollover into the first half of next year, but we will have some pretty significant information that we can convey to you once that is complete.

That’s very helpful. Thank you very much.

Your next question comes from the line of Ian Ing with MKM Partner. Your line is open.

Yes. Thanks for taking my question. Not sure how much you can talk about this, but given the uncertainty of when the defensive litigation costs end, I mean, how does this change your view on the ROI or attractiveness of the video business? And at what point would you start considering, maybe divesting or winding down a TV tuner business? I mean, how long can you monetize IP without doing it this year so far ahead?

We believe that this litigation will run its course in the timeframe that I have described to you. Obviously, with the litigation expense we are incurring, we’re deadly serious about this business. The video business is one we’ve invested in significantly over time and as Tyson just reviewed, represents a terrific cash flow opportunity for us for years to come. So, we’re pursuing this legal action with the intention to win and we expect the video business will be back to normalcy about the second half of next year.

Great. And as my follow-up, I mean, should we still assume access gradual decline each year down about 10%. You did cite some strength and voice over IP. How much of the modem decline is left at this point?

So, I think access will continue as we have suggested previously with a decline is modest, probably on the order of 10% a year. Once again it was indicated earlier in the call, we’re seeing better performance out of that business in 2014 than we suggested at the beginning of the year. So the decline this year will probably only be in the single digits but for ‘15 and beyond I would continue to project about a 10% decline.

And modems there is how much percent of sales at this point?

Modem is probably about two-thirds of that total. No, excuse me, one-third of that total.

Okay. Thank you, Bill.

(Operator Instructions) Your next question comes from the line of Amanda Scarnati with Citi. Your line is open.

Hi. Thanks for taking the question. Just on shareholder return, is there a specific target that you’re seeking either as the portion of free cash flow or as a portion of that $89 million that’s left in buyback that you’d like to achieve on a quarterly basis for a specific time that you’d like to get that $89 million return to shareholders? Thank you.

Hi. Amanda, this is John. We have not such specific guidelines along those lines. We’ll continue to be opportunistic in this area. We have a good track record of executing a shareholder return and have returned over $800 million in share buybacks since 2007. So we’re pleased that we’ve been active in Q2 and we’ll continue to be opportunistic.

Thank you.

Your next question comes from the line of John Vinh with Pacific Crest. Your line is open.

Hi. Thanks for taking my question. Tyson, you talked about broad-based being able to sustain a growth rate of kind of 10% to 15% over the long term. Can you talk about 2015 and kind of the puts and takes and how we should be thinking about that business next year?

Yeah. John, the growth rate for the model that we have for growth for the company and the long-term growth rate is 10% to 15%, so that would be inclusive of the access business and the broadcast business, as well as the broad-based business. If you look at our broad-based business since 2007, it’s been on a CAGR somewhere between 20% and 25% and those businesses have been the beneficiary of the lion’s share of our R&D as well. So I think if you look at the broad-based growth that we’re achieving in 2014 and looking out at the 2015, we believe that that’s going to continue out into the future. We see very, very good momentum with our MCU wireless and sensors products. We’re really targeting the Internet of Things and that’s just a large and growing market, which includes the traditional broad-based microcontroller market as well. You look at our timing in power products that are targeting Internet infrastructure and the SAN expansion that we’re going to achieve with the new product introductions that we are launching, as well as our isolation and power products going towards a lot of industrial automation. These are quite broad-based. So we see very good growth potentially across the board in the broad-based category. Again, our cellular products, the touch controller, that revenue has gone both in FM tuner broadcast, as well as in the broad-based category. So really it’s a pure play in terms of the broad-based revenue. I would also note that broad-based was over 50%, it was 53% of revenue in Q3. So as the proportion of broad-based continues to grow, it’s at the fastest growing piece, I think that that will provide a long-term uptick in the overall growth rate of the company going forward.

Got it. And then my follow-up question is on CMEMS. You’ve talked about getting some new design wins and some new application areas. How long is it before we start to see CMEMS becoming more disruptive in some of the traditional application areas like telecom?

So the CMEMS technology that we’ve been developing and maturing and deploying into mainstream CMOS fab is applicable at the high end. There is additional performance improvements in product development that are needed their growth in terms of the integration and achieving all of those very, very difficult steps. We have a good level of confidence that this technology will be applicable across our oscillate or clock line and it will be a key differentiator for us versus the competition going forward, but it's going to take some time. The initial product is spurring the revenue ramp here in the second half at a modest level. We do have in development a number of higher performance products that will take that to the next level. But again, this is going to play out over multiyear period.

Okay. Thank you.

(Operator Instructions) Your last question does come from the line of Harsh Kumar with Stephens. Your line is open.

Yeah. Hey, guys, thanks for letting me and most of my question have been asked, so I just had a quick clarification. Your royalty sales in September quarter, is it 150 bps or 50 bps?

50.

Okay. Thank you for that. And then, is that the last of the royalty sales you anticipate?

Yes. That’s what we have in the pipeline right now. We’ll keep working on it, but that’s all we have to talk about right now.

Appreciate it guys. Thank you. Best of luck.

You bet, Harsh. Thank you.

And we’re showing that we have no further questions in our queue at this time. I turn the call back over to Ms. Hoover.

Thank you. And thanks to everyone for joining us today. Good bye for now.