Operator: Good afternoon. My name is Martin, and I will be your conference operator. I would like to welcome everyone to the Xilinx Fourth Quarter Fiscal Year 2013 Earnings Release 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. Please limit your questions to one to ensure that management has adequate time to speak to everyone.
I would now like to turn the call over to (Rick Mushe). Thank you. Mr. Mushe, you may begin your conference.
Rick Mushe - IR: Thank you, and good afternoon. With me are Moshe Gavrielov, CEO; and Jon Olson, CFO. We are providing financial and business review of the March quarter and then we'll open the call for questions.
Let me remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the Company. We wish to caution you that such statements are predictions based on information that is currently available and actual results may differ materially.
We refer you to documents that Company files with the SEC, including our 10-Ks, 10-Qs, and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This conference call is open to all and is being webcast live. It can be accessed from our Xilinx's Investor Relations' website.
Let me now turn the call over to Jon Olson.
Jon Olson - SVP and CFO: Thank you, Rick. Fiscal year 2013 was highlighted by sales growth from our new products, which increased more than 80% from the prior year, driving PLD share gains for the year. Although muted macroeconomic conditions contributed to an overall sales decline of 3%, Xilinx achieved a record gross margin in fiscal 2013. Gross margin of 66% was an increase from 65% in the prior fiscal year, a direct result of our continued focus on margin expansion projects across our product portfolio.
In the March quarter, Xilinx's sales were $532 million, up 4% sequentially and at the midpoint of the guidance we provided. Sales from all geographies with the exception of Japan increased sequentially. Gross margin was 66.1%.
Operating expenses of $204 million, including amortization were $4 million lower than expected, due primarily to lower discretionary, sales related and litigation expense. New product sales increased 13% sequentially with particularly strong growth from Kintex-7 and Virtex-7 FPGAs. 28 nanometer product sales exceeded $40 million in the quarter, surpassing our previously stated goal of greater than $30 million.
Let me now turn to a discussion of end markets. Sales from communications and datacenter decreased 1% sequentially. This was slightly weaker than we had forecasted. We had expected this sector to be up slightly driven primarily by wired communications. The actual results were driven by a decline in wired customers, primarily on older products. New products, however, were up sequentially. The decline in wired was partially offset by wireless customers shipping both 3G and LTE technologies on a global basis. We continue to expect TD-LTE business to be a significant sales contributor in the second half of the calendar year.
Industrial, Aerospace & Defense sales increased 7% sequentially with strings from all three subcategories. Broadcast, Consumer & Automotive was stronger than anticipated with double-digit percentage growth from all three sub categories. Other income and expense was a net expense of $9 million, $2 million higher than planned, primarily due to impairment losses on private equity investments.
Net income for the quarter was $131 million or $0.47 per diluted share and included a tax benefit of $12 million, or $0.04 per diluted share as a result of a catch-up benefit related to the restatement of the R&D -- reinstatement of the R&D tax credit. Operating cash flow for the December quarter was $174 million before $6 million in CapEx. We paid $58 million in cash dividends during the quarter.
Diluted shares for the quarter were 277 million. There was a 29.4 million share dilutive effect from our convertible notes. For questions relating to the dilution associated with our convertibles, please visit our Investor Relations website at www.investor.xilinx.com.
Let me now comment on the balance sheet. Cash and investments were flat at approximately $3.4 billion. We have approximately $1.3 billion in convertible debt and our net cash position is approximately $2.1 billion. Day sales outstanding decreased two days in the March quarter to 39 days.
Inventory dollars at Xilinx declined by $25 million sequentially. Combined inventory days at Xilinx's and distribution were 110 days, down from 131 days in the prior quarter. We expect inventory dollars to be down again in the June quarter as we work towards our target of 90 to 100 days of combined inventory.
Let me now turn to a discussion of guidance for the June quarter fiscal '14. Our backlog heading into the quarter is up sequentially. We are expecting continued growth from our new products. From an end market perspective, we expect communications to be approximately flat, as wired increases offset wireless decreases. We expect Industrial, aerospace and defense to be up slightly as growth from industrial, scientific and medical and test and measurement are offset by declines in defense.
Lastly, we expect broadcast, consumer, and automotive to be up driven by increases in both consumer and automotive. As a result, we are expecting total sales to be up 1% to 5% sequentially, with sales from all geographies expected to be flat to up with the exception of Europe which is expected to be down. The midpoint of our sales guidance is predicated on turns rate of approximately 54%, which is lower than the prior quarter but in line with our full year average. Gross margin is expected to be approximately 66% to 67%. Operating expenses in the June quarter are expected to be approximately $206 million, including $2 million of amortization of acquisition related intangibles. We remain comfortable with the full year operating expense guidance we provided at our recent Investor Meeting.
Other income and expenses is expected to be a net expense of approximately $8 million. The share count is expected to be approximately 277 million shares and the tax rate for the June quarter is expected to be at approximately 13% to 14%.
Let me now turn the call over to Moshe.
Moshe Gavrielov - President and CEO: Thank you, Jon, and good afternoon to you all. The 4% sequential sales growth in the March quarter was driven by double digit increases in six of our secondary end markets. This broad-based strength highlights recovery in our business. Revenue was primarily driven by exceptional growth from our 28-nanometer product families, which exceeded $40 million significantly surpassing our expectations.
28-nanometer sales were driven by both our mid-range Kintex-7 and our higher performance Vixtex-7 product families. We are now converting technology leadership to revenue growth. 28-nanometer Xilinx is a generation ahead of our competition in four areas. We have the broadest portfolio with our All Programmable FPGAs, SoCs, and 3DICs. Second, we have the best products with an extra node of performance, lower power, high levels of integration, and connectivity with industries absolutely best service.
Third, clear our customers critically more importantly as their average design complexity has sky rocketed. We will enable the highest productivity with Vivado, the industry's first SoC strength tool suite. This enables delivering unmatched time to integration and implementation and by far the best quality of results i.e. higher density, higher performance, and lower power. Lastly, we'll enable smarter systems with the unique combination of SmartCORE IP, fee-based design tools and libraries embedded software running on our market defining ARM-based solutions. Leveraging all four advantages, revenue growth is already being driven by continued PLD share gains, considerable displacement of ASIC and ASSPs, aggressive market penetration, and core target growth driver applications. Smarter 100-gig wired networks, wireless HetNets, data centers vigilant vision based systems.
In the March quarter, we announced multiple industry (indiscernible) to 20 nanometer, clearly demonstrating that we are at this node too staying a generation ahead. Vivado tool suite now supports 20-nanometer designs. We are currently working with numerous early axis customers. We will be tapping our first 20-nanometer device this quarter as predicted. The rollout of our seven theories, Zynq All Programmable SoC product generation is nearly complete with all five families in production. Fiscal year 2013, 28-nanometer sales comfortably surpassed the $100 million. Over 500 customers receiving shipments in the March quarter alone in a broad base of applications including Communications, Industrial, Defense and Broadcast.
In the June quarter, we expect our 28-nanometer shipments to again exceed $14 million in sales. As we discussed at our Analyst Day last month, we are very confident 28-nanometer sales will grow to more than $250 million in fiscal year 2014. With an improving demand environment industry's broadest and by far the best 28-nanometer portfolio, focusing penetration into the highest growth applications and significant progress in displacing ASICs and ASSPs, the new fiscal year promises to be an exciting year for Xilinx. Here where we will clearly connect technology leadership to revenue and demonstrate we are generation ahead for accelerated growth.
Let me now turn the call back to the operator to open it up for the Q&A session.
Operator: John Pitzer, Credit Suisse Securities.
John Pitzer - Credit Suisse Securities: Jon, in your prepared comments you talked about a meaningful uptick expected in the back half of the calendar year for TD-LTE. The LTE cycle has been one that inventor have been waiting for a while. I guess what gives you the confidence in the TD-LTE market. And if you could also just discuss the kind of the LTE build out here in the developed countries. You saw AT&T kind of lowered their CapEx for the out years when do we start to see the content pick up story for you guys within that spend?
Jon Olson - SVP and CFO: Let's just talk about the TD-LTE portion first and I will go to the second half after that. The information we get is primarily from our customers and the customers who in China are providing – likely Canada to provide that equipment have given us forecast that indicated in the second half we are going to have the beginning of the ramp for that design. We have already sold into equipment where they are doing their prototyping and their first generation of testing of that capital equipment. So, I am just putting these two things together. They are forecast for the second half of the year now, of course, these aren't binding forecast, these aren't orders that are booked and it's always subject to change, but usually what we've seen is the beginning of the prototype builds followed within a quarter or two of the ramps. So, the combination of their forecast, which means there must be some confidence that they want us to build in parts for that, as well as the beginning of prototype is where I was getting that information. The second question or maybe Moshe do you have any additional color on the LTE before I…
Moshe Gavrielov - President and CEO: No, China is expected to happen in the second half, all of the signals highlight that that is the plan and it is ongoing.
Jon Olson - SVP and CFO: The AT&T announcement, it's kind of interesting. We obviously are pretty aware of that what was said. But when you peel back the onion, of what's inside there and we have talked to the carrier about this. There are program that's associated with wireless rollout of LTE actually is preserved in terms of the kind of ramp they have been talking about in terms of capital spend and deployment across the country for the rest of this year and into next calendar year. So, it's a very specific name to that program and we've gone and talked with them and checked with that and our best information is that the wireless LTE portion of this is not substantially impacted by the statements.
John Pitzer - Credit Suisse Securities: Maybe it's my follow-up guys, just real quickly, another good quarter on the gross margin line without yet seeing I think the benefit of some of the share gains you're expecting at 28-nanometer. I guess given your leadership position at 28, is that becomes a bigger mix of the overall revenue stream, is there opportunities to kind of get the margins above the higher end of your target given that there is still a gap between yourselves and your closest competitor?
Jon Olson - SVP and CFO: Yeah. So, there is no question, we are continuing to do everything we possibly can to move the margins number up. The fact that we haven't changed our business model, I kind of anticipated the question on that as well, the fact that we haven't changed our business model is not really important relative to our view in the short-term that we do think margins are going to continue to be healthy. I think one of the things we've talked about at the Investor Day was around increasing importance of Zynq against ASSPs and we're still working through those kinds of competitive situations and in terms of changing our business model, I think we're just being cautious that there is no doubt in the short run as evidenced by our forecast for the June quarter. We are confident that margins have drifted up and continue to drift up a little bit if you go back over the six quarters.
Operator: Vivek Arya, Bank of America Merrill Lynch.
Vivek Arya - Bank of America Merrill Lynch: One more on gross margin. One thing that Altera has done had these products customized for different applications with cost optimal structures, some with of it (indiscernible). They have often explained that that's the reason that their gross margins have tended to be higher, is that a valid reason? Is that the kind of gap that you can close through your own design activity? Or do you think there is that structural gap that will remain?
Moshe Gavrielov - President and CEO: We have over the past five years since the new management team has been in place; we've focused on improving the gross margins. We believe that with the unquestionably superior portfolio we have. The broader portfolio we have and the deeper portfolio we have, we'll get rewarded for that and there is now the operational focus on driving defect densities and making sure that the overall portfolio has the right mix. So, you know, there is various ways of addressing it and we like the way we have addressed it. It gives us technology leadership, market leadership and unquestionably at strong position. So, I wouldn't say there is only one way to address it and the results speak for themselves. Ours have floated up and despite the fact that we are now shipping a lot of 28-nanometer the margins have gone higher rather than lower which typically in the past it would go the other way when we are introducing a new generation of product. So, but fundamentally I believe that our overall portfolio strategy at 28 is absolutely winning and superior at this point.
Vivek Arya - Bank of America Merrill Lynch: And as a follow-up there are just some frequent concerns that large Chinese equipment vendor has been trying to actively use more of their internal A6. I know it's not a new concern, but it does come up frequently and the related concern to that is that maybe for this initial prototyping part of TD-LTE, they might be using more PLDs, but as they go forward, they might try to use more of an internal ASIC solution. Can you put that concern to bed once and for all because I think that has – it just comes up so frequently?
Moshe Gavrielov - President and CEO: We are confident that we have tailored our Kintex product to be absolutely perfect solution for those wireless requirements and what does happen is for the first few years things change quite a bit and the flexibility inherent in the FPGA is fundamentally a big feature that enables them to (indiscernible) that. So, between the flexibility they need and the very strong match that we have with our product offering to their requirements and Kintex was targeted, particularly at that. I think we have a very strong position. Any of our customers at any point in time can decide to do this, it typically is risky, lengthy and complex thing to do, and it does happen from time to time. It's becoming rarer and rarer and so the number of companies that can do it has dropped and even that the biggest names and you've alluded to one of them, where they do undoubtedly have capacity they tend to want to use it strategically where it has the biggest impact and that biggest impact actually tends to be more on the consumer side where they have huge volumes and very short product life where they can exploit that most effectively. So, I would never say never I'm just saying it's more difficult and we are intent on making it more and more as we move forward to advance nodes at the first space possible.
Jon Olson - SVP and CFO: We are seeing no signs of this activity. So, I mean, again, it could always happen in the future, but I wouldn't think of that. You specifically talk about maybe right after prototyping no way I don't believe that's happening and for all the reasons Moshe said in terms of the change that's still going on in the overall environment and et cetera. So, I don't think that's going to happen.
Operator: Ambrish Srivastava, BMO Capital Markets.
Ambrish Srivastava - BMO Capital Markets: First question is just getting back to the end markets and the guide. Jon I think you mentioned that in the coming quarter wireless will be down, but then I'm trying to reconcile that with TD-LTE builds happening. Since you just had prototyping, if they're happening in the back half, and assuming they're strong. Then what is weaker in wireless? So that's my first question. The second question is back to your business model. Through the cycle, through the cycle, through all the top line volatility, the franchise has become more profitable. So could you please remind us again, and I won't ever fault you for not returning enough to shareholders, but the business is more profitable, and you churn out load of cash. So just remind us on the priorities on buyback versus dividend.
Jon Olson - SVP and CFO: From an end market perspective, yeah, I can sense why there is maybe some distance or differences in those two statements that I made that you mentioned. But a lot of what's going on is just what our customer patterns of individual projects. So, nowhere near the entirety of our wireless business is dedicated to TD-LTE, in fact it's obviously very small at this point in time. Again, prototype tends to be built in batches and then there is a deployment and then there is contract (indiscernible) and then there is approval for it. So, it's natural to have kind of a build-up in one quarter, a pause and then kind of a initialization of ramp when you're talking about a new technology rolled out. So, that's sum of what you're seeing in the June forecast. Then very broadly, the rest of our business, which is related to both 3G and LTE roll out elsewhere in the world. It's just the normal bumpiness. We are not going way down or way up, it is just down a little bit in wireless and then up on the wired section. So, it's not really particularly very pronounced for either one of those two sub-segments in the directions that we've forecasted. So, hopeful that was helpful. The business model approach is, yeah, we are very profitable. I will remind you that we did return $430 million of our $660 million of operating cash this year to shareholders. So, very high percentage of what we generated this year and we are confident about growing profitability in the company and we will make adjustments to our cash return to shareholders as those opportunities present themselves relative to growing cash balances and a decision that we make about how to do that. So, just to refresh your memory on what our strategy is the first preference is dividend and we've raised our dividend every year since inception and we raised it again here in the last quarter by double-digit percentage. The buyback is -- the good amount of buyback is at least dilution or in the range of $100 million to $150 million every year plus opportunistic on top of that which is really dependent on the stock price and the cycles they are going on. So, we have an algorithm that we use as a guideline, but not as an absolute and we implement that as it hits our strike prices.
Operator: James Schneider, Goldman Sachs.
James Schneider - Goldman Sachs: Just returning to the carrier CapEx commentary again. If you set China aside for a second and look at the broader market outside of China, if you tore up what all carriers have said about their spending plan for the year, and look what they spent so far, you mathematically conclude that there is going to be a big recovery in the back half of the year. So, my question is based on your customer forecast and do they basically support that snap back into back half of the year or are you more cautious on whether that can really happen?
Jon Olson - SVP and CFO: When we put together our forecast for the year, this year and we try to add this thinking into what we talked about in the Investor Day in March. I agree with you, it looks a heck a lot more bullish if you add up all the capital spending that's been published and we indicated a very strong snapback in the second half and we haven't modeled anything near that strong. I think it's going to be more of a steady growth situation, not some sort of step function up for a couple of quarters. So, I think, we've been a lot more cautious.
James Schneider - Goldman Sachs: Then as a follow-up, you noted a really large increase sequentially in Europe. I think Europe was up 14% sequentially and obviously that's way outside the bound of what the broader market in something like analog is doing. So, can you help us understand what's going on with the European sales, is that all being driven up by step up in your large European telecom customer and what do you expect from that region going forward?
Jon Olson - SVP and CFO: Yeah, actually the growth in Europe was very broad-based and the industrial improvement that we had forecasted in Europe came through. We had double-digit growth, I would say in the mid-to-small customer range just as we had forecasted. If anything by the way, it was a little weaker than we thought in North America in that category, but in Europe everything came out just as right. So, we had in addition to this broader-based industrial growth, which came through distribution support primarily. We also had strengths in automotive this quarter that was focused a lot on the European market, so a very strong business there. We had a few isolated Aerospace & Defense increases in Europe, greater than on a growth basis as well. Moshe talked about having multiple sub end markets growing. It really – recovery that we had forecasted really was broad based and it kind of got us back I would say to the normal supply demand kind of thing. I haven't been able to reconcile it, other semiconductor companies have said because I know there has been a lot of negativity going even end the March quarter around, strength in industrial. We absolutely saw strength in industrial and in test and measurement and in broadcast and in automotive. It wasn't just a large communication with customer in Europe.
Operator: Glen Yeung, Citi.
Unidentified Analyst - Citi: This is (indiscernible) Glen. I wanted to ask really quickly, if you can disclose it. How much of your cash balance is offshore and how much of your cash flow would you say is offshore as well?
Jon Olson - SVP and CFO: So, I'm also always hesitant to give precise numbers on the offshore, onshore cash split because we do have ways of bringing cash back to the U.S. cash tax efficiently, obviously not all of it, some of it would give us 35% haircut. I was bristle when someone – when an investor says I've just taken your estimate of your cash and given you a 35% haircut that really isn't right, the right way to look at it. The neighborhood of a third or so is onshore and two-thirds is offshore, but again, I'm cautioning you some of the offshore can be brought back cash efficiently. From a cash generation perspective, I can tell you, we have definitely talked about this before. We are comfortable with our U.S. cash generation able to absorb dividend or dividend payments plus increases in the future and dividend along with supporting our U.S. needs for cash. So, we are in a pretty good position in cash generation in the U.S. and also pretty good position in terms of our overall cash balances.
Unidentified Analyst - Citi: Then regarding OpEx it seems to be coming in a bit lower than expected. Are you being conservative there and when does spending for 20-nanometer kick in?
Jon Olson - SVP and CFO: So, I think we are pretty much on our thought process in terms of our June forecast for OpEx and it does grow throughout the year, so the second half of the year is greater because of tape-outs primarily and there will be additional tape-outs for the next generation. I mean, there is still some tape-out going now, but it is on a relatively low level of finishing off the 7 series of Zynq parts. And then in the second half, we will get some uptick in the second half, nowhere near the kind of uptick that we experienced in the last fiscal year where we had our huge crescendo. It is a little flat or starting, if you will. So, second half up from first half.
Unidentified Analyst - Citi: If I can just ask one more. 28-nanometer color where is it doing well in the short run and where do you see it most successful in the long run?
Moshe Gavrielov - President and CEO: Well, it's by far our broadest product offering. If you look at the portfolio, it goes all the way from the low end the Artix family through Kintex, which is a wireless oriented family to Virtex and then there is the high end of Virtex, which is primarily implemented with the 3D technology, where we're the only ones who are shipping that in production today. If you look at the breadth, it addresses all of the markets we are in. So, there actually isn't a market that we play in, which will not be served very well by 28-nanometer. If you look at timeframe, these markets tend to happen at a different rate. So, wireless, the high end of test and measurement actually happened to occur quickly, emulation of course happens quickly too. So, those are the three plus to ones. And then the other markets tend to happen at their own distinct rates where typically some elements of Aerospace & Defense take the longest, but not all of them because even there are markets that move faster than the average, but I would say it's a continuum where the three that I mentioned are the fastest coming out, but based on the fact that we've shipped to 500 customers in all of the markets we serve, it's coming out very broadly and strongly across the entire portfolio and we expect it to manifest itself in being by far the strongest node we ever have had. And the early signs and the $100 million worth of revenue that would ship this past fiscal year and the $250 million, which we feel confident in are all manifestations of that.
Operator: Anil Doradla, William Blair.
Anil Doradla - William Blair: Yes, Moshe, I had a question on your Zynq product line. Clearly there is a trend of ASSP replacement and Zynq is benefitting from that. Can you walk us through how you expect that to play out over the next couple of years? Do you think Zynq could be a 10% revenue generator for you guys?
Moshe Gavrielov - President and CEO: It's a groundbreaking product. It dresses a lot of markets, which again happens at different rates, but for sure it would be 10% or higher, of the 28-nanometer generation. Because at any point in time we're shipping numerous generations product in parallel, it isn't likely to become 10% of our overall revenue anytime soon, but then there is the follow-on product of Zynq, which will build upon that. So for 28-nanometer for sure it should be -- in excess of 10% of that. The way these markets work and the target markets of Zynq, some of them for example Automotive and Industrial take a little longer to manifest themselves. So that will both happen in the short-term, but three to four years out, I would expect it to be well in excess of 10% of the overall revenue of the 28-nanometer shipment.
Anil Doradla - William Blair: So, is it fair to say that initial deployments are on high-end and as you get out new iterations, you're going to work your way towards the mid and low end?
Moshe Gavrielov - President and CEO: I wouldn't use high-end and mid and low. And here I would say that its market depended, but Zynq is a mid and lower end product by definition. It's not an ultra-high end product. It's basically focused on a Kintex and Artix type set of markets, but I would say within those it is at the high end of those markets, that's what we've targeted Zynq at. The design wins are phenomenal and this year it will start to be visible. The year we are in, the fiscal year we are in it will be visible on the shipment it just won't be at the 10% level yet by the end of this year.
Operator: Joseph Moore, Morgan Stanley.
Joseph Moore - Morgan Stanley: Can you give us a similar discussion of the 3D business today. Can you help us right now that you are over 40 million a quarter? Can you help us decide how big that exposure might be and how big it might get?
Moshe Gavrielov - President and CEO: I'll let Jon answer the first part and then I'll talk about where I think it could go.
Jon Olson - SVP and CFO: The 3D implementation generally describes our largest devices and the largest devices go into a combination of end markets relative to test and measurement and emulation, prototyping and then also high-end communications for high speeds, for a lots of (indiscernible) and then also aerospace and defense and other communications where you can take out much larger ASIC. So, those are all descriptions of businesses that many of them don't take-off right away, but yes, emulation and prototyping do take-off relatively fast. Vis-a-vis the strength of our $40 million definitely was a significant contribution there, but by and large, as Moshe talked about how strong wireless and other end markets have been, our mid-range products has taken off much, much faster from a revenue perspective. So, it is extremely important to us that technology and it has been a very strong contributor to the $100 million level, but it's actually not the biggest component of what we're going to ship.
Moshe Gavrielov - President and CEO: Kintex by far has been the biggest component and there is being huge take-up of Kintex shipments in the wireless market, so that's the biggest. And then the high-end of Virtex is, the second. And then next the normal Virtex product followed by Artix and Zynq are still a very small percentage point. Over time, we'd expect Virtex and Kintex to probably be neck and neck -- the mainstream Virtex and the mainstream Kintex to be neck and neck in terms of being the largest and then the high-end of Virtex to follow that.
Operator: Chris Danely, JP Morgan.
Christopher Danely - JP Morgan: With the 20-nanometer business being a little bit better than expected, can you just talk about your expected ramp for that in the June quarter and then the second half of the calendar year and then did you guys mention what the 40/45 manometer revenue did during the quarter, if you could talk about that as well?
Jon Olson - SVP and CFO: Sure, Chris. 28-nanometer ramp number next quarter we said it would exceed 40 again. So, we exceeded 40 in the March quarter. In June, we said we would exceed 40 again, and then just to remind Moshe had said we would exceed $250 million for the year, which is consistent with what we said in New York at Investor Day. So, that would lead a person to believe that there will be a quite of healthy ramp through September December and March in order to achieve that's greater than $250 million. So, we do expect September to be approaching 10% of our revenue and continue to grow from that. We have -- again these are predicated on lots of forecasts from customers that we have very detailed tracking around monitoring of monetizing 28-nanometer to its company, maybe different than we've approached things in the past. So, we have a pretty good handle on what we think designs are ramping from our customers with respect to that technology. So, we feel I think everybody is confident as we did in New York on this particular area. We didn't specifically say anything about the 6 series. If you do the arithmetic on new products quarter-on-quarter, the new products is really made up of 28-nanometer and the 40-nanometer node, you would see that the 6 series was in the neighborhood of flat quarter-on-quarter. So, we do expect the 6 series to grow next quarter in the June quarter. So, it's flattened out for quarter and then it will start growing.
Christopher Danely - JP Morgan: As my follow-up. I guess just one more question on capital allocation. If I look at your share count from basically fiscal '07, '08, until fiscal '11, it went down on a pretty healthy rate -- fiscal '13 is in the books, your share count has actually gone up a little bit each of the last couple of years, along with your cash balance too. So, I'm just wondering like how you guys look at that? What are the plans to deal with sort of the share kind of creep going forward here?
Jon Olson - SVP and CFO: Yeah, the biggest (indiscernible) of our share count increase is the dilution effect of the convertible that the accounting world says we have to take, but the call option we have to protect us on the strike price can't get recognized of the P&L in terms of the diluted share count. So, it is actually little bit attorney of accounting. If you net all that out you would have seen a slightly declining share count for us but because our actual stock price has been increasing, which is a good thing, over the same period time. You ought to give some credit for stock price going up during that time. Now, that doesn't necessarily wipe away your base question I am trying to make sure that you understand what the mechanics were relative to the share count. So, absolutely, we see our cash balances creeping up slightly not to a great degree and we have had kind of over two years of flat return of cash to shareholders in the neighborhood of 425 to 450 or 420 to 450 kind of range. So, we are aware of that. So, I'll also point out that we distributed in the neighborhood of two-thirds of operating cash for the year which is actually very high payout ratio. So, we do look at a combination of payout ratios and our cash forecast in order to make that determination. We are very aware of it and we have continuous conversations with the Board about it and again we are continuing to review those particular alternatives. I am not going to change statement today that we are going to change what we are doing right now.
Operator: William Stein, SunTrust Robinson Humphrey.
William Stein - SunTrust Robinson Humphrey: From your comments earlier in the call it sounds like the booking pattern during the quarter improved. Do I have that right and then I have a follow-up?
Jon Olson - SVP and CFO: I think it kind of came out normal. Also in normal quarter, we had strong beginning and in okay third – third month of the quarter and the second month is a little lighter vis-a-vis the first month of the quarter. So, I wouldn't say it was exceptionally strong at the end. I think it was kind of average.
William Stein - SunTrust Robinson Humphrey: Then to the degree there is normal with regard to seasonality any more. Can you remind us what you'd view as kind of a typical September quarter change sequentially?
Jon Olson - SVP and CFO: Yeah, September has been – has had a lot of different patterns for us in the past. We also have this effect of the industrial smaller customers, particularly in Europe getting a lot softer for us in September – in the September quarter. So, June has been up and if you look at history, in seasonal, we are in the range of where we've been and September sometimes has been down, but I'm not making any statement about September again with all the CapEx spending growth that we believe is going to happen. It's way too early to know the timing of some of those programs to know about September.
Operator: (David Wu, Indaba Global Research).
David Wu - Indaba Global Research: I've got one on Zynq because that's a new business you are replacing existing processes. How should we think about the profitability of that business versus the FPGA business?
Jon Olson - SVP and CFO: At this point in time, what we've seen is, it's pretty – right now it's pretty close to from an end-market by end-market basis to what the average is for each of our end markets. Now acknowledging that the first wave of business came from existing FPGA customers, who are now substituting an FPGA -- processor for Zynq products, so I would say there is some cannibalization going on relative to our FPGA business. But it is value additive because now we're getting the dollars for the processor as well. So by and large, we aren't sensing any sort of downward pressure or different. We have some designs where the value of proposition is so high we've been able to get premium for it. At some situations where it's more price sensitive.
Moshe Gavrielov - President and CEO: Just to complete the thought there. The processor business is huge and it goes all the way from the third cheap microcontrollers to the ultra-high end, which obviously has very handsome margins. But we've targeted the middle of the market. So we have very intentionally stayed away from the profitless prosperity of the ultra-low end and we're making sure that product in of itself targets markets where we believe that it's generally in line with our FPGA business. We're not targeting, at this point, neither do I expect the future to target those ultra-low end (indiscernible) cheap markets where we can sell billions of these but it is unlikely to enable us to sustain our model. So, if you look the way the product is designed. If you look at the power of processor there which is actually a very formidable dual processor on-core you can see why we are pretty confident in our ability to do that. That's why we are not saying this is a consumer product it isn't, it is targeted for markets which are more in line with our typical market.
David Wu - Indaba Global Research: Can I ask a quick follow-on. Do you treat that as the process CPU market as a separate line item in your own internal business or do you see that as an ASP enrichment. So, really P&L wise (indiscernible) business.
Moshe Gavrielov - President and CEO: Well, we look at it both ways. But you know when you introduce new product which really is revolutionary and we were the first to do this way ahead of anyone with regards to product of this sort of and we now have been followed happily into this. But both fundamentally at this point when you have a new product, you want to isolate it so you can accelerate your learning and it is looked at separately at this point. I do believe that over time these market do tend to converge and if you look at other technologies we've introduced in the past where they were total separate or they address the small niche of our applications over time those technologies have become widely used. So, DSP cores are now widely used, still these are widely used. So over time, I do expect it to converge and become closer to our core market.
David Wu - Indaba Global Research: Just one quick follow-up, is there a need for you to expand into the 64-bit addressing that the ARM (indiscernible) have just recently announced and does it help you in your customer base?
Moshe Gavrielov - President and CEO: Well, more technologies is always better, right. So, I won't say it doesn't help us, but if you look at the product we have, it really has very broad applicability and there is an emerging 64-bit market and as this progresses, I wouldn't be surprised if over time we look at ways to address that. This isn't a short-term need for our core markets. Our core markets are more than adequately serviced by the existing architecture and its capabilities.
Operator: Ian Ing, Lazard Capital Markets.
Tyler Radke - Lazard Capital Markets: This is actually Tyler Radke calling on behalf of Ian Ing. My first question relates to TSMC's 16-nanometer. Just trying to understand how that changes your strategy with respect to 20-nanometers and can you just kind of walk us through the puts and takes of that?
Moshe Gavrielov - President and CEO: Okay. Why don't I answer that and if you could kindly raise your voice when you ask the second question because you are very barely audible to us. So, we can hardly make it out. But we are very pleased with our success with 28-nanometer. We were first in the market. We have the broadest portfolio by far. We have the deepest portfolio by far. We've demonstrated that even with a totally new foundry, we can come out and demonstrate leadership. Similarly on 20-nanometer, we've already announced some elements with regards to tap out where we believe we're going to be the first FPGA company to tap out the 20-nanometer software, software is there already, it's being used broadly by customers and a whole host of other things, which give me tremendous confidence that in 20-nanometer we're going to be able to continue and extend that leadership and keep our generation ahead. We have not announced anything yet on our plans beyond that, we're pretty sure that we are not resting on our laurels here and we expect to continue to deliver leadership to our customers. We will communicate that and our strategy and when it (behoves) us. So at this point in time most of the design wins or a large plurality is in 28-nanometers. We'll continue to be there in that for some years going forward, and then immediately after that there is 20, and we will make sure that we have a response for anything beyond that at the appropriate time.
Tyler Radke - Lazard Capital Markets: So my second question, my follow-up, and I don't want to beat the dead horse here, but just as it relates to wired and carrier CapEx, obviously I think you guys said wired was down more than expected, but you expected it to be up next quarter. As you look at obviously AT&T and Verizon, CapEx coming in a bit lighter than they had hoped, do you think this is a function of late releases of their budgets and the stuff getting pushed out into June? Or is there something else your customers are saying that we should be thinking about?
Moshe Gavrielov - President and CEO: Our specific methods and then our confidence about the next quarter was directly related to only a couple of customers program that the timing was up from what we had thought. So, I want to make another statement in a second, but I was going to make sure that it was clear that not to read too much into my next statement because there really is a macroeconomic overhang where people were the confidence in spending kind of ebbs and flows almost on a weekly or monthly basis and that does end up with caution in our customers ordering patterns and all of a sudden they want to expedite in and do something. We were finding it harder and harder to nail down forecast and trends on key programs just because of that secondary factor. But again, the fact that we were down or below than expectations and we were going to come back up in wired is really related to a couple of specific programs at a couple of specific customers.
Jon Olson - SVP and CFO: With regards to LTE deployment, one way of looking at it and probably the best way is as a customer. Regardless of who is winning and who is not winning on the smartphone world, that world just continues to go through the roof. It generates huge demands on the infrastructure. Those infrastructural demands can only be addressed by over time moving to the newest generation of technology and to a large extent, we are seeing a commitment, strategic commitment to do that and it's in each country region, it happens at a different rate. But it definitely is happening and to some extent when you have a major -- all of these companies, they have numerous carriers. At any point in time when one pulls ahead, it generates tremendous demand for the others to catch up otherwise their service levels become unacceptable and we are seeing that happen. So, even if from time to time, they do need to watch their deployment. We see more of those dollars being directed at new technologies as opposed to upgrading old ones. So, given our very strong 28-nanometer position and the larger percentage that we get that tends to help us. So, I'm very bullish on that and I don't see that trend reversing itself anytime soon.
Operator: Srini Pajjuri, CLSA.
Ryan Goodman - CLSA: This is Ryan Goodman for Srini. So just as a follow on to that last question on wired. So, it sounds like the macro is weighing a bit on maybe the enterprise demand within wired. Could you give an update on how the data center demand looks? And also last quarter, I think you had mentioned the largest data center high speed connectivity win that was supposed to ramp in the second half, any update on that as well?
Jon Olson - SVP and CFO: So, I think you characterized the wired accurately there. Relative to Data Center, our datacenter market is a new area for us, and it will take a little bit of time before it grows at a more accelerated rate. So when it does, some of the design wins we won already and are about to win, it is going to start to take us at a more accelerated rate, but that's not going to be at the back half of this year and into next year. We have won -- any of the designs that we've talked about in Investor Day in New York, we're still either on track to win or have won because we're – things are going very well yet and it is around high speed connectivity, is our biggest value add there. Now we have been in solid state drives, fairly broadly as controller units that business continues to be very good for us across the variety of customers, but it ebbs and flows on individual customers shipments et cetera. But by and large we're where we wanted to be on Data Center, but it's not a big part of our Communications business at this point in time.
Ryan Goodman - CLSA: Then just for another area in Industrial, looked pretty strong across the board. Just curious, how much of that do you think is coming from inventory replenishment versus sell through demand? How do you feel about customer inventory levels now? Are you comfortable where they are going forward?
Jon Olson - SVP and CFO: So I think given the fact that, we are maybe a little bit, but outlier of calling the industrial recovery and we had it – I think a quite a bit of – maybe in the neighborhood of two-thirds was inventory replenishment, but we are seeing signs of stronger continue ordering patterns from some key customers there, which duly need to believe there is sell through going on in that particular end market category. I do not believe there is much inventory in the channel in that end market at all at this point.
Rick Mushe - IR: Thanks for joining us today. We have a playback of this call beginning at 5.00 pm Pacific Time, 8.00 pm Eastern Time today. For a copy of our earnings release, please visit our IR website. Our next earnings release date for the first quarter fiscal year '14 will be Wednesday, July 17, after the market close. This quarter we will be presenting at the 2013 Barclays Telecom and Media conference in New York City on May 22nd; the Bank of Merrill Global Housing Conference in San Francisco on June 5th, and lastly at the William Blair Annual Growth Star Conference in Chicago on June 11. This completes our call. Thank you very much for your participation.