Silicon Laboratories, Inc. SLAB
Q2 2011 Earnings Call Transcript

Operator: Tore Svanberg, Stifel Nicolaus.

Tore Svanberg - Stifel Nicolaus: My first question relates to your guidance. Could you talk a little bit about just qualitatively what do you think is going on here? Do you think this is going to be a sort of one quarter correction due to some inventories or do you think this is the beginning of maybe a broader base correction?

Necip Sayiner - President and CEO: I think in our video business, we do see, Tore, as a single quarter issue. When we talk to our top customers, both module makers and OEMs, they tell us that currently they have about four weeks of shipped inventory, about four weeks of module inventory and another four weeks of finished goods. This is higher than what is justified by the end-user demand, so we expect this to get worked through the quarter but we do expect to see the video revenue to recover in the fourth quarter. As it relates to the issues we see in the networking business and that is largely impacting our timing revenue and to a lesser degree, our MCU business in optical transceivers, the long-term trends are very favorable. As the demand for bandwidth continues to increase, that only increases the demand for the type of products we are talking about both in clocks and MCUs. If you talk to our customers, they would say that they were expecting a better second half than what we are seeing today. So, it's too early to say I think it is a single quarter issue versus a longer term phenomenon, but that's what we see in those two product areas.

Tore Svanberg - Stifel Nicolaus: Very good and as my follow-up, could you talk a little bit about how you are expecting to manage our own inventories in Q3. You did a good job bringing them down in Q2, what should we expect for the September quarter?

Necip Sayiner - President and CEO: I think we'll continue to manage inventory tightly. There are a number of products we'll be ramping in Q3 as well. As I mentioned, we're starting to send new products to our TV customers with our latest generation TV tuner as well as the ramp of the touch controller into handsets. So, we'll be building inventory in those areas as quickly as we can, but the rest of the business we're managing it very tightly.

Operator: Craig Ellis, Caris & Company

Craig Ellis - Caris & Company: Necip, just with respect to the comments that Broad-based businesses would come in at the lower end of the 20% to 30% target, is that entirely attributable to timing or are you seeing that there are some other dynamics at play given the macro weakness that you cited that will impact other businesses as well as you think about the growth in that segment?

Necip Sayiner - President and CEO: I think if I look at the complexion of the Broad-based business and the range we've provided beginning of the year versus what we are looking at today. I think a large part of the deviation is in the timing business, but we are also taking a somewhat more cautious view for the second half of the year based on what we see in the macro environment, as well as the trend in bookings as of late. In the last four weeks or so, the order patterns has been relatively weak, and we are going into the seasonally slow, summer season, particularly in Europe, so we are taking a more conservative view of the overall demand environment as well.