Skyworks Solutions, Inc. (SWKS) Q2 2011 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Skyworks Solutions Second Quarter Fiscal Year 2011 Earnings Call. [Operator Instructions] At this time I will turn the call over to Steve Ferranti, Investor Relations for Skyworks. Mr. Ferranti please go ahead.

Thank you, Jake. Good afternoon, everyone, and welcome to Skyworks Second Fiscal Quarter 2011 Conference Call. Joining me today are Dave Aldrich; Don Palette and Liam Griffin. Dave will begin today’s call with a business overview, followed by Don’s financial review and outlook. We will then open the lines for your questions. Please note that our comments today will include statements relating to future results that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. Actual results may materially differ and adversely differ from those projected as a result of certain risks and uncertainties, including but not limited to those noted in our earnings release and those detailed from time to time in our SEC filings. I would also like to remind everyone that the results and guidance we will discuss today are from our non-GAAP income statement, consistent with the format we have used in the past. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP. I'll now turn over the call to Dave for his comments on the quarter.

Thank you, Steve, and welcome to our second fiscal quarter 2011 earnings call. I'm pleased to report another solid quarter of execution by the Skyworks team. Our financial results for the March quarter exceeded our prior guidance and significantly outpaced normal seasonal trends. In fact, our sequential revenue performance demonstrates how a diversification strategy and growth in new market segments are contributing to stronger financial results for our shareholders. We fully expect momentum achieved in the first half will translate into further market share gains during the remainder of the fiscal year throughout fiscal 2012 and beyond. Of note in the second quarter, we delivered revenue of $325 million, this represents year-over-year growth of 37%, with a seasonal impact of only 3% versus normal March quarter seasonality of 10% to 15%. We reported strong returns with gross margins of 43.9% and an operating margin of 26.1%. We grew operating income by 74% to $85 million, and we are in $0.41 per share. Now that's $0.02 better than our prior guidance. And we continue to improve our balance sheet. We generated $92 million in cash flow from operations, and we exited the quarter with a cash balance of $504 million. As our second fiscal quarter results indicate, our strategy is working, our business fundamentals are improving and our opportunity set is growing. The mobile Internet and an expanding set of addressable analog market opportunities are fueling an exciting growth of pipeline for us. First, mobile computing, and ubiquitous broadband connectivity continued to be the key drivers of our business. Even in the normally slow post-holiday season period, sales of smartphones and tablets have remained brisk, driven by exciting new product launches and the early rollout of 4G devices. Incidentally globally, the adoption rate of smartphones continues to significantly outpace the growth in the overall handset market by at least 4x. And in fact, smartphones still account for only about 25% of global handset shipments. We firmly believe this figure could easily double by the year 2014. And at the same time, subscribers are increasingly carrying multiple mobile devices. I think tablets are terrific example of this. The tablet market is forecasted to grow at a 78% compounded rate over the next four years. From less than $20 million last year to $200 billion by 2014. Interestingly, tablets are becoming more than just a consumer discretionary purchase, as they are finding their way into enterprises and new vertical market segments like healthcare, like education, like retail. Demand has thus far, exceeded most market analysts' initial expectations, and early indications are that tablets represent an incremental purchase and more and more often, these devices come embedded in 3G and 4G connectivity. So whether we're talking about smartphones, tablets, eReaders, portable gaming platforms or any other mobile Internet devices, one trend is clear. wireless connectivity is becoming more widespread and RF complexity is increasing, and the dollar content for us is rising. Skyworks is clearly capitalizing on consumers' skyrocketing demand to be connected anywhere and anytime. Now I'd like to spend just a moment on exactly how we're gaining share and why we win. Skyworks leverages a long heritage of deep systems level integration to engage in collaborative and highly customized development programs with our customers. We help to solve increasingly complex RF design challenges and reduce the size, lower the build material cost and increase performance. Leveraging on R&D scale, we are strategically engaged with each and every leading handset, smartphone and tablet OEM, as well as all baseband providers. This is across the entire spectrum of products from discrete implementation to highly integrated multimode converged platforms. We've staked out a market-leading position with our broad portfolio of high performance front-end modules and discrete WCDMA and LTE devices. Similarly, we are currently in high-volume production with our converged multimode platforms and we expect to see an accelerating rate of adoption across our customer base during the second half of this fiscal year. Now at a higher level, Skyworks is agnostic to our customers' architectural choices. Whether it's a discrete design, a PA Duplexer, multimode or some variation of all of these. And instead, we remain focused on leveraging our scale advantages our technology leadership, our integration capabilities and our unique product breadth. And this enables us to stay broadly engaged across our customer base versus wagering on a single approach. And this strategy has served us well and it will enable us to continue to gain share in the years to come. Now as evidence of this and towards this end, during the quarter, we powered an entirely new lineup of android-based smartphones and tablets from HTC, which leveraged our highly integrated front-end solutions. Likewise we were designed into multiple new sockets in key Samsung Galaxy smartphone platforms. We introduced a new family of antenna switch modules supporting a host of multimode smartphones, tablets and data cards. Further we expanded our support of next generation Qualcomm MSM reference designs encompassing now WCDMA and LTE applications. And finally, we were honored to be the first semiconductor company ever to receive the 2010 best quality award from Samsung. This award recognizes Skyworks' excellence in overall product quality and our supply chain efficiency. This activity is reflection of the significant traction our mobile Internet business is gaining as we head into 2012. Okay now, switching gears for a moment, our linear products area continues to grow in near lockstep with our Mobile Internet business. And of course, this is dramatically outpacing the broader analog market growth. And now here, we are leveraging our catalog of precision analog products to address a broad variety of markets, including automotive, avionics, satellite, medical, military and industrial. And with our global customer base, it is now over 2,500 analog products, we continue to bolster our portfolio with each and every new product launches and each new customer engagement. We've successfully leveraged our growing and profitable Catalog Component business in the high-performance solutions from vertical markets as well like cellular infrastructure, like wireless networking and smart energy and home automation. These vertical market applications further increase our diversification, it deepen our level of customer engagements and help improve our margin profile. And some recent example design activity here, we secured analog design wins with STMicroelectronics for their next generation IP television chipset reference design. We ramped production of precision analog IC supporting enterprise access points, cable set-top boxes and wireless video systems for Motorola and Cisco, among others. And without supporting General Dynamics with high-powered switching solutions for military land mobile radios. And we captured multiple infrastructure sockets with Ericsson, Huawei and ZTE for complex WCDMA base station transceivers. And finally a quick comment on Japan, our team has been actively engaged across all levels of the supply chain, and I think has done an excellent and outstanding job of ensuring business continuity. And while uncertainties obviously still remain in this area, we currently do not foresee any supply-chain impact. Of course, we'll continue to closely monitor the situation and we'll keep you posted if anything should materially change. So in closing, our second fiscal quarter was another strong one for Skyworks and the second half of fiscal 2011 is shaping up to be even more exciting. We believe that our strategy of diversifying across baseband partners, among OEM customers and new vertical markets while continuously improving operational execution is clearly working. Given the multiyear revenue drivers we've discussed, along with a design win momentum, our expanding customer base and new market opportunities, we intend to demonstrably outpace industry growth and not only the second half of 2011, but throughout 2012 and beyond. I'll now turn this over to Don for his financial review and outlook.

Well thanks, Dave. And thanks again for joining us everyone. I will first provide a quick summary of our second fiscal quarter results and then outline our business outlook for the third fiscal quarter. Revenue for the period was $325 million, up 37% year-over-year and ahead of our guidance for $310 million to $320 million. Gross profit was $142.9 million or 43.9% of revenue, a 160 basis point year-over-year expansion. Operating expenses were $57.9 million, in line with our prior outlook. R&D for the quarter was $35.2 million and SG&A was $22.7 million yielding $84.9 million of operating income and a 26.1% operating margin. That's a 560 basis-point improvement over the prior year. Our net interest and other expense for the quarter was $200,000 of expense, while cash taxes were $5.9 million, resulting in a 7% tax rate. As a result, our net income was $78.7 million or $0.41 of diluted earnings per share versus our guidance of $0.38 to $0.40. Turning to our second quarter balance sheet and cash flow, we generated $92 million in cash flow from operations and that's attributable to our strong operating results and second quarter collections. We invested $32 million in capital expenditures during the quarter, reflecting process investments to complement our existing assembly and test capacity. We anticipate these investments to pay back within the fiscal year and improve our return on invested capital. I would point out that we have completed the majority of our capacity investments in Mexicali, and we anticipate that CapEx will begin to moderate back towards maintenance level over the next couple of quarters. Depreciation for the second quarter was $14.3 million, and we ended the quarter nearly debt-free with a cash balance of $504 million. These improvements highlight the progress we've made in our broader strategy to strengthen our balance sheet. Now to our business outlook. Based on our broad customer base, diversification in the new markets and share gains, we are forecasting current quarter revenue to be approximately $345 million. At this revenue level, we suggest modeling gross margin of 44.5% to 45% with operating expenses of roughly $60 million. Below the line, we expect $200,000 of net interest and other expense and we now plan on our cash tax rate for the remainder of fiscal year 2011 to be 7%. In turn, we expect our non-GAAP diluted earnings per share to be $0.46 off of a base of 192 million shares. And finally, I would like to point out that our third quarter guidance puts us squarely on a path to approach a $1.5 billion revenue run rate with $2 in annualized EPS by the end of this fiscal year. That concludes our prepared remarks. And operator, we'll open the lines for questions.

[Operator Instructions] We'll go first to Parag Agarwal with UBS.

First question is about your guidance and outlook for the market. If you look at that guidance of many of the baseband players and some of your competitors, June quarter guidance for these guys have been kind of muted to down. But your guidance is pretty strong. So just -- if you can explain what are the moving parts herein from what your vantage point? Can you explain what is happening in the market?

Thank you. And I think the easiest answer is that it is a function of a very strong backlog, so our visibility is quite good right now. And that visibility is being driven by very specific program ramps. So both within our linear products segment, as well as smartphone, tablet and some feature phone launches. We've been able to continue to take some share of those program launches are happening as we speak. So that's helping us, help us to offset the seasonality of margin. I think it's helping us to power through the second half with above market growth rates.

Okay. And there have been some speculation about your content or your status with one of your leading customers. I know you cannot talk about that customer, but could you talk about the design pipeline as you see now and your confidence in your second half of the year outlook?

Thank you. As I've said, the visibility is quite good and it's driven by that design pipeline. And as I think our track record reflects, we consistently win more than our fair share of new designs. I'm proud of the team's ability to continue to do that. And in fact, we gained points of market share in the first half of 2011. We're on track to do that with designs already in place. We're on track to do that again in the second half and we believe we'll grow 2012 beyond yield growth rate of the market. And as Don stated, we're now on a path to approach $1.5 billion revenue towards the end of this year, and $2 in annualized EPS. We're quite comfortable in our ability to do that.

We'll go next to Alex Gana with JMP Securities.

David I think you answered that question pretty well but let me ask in a different way around investor concerns. I believe they're centered around some of these leading smartphones as we see, UMTS and CDMA converging. There's been some arguments put out there that if your heritage in the UMTS band, and some of your rivals may be coming at some new approaches in the CDMA band that maybe it's easier for some of these CDMA players to encroach on your GSM track record or UTMS track record, versus the other way around? Is there any truth in that argument or that concern?

Well, keep in mind that we've always been a major player in CDMA. Our heritage goes back over a decade. So we are very strong in CDMA. In fact, I'll remind you, particularly, a lot of people have forgotten, sometimes we want to forget that we were a pretty major player in transceiver development for CDMA as well as GSM. And so we have a strong systems heritage, we understand those implementations. And so if you look at the architectures and the way they're panning out today, there's everything from performance oriented discretes to power amplifier duplexers to converged per se, let's say the mid to low end of the smartphone market, and we're involved volume production each and every one of those. So we try to be, and we're successful in being completely agnostic with respect to architectural approach. We partner with all the baseband folks, we sell to all the OEMs, whether they'd be smartphones or tablets. And so that gives us a good sense for the overall market, and it implies that we have not only a breadth of engagement with those customers and baseband partners, but we have the building blocks, the scale to confidently go ahead with all of those. So we really don't get too hung up on which architectural approach, because we made those investments.

And as a related follow-up on that, I know you're very clear in the second half, you expect your pace of growth to exceed that of the market. What about your building materials within some of the leading smartphone designs? Is that going up? Is that really the driver? Or is it more of the share gains?

It's both. The build material average continues to go up. I think we've mentioned in the prepared comments that this year, roughly a quarter of the phones delivered our smartphone in nature, we think that number doubles in the next few years. That's a huge driver to the overall blended dollar content in our business. So while a 2G phone is still a buck, we are seeing a disproportionate amount of phones converting to an EDGE device with two bands, it's on a CDMA 3, 4, bolting on LTE so in general, the blended ASP across the market continues to rise.

We'll go next to Nathan Johnsen with Pacific Crest Securities.

I just want to come back a little bit on the questions surrounding architecture. Obviously, one of your key competitors has kind of a critical platform change from their perspective. I wanted to see what Skyworks' view on converged solutions in 2011? How much of a place do you think they have in the market and does Skyworks expect to ship any fully converged solutions in 2011? And then secondly, clearly, Nokia has been an area of growth for you guys over the last few quarters, but a lot of moving parts there. Just wanted to see if you guys still view that as a potential growth area or if kind of the share gains are being overshadowed by some of the weakness that they're seeing there.

Sure, this is Liam. Let me take the first part of your question, then we can talk about Nokia. Well first of all, we are in production today with converged platforms. We're shipping them now, we have several customers that should be ramping by the end of the fiscal year. Multiple products, multiple platforms, so that's a given. And one of the things that we like to do with our converged platforms is as Dave mentioned, take a real customer agnostic approach, who address each account and each base band provider with the tools and the technology, the DNA that they like. And then deliver a collaborative solution around that platform. So that's going quite well for us. Your point about where the market is going, the market today is very different. Each customer has different preferences, there are some that favor a lower cost, lesser performance architecture, maybe fully converged, but there are hybrids where maybe you converge a couple of bands and have discrete WCDMA, and then there are complete full on discrete solutions that are out there. And our ability to cover all is in place, we have the customers set, the relationships to go about our business in the way that our customers favor.

If may add one of the things that we're finding and I think it's longterm going to be very good for us, is I had mentioned that we are addressing all OEMs in the intersection point of those OEMs with the various baseband partners out there. And what we're finding is that the competitive base, I think out of necessity, has become more niche-y. They're competent obviously, but they're more niche-y. So a competitive may be very deeply engaged with a baseband provider, and then and there, it's their handset of customers, some with another baseband provider. We simply don't do it that way. So when you hear folks talking about a converged platform and a flavor of a converged platform, that's fine, we compete there. They're good, we're good. But that's not the way the market's going, the market is going very customer specific, very custom. And so we believe we have the scale and the breadth and greater than anybody in the industry today, that would address those and address that complexity.

We'll go next to Craig Ellis with Caris & Company. Craig Ellis - Caris & Company: I just wanted to follow up, David, on your comments regarding HTC. It sounds like there's some nice share gain. Can you comment on what percent of your business you think you have, and what could that grow to over time?

Sure Craig, this is Liam. HTC is an account right now that's developing quite well for us. We are very much in the early innings with this customer. Difficult to handicap share but I'll tell you that we have a lot of room to grow here. They're a company that is enabling very content rich devices in smartphones, they have some great tablets and we're well positioned. Of course these are all higher end 3G and in some cases, LTE platforms. Craig Ellis - Caris & Company: That's helpful, Liam. And then David, regarding the confidence in outgrowing the market in fiscal '11 and fiscal '12, I understood that to be both the linear products and the more of a power amplifier front-end module statement but can you clarify that? And any further comments on that will be helpful.

Okay, sure. We put a lot -- the short answer is yes. We put a lot of our investment in applications, systems, know-how and design to continue to address not only the Component business within our Precision Analog business but also, more of these vertical markets that have very high gross margin, their long product life cycles, like that business a lot. So what we model, what Don talked about the second half of that $1.5 billion run rate, and what we've done in the past, model -- our midterm financial model, we made the assumption that the growth rate is similar for each product line, and we are continuing to do so. And we've had that experience now going on three years.

We'll go next to Tim Luke with Barclays Capital.

With respect to the outlook, could you give some color on your perception of how you see the tablet market evolving and what it may mean for you given your position? It seems as an important supply there. And Don, in seeing the revenue ramp, could you just sort of give us some feel further about how you see the profile of your gross margins developing going forward? And then maybe lastly, Dave, could you just balance the growth that you're seeing in the device side and smartphones relative to the linear business?

Tim, this is Liam, yes let me start with tablets. Clearly, we're very bullish on that market as Dave articulated. We think it's really the fastest growth area in mobile today. Our base position there is quite good, it's quite strong. Tablets tend to be content rich, performance oriented architecture, which is just what we do best here. I think you're going to see more entrants here over the next several years. We are engaged with everyone in that space, just to tell you that. We are working with each and every player. And we feel very bullish about that and that will be one of the growth drivers for us in 2012 for sure.

And that's where you'll see LTE. We think the penetration the highest, so there'll be additional bands. And there'll be more of an eye towards performance and there is trying to squeeze the next $0.10 out of the build materials. So we think it does stay more hybrid, more discrete. With respect to linear products, versus front-end solutions growth, again, as I stated, we think we can grow those business roughly equally. And that's really good for the overall margin structure of our company.

And Tim, you asked a question on the margins, too. Absolutely we still see opportunities for margin expansion. Just as a refresher to keep in mind, when we announced our midterm target model back in September, part of that was continued margin expansion, as well as leveraging our operating expense. That we just guided to a number between 44.5% to 45%. That model assumes 45%. So as revenue continues to grow, we leveraged the hybrid manufacturing model, you combine that with the focus we have on the CapEx investments that they're going to drive, productivity and margin expansion and all those things combined are going to bend a higher dollar content with a more complex RF devices that are going in the phones today. All that's going to continue to allow us to have an opportunity to expand margin as revenue grows. That's clearly part of the story for us.

We'll go next to George Iwanyc with Oppenheimer.

Don, following up on your margin comments right now, can you give us an idea of what the operating margin target was and what sales level you are expecting to have to reach that level?

Sure, George. Again we announced that at the Analyst Day in September and we said that at $375 million, to $400 million of quarterly revenue, we were going to deliver 30% OI. So that was the range. Keep in mind, we've done that multiple times. When we set targets, we typically achieve those targets in four to six quarters, so stay tuned.

Okay. And Dave, could you give us an update on how you approach the filter part of the front end and what are the big advantages and disadvantages in your approach to sourcing filters?

I think that's a great question. I would say, I've been around this business a long time, and what we found in the past is whenever there is a change in architecture, for example, right now, there's movement in exactly, which bands of WCDMA are going to be combined, how they're going to be combined with bands at LTE, how discrete versus integrated it's going to be. And whenever there are those kinds of changes like that, we're in the early days when analog went to digital, it creates some disruption of filter technology, there's a bit of a scramble. You saw our guys who typically done a good job of moving up in frequency and performance while keeping the costs low. But over time, once those architectural shifts settle down, the very high volume filter companies, typically out of Japan, have been able to drive volume and commoditize the pricing of that segment. That's happened every time there's been a change. And so our strategy keep in mind, is to be vertically integrated where the technology is unavailable in emerging market, and a partner with the best of breed for those who make versus buy. In the case of filters we have partnered with the very best filters suppliers, we are aligned with the desire to address this market with the best-in-class devices. And I believe that, that's the right strategy. I think over time, by the way, incidentally, we're in very high volume production of filter-enabled pads and designs today. We're winning sockets that are enabled with filters and without. And so I think the strategy of partnering with the best, and allowing those very big filter providers to drive pricing down over time, will serve us well.

We'll go next to Jonathan Goldberg with Deutsche Bank.

I was wondering if you could give us an update on your manufacturing utilization, how you're doing -- well how much you're doing in-house versus outsourced? And just give us an update on that strategy.

Sure, Jonathan. And we've each talked about this before. And when we look at utilization, it's really two numbers that are important. It's sort of the equipment line utilization, which we consistently run a theoretical capacity then it sort of, you look at the facility utilization. And so you're looking at your usage of the factory and the square footage. And so for us, that's still a number where we have the opportunity with very specific reasonable CapEx investments to put those in and to get very, very quick payback to give us a much better incremental margin answer because we're able to keep the utilization at a very high level and we're able to keep that balance between internal, external. The hybrid manufacturing model in line to give us that best margin and ROIC number. Typically, we were on and it varies based on the specific demand profile in the quarter. But we'll run about 20% wafers that we outsource and it's running 5% to 10% for assembly and test operations. That's typically what we see.

And then just a quick housekeeping question, you talked about an annual run rate of $1.5 billion in revenue, is that fiscal or calendar?

Well, the way to -- that $1.5 billion is a calendar number, it's a fiscal number. But the way to think about that number is to take our guidance that we just provided for the reasonable growth rate onto that number, and you annualize that, and that gives you a comfort level of $1.5 billion. That's the way to think about it.

We'll go next to Sujee De Silva with ThinkEquity.

Quick question for Dave or Liam. As customers try to put products in the market into newer platform, do they tend to lean toward trying to make it more integrated to reduce the complexity or more discrete and then move toward integrated, which of the two have you observed historically?

I think we've observed both and everything in between. There's some cases where the platform is designed specifically around a chipset to be low cost for example, may not have many, many bands. The WCDMA, this is an example where they'll go converge and try to go converge early on, and others will say, no, this is a performance-oriented architecture. In fact, we're seeing customers who have gone converge or go in the other way. And that's a trend we're seeing right now. Kind of interesting one. Where they say " Look, yes this works okay but you know what, for a few pennies more, a little bit more money, I can go at a much higher-performance design." So we're seeing customers go from discrete to hybrid to converge, and we're seeing the exact opposite. It is very different customer by customer.

And I think as you start to look at market like tablets where you're bolting on LTE bands, and really focusing on high-speed video and content rich applications. We are seeing the potential move back as Dave illustrated to. Even a hybrid approach where maybe a few bands were integrated, with several discrete LTE and WCDMA devices. But all of that points to more content and an RF-rich device.

And the other thing that we're kind of excited about is the upgrade of some of the lowest dollar content is dual-band GSM. A lot of that is sold in places like China. And as there's a push by the carriers and consumers to upgrade to 3G, we think that will be an interesting area where they will be highly integrated, they won't be world phones, we'll have very many bands, they may use GSM receive side for example, so it's kind of interesting to watch that evolve. We really like the effect. Now those won't be $8 per phone, but I'll tell you, that will be a lot more than a dollar. 2x or 3x added, so we think that's a big, we think, under -- not very well understood TAM driver in our space over the next five years.

And just a housekeeping questions for Don, what's the turn in the guidance, Don, and what are your top 10 customers?

I'm sorry Sujee, did you say turns?

Turns, yes, in the guidance, your backlog coverage versus turns.

Oh 100%. 100%

100% coverage right backlog coverage right?

100%. Top 10 customers for the quarter were Foxconn, Nokia and Samsung, which is consistent with what we had last quarter.

We'll go next to Cody Acree with Williams Financial.

Back to the converged platform, you said you're now qualified in multiple basebands, are there any significant suppliers that you're not qualified into?

No.

Great. And then just on that, the performance versus maybe the cost and flexibility, what is typically the performance trade off that you're seeing in your products versus your discrete solutions?

You mean between a multi-motor converged and discrete?

Yes.

Well it really kind of depends. The trade off is in linearity, power and efficiency, which translates into talk time, sometimes thermal characteristics of the device battery performance and data speed, download data speed. There's also areas around isolation, noise, it get a little bit more RF esoteric, but they're quite a bit harder to implement in a multimode design. And so if you keep in mind that a process technology like any process technology, let's get gallium arsenide, tend to be a bell curve across frequency. And let's say for example efficiency. So what you wind up with -- it maximizes at a certain frequency, and then rolls off the edges of that frequency band. The broader, the more bands or the broader the frequency range you ask and amplify to address, the more it's going to roll off, at the end to that. So if you optimize it at 1.5, it will roll off at 900 megahertz. So that is the trade off. So customers using converge have to just kind of try to center it where the phone will be used the most, and then they pay a price for bands that move away from that centered frequency. Some cases, the market's okay with that, which mean it will work great in your own territory, when you're running 3G, but then when you roam, it will be much worse. And in some markets, that's okay, in some that's not okay.

We'll go next to Anthony Stoss with Craig-Hallum.

A lot of my questions were answered, however, can give us a breakdown between 3G and 2G, and also a percent was from the linear products groups? And then right after that David, you wouldn't mind just talking about given your capacity where you are right now, are you prevented from or do you have to walk away from anything currently?

I'll just get those housekeeping questions, on the air interface for the quarter, we were -- 2G, we were roughly 25%, and EDGE WCDMA was roughly about 75%, which these percentages continue to reflect the upgrade cycle and the revenue segmentation mobile Internet access, we were roughly 60%, 2G feature phones 20% and linear products roughly 20%.

And to answer the second part of the question, no we're not walking away from any business today, keep in mind, we successfully completed the 6-inch conversion in our HBT fab. We've increased our PM capability for switches and ASMs. We also partnered with or assembly pdf in HBT with others. They're doing copies that process for us. So the combination of our own capacity and their capacity, gives us a great deal on comfort as we look out over the next few years. If we don't have to do anything major in terms of bricks and mortar in our operations.

We'll go next to Aalok Shah with D.A. Davidson & Co. Aalok Shah - D.A. Davidson & Co.: Dave, maybe you can explain this a little bit, a, can you tell us where you are with Nokia now, are you done with your ramp-up phase or are there more to go? And then b, in terms of kind of where you guys are really winning share, I mean I guess we're all a little confused with everyone else in the wireless space, kind of guiding down for Q2. I know there are share gains for you, but we're trying to -- I guess the reason for me, trying to consider where really you guys have really made the momentum shift in the last quarter to gain this much share in just a quarter's time spent really.

Sure, this is Liam. Some of these wins are certainly programs and applications with customers that have been in the works for years and months, right. So this is not a short-term reflection. Nokia is a great case. So we are moving forward with share gains. We're actually making great progress and continuing along our 3G path. Our multimode path as well as 2G. So that account is in great shape, we see continued upside there. And then in the broader markets, we're also seeing smartphones in general, tablets in general, higher end handsets in general present an expanding TAM, much faster than unit growth rate. So you get top 10 gains in these devices, and then there are many, many customers out there that we really are in the early innings, we've mentioned HTC, ZTE and Huawei are others, and there are some other smartphone players that quite frankly, we're in the early innings and have plenty of blue sky to grow share.

And keep in mind just, to add a little color to Liam's comment, we are very diversified in this space. So the guidance may vary for company to company, the overall market is growing. And the market, we expect to grow in June. And we've got backlog coverage to that. So it is share gains and identified programs that are ramping, I can tell you the market is not bound for the June quarter. And so if the market is down for a particular company, it's a share issue, it's not the market. I think we benefit from diversification, while there are OEM share shifts that happen out there, they happen all the time. And that may be many accelerating, as there's so much dynamic, market is so dynamic. We attempt to stay so diversified that we can power through those and that's what's happening in June.

And that's all the questions that we do have at this time. I'd like to turn the conference back over to Skyworks Solutions for any additional or closing remarks.

Well, thank you everyone for listening. That concludes the call and we look forward to updating you in the future.

That does conclude today's conference. We thank you for your participation.