Silicon Laboratories, Inc. SLAB
Q3 2010 Earnings Call Transcript

Operator: Anil Doradla, William Blair.

Anil Doradla - William Blair: I think, Necip, when I sit back and look at the big picture, you talked about fourth quarter being the trough. What gives you confidence, why doesn't this extend into the first or second quarter, can you share with us some insights as to why you believe the business will bottom in the fourth quarter?

Necip Sayiner - President and CEO: Yes, I can. There are basically three items we're basing this projection on. The first is the fact that we've been having conversations with our customers as well as our channel partners, who are most affected by the downturn we see in the Access and consumer audio business. It relayed to us that at the moment, they are buying a product from us at a lower rate than end-user demand, and we expect and they expect the inventory for these two product areas to clear by the end of the year. The second reason for our confidence is the reversal in bookings that we've seen so far in the month of October. When we revised our guidance back in September, I reported that our bookings has declined in the month of August, and September was worst in that regard. Our book-to-bill dipped below one by the end of August and that was throughout the month of September and this also starting seeing some softness in areas like industrial toward the end of the quarter. That trend has reversed substantially in the month of October, the three weeks to month to date. Our bookings rate now is back to levels that we've seen back in June, July timeframe. The third item that gives us confidence is that the ramp of the TV tuners. As I mentioned, we have won designs with all five top customers we've been targeting and we know the programs that we won and we started receiving orders for shipments in the first quarter. So, all those three items combined gives us the confidence that Q4 will indeed be a trough.

Anil Doradla - William Blair: One follow-up is on the access side of the business, do you think 2011 will be a single-digit growth year-over-year or do you think that would be a down year for the Access business?

Necip Sayiner - President and CEO: I think given what we've seen over the last 12 months, we are going to need to revaluate growth prospects for the Access business. Going forward, I think conservatively looking at Access business for the next year, if you were to assume that the business will maintain the exit rates of 4Q that will be a measureable decline year-on-year. I think that would really represent based on the trends that we see in the business and the fact that we are undershipping the demand right now would be a conservative bet.

Operator: Craig Ellis, Caris & Company.

Craig Ellis - Caris & Company: Necip, can you just talk about some of the puts and takes in the Broadcast business as you look at the fourth quarter trends?

Necip Sayiner - President and CEO: Sure. Going into fourth quarter, we see consumer audio down seasonally. This is primarily driven by lower shipments to our PND customers. We had seen similar trends in prior years. I have to note, however, the sequential decline to 4Q seems a little bit more pronounced this year than we’ve seen in prior years and handsets are down a little bit further than 3Q level. So AM/FM I think will remain steady. The customers are telling us that the current level of demand for our products will remain relatively constant this quarter until they start building for Chinese New Year in the first quarter of next year.