Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

Diodes, Inc. (NASDAQ:DIOD)

Acquisition of BCD Semiconductor Manufacturing Limited Conference Call

December 27, 2012 11:00 am ET

Executives

Brett Perry – Investor Relations

Keh-Shew Lu – President and Chief Executive Officer

Richard D. White – Chief Financial Officer, Secretary and Treasurer

Chieh Chang – Chairman and Chief Executive Officer

Analysts

J. Steven Smigie – Raymond James & Associates, Inc.

Gary W. Mobley – The Benchmark Co. LLC

Harsh V. Kumar – Stephens, Inc.

Nick Clare – Robert W. Baird & Co.

Shawn Harrison – Longbow Research

Operator

Good morning and welcome to Diodes Incorporated Conference call regarding its proposed acquisition of BCD Semiconductor Manufacturing Limited. At this time all participants are in listen-only mode. At the inclusion of today's conference call, instructions will be given for the question-and-answer session. (Operator Instructions) As a reminder this conference call is being recorded today Thursday, December 27, 2012.

I would now like to turn the call to Shelton Group, the Investor Relations Agencies for Diodes Incorporated, Brett. Please go ahead.

Brett Perry

Good morning and thank you for joining our conference call today to discuss the proposed acquisition of BCD Semiconductor. I’m Brett Perry with Shelton Group Diodes Investor Relations firm. With us today are Diodes President and CEO, Dr. Keh-Shew Lu; Chief Financial Officer, Rick White; Senior Vice President of Sales and Marketing, Mark King; Director of Investor Relations, Laura Mehrl; and also joining us and available for questions is BCD Semiconductor’s CEO, Chieh Chang.

If you have not yet received a copy of the press release, you can access the copy on Diodes’ website at www.diodes.com under the Investor Relations section. There is a slide presentation that we will be using in conjunction with today’s call that may be accessed through the webcast link on Diodes website. A pdf version of the slide presentation is also posted in the Investor Relations sections.

The slide presentation and management’s statements during this conference call will include discussions of certain measures and financial information in both GAAP and non-GAAP terms. Included in the Company’s slides are definitions and reconciliations of GAAP net income, the EBITDA which provides additional details.

Before I turn the call over to Dr. Lu, I would like to remind our listeners that management’s prepared remarks contain forward-looking statements which are subject to risks and uncertainties and management may make additional forward-looking statements in responses to your questions.

These forward-looking statements include, but are not limited to statements related to the benefits of the proposed transaction between Diodes Incorporated and BCD Semiconductor. These forward-looking statements are based on information available to Diodes and BCD as of today, December 27, 2012, and current expectations, forecasts and assumptions involve a number of risks and uncertainties.

Actual results may differ materially from these forward-looking statements, and therefore we refer you to a more detailed discussion of the risks and uncertainties in the Company’s filings with the Securities and Exchange Commission. The Company claims the protection of the safe harbor, forward-looking statements that’s contained in the Private Securities Litigation Reform Act of 1995 and assumes no obligation to update these projections in the future as market conditions may or may not change.

For those of you unavailable to listen to the entire call at this time, a recording will be available via webcast for 60 days in the Investor Relations section of Diodes website at www.diodes.com.

And now, it’s my pleasure to turn the call over to Diodes President and CEO, Dr. Keh-Shew Lu.

Keh-Shew Lu

Thank you, Brett. Welcome everyone and thank you for joining us today. We are very excited about today’s announcement regarding the proposed acquisition of BCD Semiconductor by Diodes. This transaction offers substantial synergies and a compelling strategic rationale of both companies’ customer, employee, and shareholder. As we would discuss today, this transaction make all our acquisition material and with also the immediately accretive to GAAP and earning per share.

As Brett mentioned, there is a slide presentation available on our website, which I’ll now review with you as part of today’s call, before we open the call for your questions.

Let’s look at the slide 3, a winning combination. Diodes acquisition of BCD Semiconductor creates a stronger global company with greater enhanced analog offering. When looking at the strength and the expertise of each company, Diodes had high volume Discrete, Analog and Logic products. Cost efficient packaging capability, strong global presence, a broad product and customer base, and we focus on consumer, computing, and industrial market.

BCD Semiconductor had solid standard Linear and Power Management offering. They have very strong AC to DC solutions for Switch-Mode Power Supply charger and adaptor. Cost effective China wafer fab capability and capacity, the extensive China-based development team and a very strong local market position in China.

When combined, there are many synergies including expanded application platform in the broader Analog footprint. Manufacturing synergies, operating synergies, and a common diversification, expanded customer base and the distribution channel as well as expanded position in China.

Slide four, at the effective date of the merge. Each American Depository Share, which represents six ordinary share of BCD, will be converted into the right to receive $8 in cash without interest, that aggregate consolidation will be approximately $151 million. the acquisition is expected to close today in the first quarter or earlier in the second quarter of 2013. The goal of the both company had approved the transaction, which is still subject to approve by BCD’s shareholders as well as other customary closing condition and the regulatory approval.

Let me now provide an overview of BCD business from both a corporate and a financial perspective. As for DVD supplier of standard linear and the power management, BCD has certified our portfolio that includes AC/DC Solutions for chargers and adapters. Company was formed in 2000, IPO in February of 2011 on NASDAQ, and is incorporated in Cayman Islands. The company has over 1,300 employees and 300 products with sales office in Shanghai, Shenzhen, both in China and Taipei, Taiwan and Seoul, Korea and the U.S. BCD also has in-house design and wafer fab capability in Shanghai with the second fab nearing completion also in Shanghai. [Added] maturity of company's product packaging is also the partner in Taiwan and China.

In terms of funding, BCD report revenue for the first nine months of 2012 of $106 million with $14 million in EBITDA, and the cash balance of approximately $39 as of September 30 this year.

The business strength and attributes strongly support our rationale for transaction and that will greatly benefit Diodes’ business and extend our product offering. The rationale for transaction including strengthen our Analog product by increasing the depth of our standard Linear and Power Management offering including AC to DC and the DC to DC solution of power adaptors.

It also extend our platform value for existing consumer, computing in the communication application and the customer base.

Additionally, this transition extend our geographic footprint through cost saving opportunities, and it provides increased exposure and the penetration of Diodes product in China local market and the BCD product in North America, Europe and global multination company. There are also opportunity for making improvement through cost reduction due to enhanced scale and the increased spread in A/T utilization.

In addition the transaction provides ability today which technology and the process capability by which BCD can use Diodes cost effective packaging and manufacturing. Currently 80% of BCD’s product overlap Diodes packaging, which highlight our complementary wafer prospects and the packaging capacity and the capability.

And finally, it in-line with Diodes’ strategy to drive growth through selective acquisitions or to drive growth through selective acquisition. We have a successful track record of integrating our acquisition including FabTech in 2000, Anachip and APD Semiconductor in 2006, and Zetex in 2008.

From a product perspective, the combined company offer a significant increase the depth and the breadth of product offering. The white represents Diodes products. The pink highlighted section are BCD support, and the dark blue section represents the synergetic product portfolio. Together, the combined portfolio are complimentary and enhance the product offering available to support a larger more diverse customer base. As a result, we expect to realize significant cross-selling opportunities which with inclusive of combined company sale across the extended customer base.

In terms of manufacturing, our global infrastructure which consist of Diodes wafer fab in Kansas City and Oldham UK, and our packaging facility in Shanghai, China, Neuhaus, Germany, as well as our joint venture packaging facility in Chengdu, China.

BCD will add an additional wafer fab in Shanghai and it also in the process of completing a second fab in Shanghai too. This addition provides Diodes with a large regular base as well as activity to achieve manufacture and operation synergies in order to expand our market and accelerate margin growth.

When look at the combined 2012 pro forma result, revenue will be approximately $776 million, with a healthy gross profit of approximally $190 million and the gross margin of approximately 25.6%.

For the first nine months of 2012, the combined entity generated significant cash flow and EBITDA of $83 million. As a result, the transaction will be immediately accretive to GAAP and earnings per share. Additionally, we believe there is opportunity of further expansion and margin growth, through manufacturing and packaging synergy, as well as capacity efficiency.

On slide 12 and 13, we have provided the definition of EBITDA as well as the consolidation of net income to EBITDA of both companies, as well as the combined entity for the nine months ended September 30, 2012.

On slide 10, in summary, we believe that BCD semiconductor is the strong strategic fit and met the acquisition criteria that we have been consistently communicating to our shareholder and investor.

First, the proposed transaction is very synergistic to our packaging capability and capacity. It is also immediately accretive to funding, exceeding our typical one-year goal for most acquisitions.

In addition, it allow us to extend our existing analog portfolio while also entering a new product area within analog as well. We also again added two additional process technology. And finally, it has strengthened our region sales potential in Asia especially in China local.

To conclude, Diodes focus continue to be, producing profitable growth through a combination of manufacturing cost leadership, high volume and market focus, strong customer relationship, aggressive new product introduction, product portfolio expansion, innovative process and packaging technology, as well as selective strategic acquisition.

BCD is another key milestone in this growth strategy and I am looking forward to reporting on the companies combined success in 2013.

With that, we would now open the call for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from the line of Steven Smigie from Raymond James. Please proceed.

J. Steven Smigie – Raymond James & Associates, Inc.

Great, thank you. I’d like to say congratulations on what looks like a pretty strong deal for both sides here. Dr. Lu, I was hoping if you could talk a little bit about synergies in terms of dollar amounts, and what you think you can achieve if you can’t talk in terms of dollars, can you just give some color on which areas do you think see the most likely biggest dollar changes, maybe SG&A or any cuts in R&D at all? Thanks.

Keh-Shew Lu

Okay. I think this acquisition is really we are buying the company, we are buying the business, and we’re buying the people. So we would not see a cost deduction through R&D or SG&A, that really is the synergy we are looking forward to have it, but not through the cost deduction.

Like synergy, the sales, cross sales is one of the area, because they’re very strong in the China local market. we are granted stronger than them in the North America and Europe; especially we are very strong in the multinational customers. And still we are able to build a product into every nation we are strong and they are able to help in that to stay out in the product, stay out Diode’s product to China local, so that’s the key, then.

And the second key synergy is, they have some product portfolio, we don’t have it especially, AC to DC chart for the power solution for the charger and adaptor. We don’t adapt all that the pink column and then they complement out of the product we are ahead, it strengths our portfolio, okay, so the synergy I’m looking at. Then the most, the last one, which is still very important is, we are able to utilize our capacity, packaging capacity. and if I think in the speech, I’m talking about 80% of their product actually can be produced by our packaging capacity facility. So those are the key synergies I’m looking at.

J. Steven Smigie – Raymond James & Associates, Inc.

Okay, great. thank you. And then can you discuss the balance sheet a little bit, so after the acquisition, I’m assuming you only have $50 million, $60 million left if you pay our cash out. Would you consider raising some lesser cash with some form of debt or would you be happy with where your cash position will be just paying it all on cash?

Keh-Shew Lu

I’ll let Rick White answer this question.

J. Steven Smigie – Raymond James & Associates, Inc.

Thank you.

Richard D. White

Yeah, thanks Steve. Right now, the acquisition is going to be funded from our cash resources, and drawing down credit line. So we don’t plan to just use every single piece of cash we have. So we believe after this, plus you have to remember that at the end of September, they had $39 million worth of cash. So in general, we think that we’ll have plenty of cash going forward, once the acquisition closes.

J. Steven Smigie – Raymond James & Associates, Inc.

Okay. And then the last question is just with regard to capacity. Obviously, economy has been little a bit slow and you guys are righty slow, your capacity expansion in Chengdu a little bit, now we’re adding a couple of facilities here, even BCD I think has slowed some of the [margin] expansion plans on their second facility. How do you think about your capacity at this point? What is that gained in terms of, clearly, I can see the packaging synergies, but how do you think about capacity now you’re adding their manufacturing facilities as well?

Keh-Shew Lu

Okay. Steve, the capacity we separate into two areas. one, is the packaging capacity, which is we are really under loaded right now.

J. Steven Smigie – Raymond James & Associates, Inc.

Okay.

Keh-Shew Lu

You didn’t mind, several earnings conference call, I always said, our packaging capacity is under loaded and virtually, BCD do not have a timely capacity that use in the partner that become partner in Taiwan and China for their packaging, and I’d say 80% of their product can be used in our packaging facility or capability. But they are not over there on the packaging site.

For the wafer fab side, we’re using ourselves. we have two wafer fab, both of our wafer fab is more concentrate and discrete product, not the analog product, okay. We outsource, we foundry our analog product from foundry company source and BCD, their wafer fab both Oldham is really for the analog, especially BCD prospect, okay. So therefore they have no over debt from different spec. Now, I agree that second fab is ready for production, and they will be started, but I think they grow their business next year. so from wafer fab point of view, I think we will have temporary. When they ramp up, some capacity I felt, but I don’t, but I don’t think that’s long-term issue. But Chie, can you answer this question?

Chieh Chang

Well, I think our wafer fab is going to basically start ramping Q1 next year, right. So our goal is basically to get it to, first phase is really to get it up to like 10,000 wafer per month toward the end of the year.

So we feel great, we get that level, our cost will be equivalent wafer we’d buy from outside. So we look at our model. so the next year our model is building some margin relationship, because of the ideal capacity. Now was this idea was with style, probably in the short term lag, because it still takes some time to move the product into our fabs, I think next year probably, it’s not going to have a huge impact, but I think by 2014, I think we have enough time to qualify according to our fab. I think you should accelerate the loading our fab. So I think in 2014, we should see the much more benefit was the synergy of the deal.

J. Steven Smigie – Raymond James & Associates, Inc.

Okay, great. Thanks a lot, gentlemen. I appreciate it.

Keh-Shew Lu

Okay.

Operator

Your next question comes from the line of Gary Mobley from Benchmark. Please proceed.

Gary W. Mobley – The Benchmark Co. LLC

Hey, guys.

Keh-Shew Lu

Hi, Gary.

Gary W. Mobley – The Benchmark Co. LLC

This acquisition certainly looks compelling on the surface, and congratulations on concluding the acquisition or at least announcing that. First question I have like to the immediate accretion from the acquisition. I’m assuming you’re going to give up $3 million in interest income from the cash that you gave up for the acquisition, and of course, take on some interest expense from the lines of credit, but looking at the after-tax income from BCD on a non-GAAP basis that looks to be somewhere between $10 million and $15 million annualized. It looks like this acquisition could be $0.20 accretive to Diode’s. am I far off there?

Keh-Shew Lu

We have not forward – we don’t give any forward-looking or anything that you’re calculation is reasonable.

Gary W. Mobley – The Benchmark Co. LLC

Okay, fair enough. And this acquisition looks compelling, because of the combination of your powers in packaging and what appears to be some significant manufacturing wafer capacity from BCD. I am just looking at the gross margins now on a combined basis, it looks to be about 26%, but if you take of all BCD’s packaging needs and put it into Diodes what does that translate into as far as gross margin goes?

Keh-Shew Lu

Well, we do not go through this one yet because it takes time to do what we're talking about. Okay and we need to go through the qualification and we need to go through announcement and that we need to wait in for customer approval. So we don’t know the timing and then we don't know what will be the market look like in the second half, the next year. If market is going up then this one will be increased (inaudible) time. Okay, so we really do not have that number available at this moment. And we really – all we know is we're going to be helped to (inaudible).

Gary W. Mobley – The Benchmark Co. LLC

Okay. And looking at BCD's CapEx to sales ratio, that looks to be about 20% on a similar elevated because of the second wafer fab facility being brought on line. Longer term what would you expect the CapEx to sales ratio to be for the combined company?

Keh-Shew Lu

I think number one we didn’t go through that yet, but you are right, the capital is really for the wafer fab and (inaudible) number two, (inaudible) put the equipment, so that's majority of their available capital was spend there. But move forward, other than from wafer fab point of view, other than finish up that become fab and then the rest of the money will be kept as normal production replacement capital, which is similar to our fab in Kansas City or UK.

So I think from capital point of view when they finish the fab 2 then it should be very load able, and in Diodes, it’s the other way right, majority of our capital were spend on the packaging, and we don’t spend much money on the wafer fab and therefore when we combine together, I strongly believe after we finish Chengdu, after they finish fab 2, our including those two portion we should be within our business model of 10% to 12% of CapEx, okay I hope you (inaudible).

Gary W. Mobley – The Benchmark Co. LLC

Okay, last question for me. The executives and insiders of BCD look to own about 40% of the shares outstanding and since this is an all cash acquisition, I was curious to learn how you intend to promote loyalty within BCD management following this acquisition?

Keh-Shew Lu

This is a very good question, and we right now, the placement, the CEO and the Senior VP of Finance Marketing, Senior VP of Sales and Marketing those key people already sign up to stay for two years or longer, okay. And the CFO and others key manager they will sign up to stay 18 months, okay. So we do come out incentive bonus, retention bonus from them today, and they will (inaudible) with us. So I think with their help and when we project a successful market, your own company and then they will be very excited, and if they can state that Chieh to be, we’re talking about they needed to stay for 18 months, they thought we will stay even much longer. They can see this successful company.

Gary W. Mobley – The Benchmark Co. LLC

All right. Thanks, guys.

Operator

Your next question comes from the line of Harsh Kumar from Stephens. Please proceed.

Harsh V. Kumar – Stephens, Inc.

Dr. Lu, congratulations.

Keh-Shew Lu

Thank you.

Harsh V. Kumar – Stephens, Inc.

It looks like a really good deal. I just had a couple of simple questions. First of all Dr. Lu, I’m not familiar with BCDS very much. I’m curious if you could tell us who their large customers are and what are some of the biggest end markets by application that they complete, is that consumer or TVs or phones some of those things?

Keh-Shew Lu

Okay, I answer this and then I pass over to Chieh, okay. We do not really disclose on the major customer. As if we expect they are very focused on China local, very successful on China local, but that didn’t mean they are not successful on others. We just, majority of the revenue base is coming from China local, therefore it’s up there, but we don’t really disclose any major customer engagement, okay.

Harsh V. Kumar – Stephens, Inc.

Okay.

Keh-Shew Lu

And from the market segment, I think I would let Chieh to answer this one.

Chieh Chang

Okay. Currently, we have a pretty diverse customer base. so we don’t have any 10% customer right now. so it’s a pretty diverse customer. So we have many sell-through the 3 C manufacturer in Asia. so this means our consumer like TV is a big end-market for us. And the other is actually, also goes to the power, so maybe consumer and computing mainly on the power management side. We also sell into, we’re putting to as a communication, but really these are not the central office communication. these are still kind of like consumer, because these are the set-top box stuff like that.

So I think the model is somewhat similar to Diodes is that really we go after the high-volume market. So from that point of view, I think the philosophy is pretty similar.

Harsh V. Kumar – Stephens, Inc.

Thank you. and Dr. Lu, last conference call, you had announced that you had made some small acquisitions as well. This looks like a really good deal also on top of all those acquisitions. I’m curious what’s driving that Dr. Lu within Diode, is it meeting some long-term goal? Are you just seeing a lot of opportunities or you think that capital is cheap, I’m just curious what the thinking is?

Keh-Shew Lu

Well, I think you always say most of that reason, but the key one since day one when I joined the company, I put up a vision is [possibly] for growth. And we set our mind; we want to grow up much better than market growth. Okay that is really our vision. And, so M&A is one of the growth – one of the methodology of our growth and organic growth is good, but M&A is another good way to grow and if you go and look at the past history, when I joined the company, we acquired and achieved (inaudible) and then we have APD product acquisition, SDR acknowledged, and then in 2008 we acquired Zetex to give us a very strong degree and analog technology.

In the PAM and those are very small, PAM really give us the OREO product portfolio. And BCD is not just give us the product portfolio like I’d mentioned, especially in AC/DC, and after charger area. It’s our product portfolio that could certainly (inaudible) at the same time, they bring us favorable offer the market, the market segment, the customer, all the one I have been talking about. So it’s part of my profitable growth vision and this is a of course –very good – target of good acquisition to achieve our mission.

Harsh V. Kumar – Stephens, Inc.

Thanks Dr. Lu and my last question was longer-term just forgetting about the markets that we are in right now, Diodes’ gross margins are somewhere in the 30%, 31%, 32% kind of range, just how I think of Diodes. BCD is a little bit lower today with some possibility of synergies, I’m curious if you think Dr. Lu that BCD can be brought up to that 31%, 32% kind of percentage range?

Keh-Shew Lu

I think, I’ll let Chieh answer, but actually (inaudible) they actually is above 30%, it’s because right now 20% something is just because the market situation like us under loaded situation, but Chieh, can you answer what your historically GPN percentage?

Chieh Chang

Yes, I think our business model, long-term model is really somewhat similar to Diodes, basically I think we like to operate in the gross margin in the low 30’s and the total expenditure need to be under 20%.

So I think from the long-term financial model, I think we are actually quite similar. And we believe this is the model that give us a tool to gain market share from the other people, which require much higher gross margin. So from that point, I think the company are actually quite similar.

Harsh V. Kumar – Stephens, Inc.

Thank you and congratulations again. Thank you.

Richard White

Thank you, Kumar.

Operator

(Operator Instructions) Your next question comes from the line of Tristan Gerra from Robert Baird. Please proceed.

Nick Clare – Robert W. Baird & Co.

Hey, guys. This is Nick Clare, calling in for Tristan. Congratulations on the deal. And I guess the first question is, I know you mentioned recently the 3 C’s area being a specific area, where there is some cross-selling opportunities. Just curious, are there any particular product areas where you see the largest opportunity?

Keh-Shew Lu

Chi, you want to answer that.

Chieh Chang

I think the way we see it is that the – we have tried to move more from a pure components prior more toward – little bit more a solution provider. So I think if you look at the combined company, we have much of our revenue derived from analog IC. Well that has a very strong discrete, say if you look at the system, you need really boast to get a system. So I think, in the longer term, we really want to move toward more a system solution oriented provider. So it will take some time, but this was the combined company with a resource, that’s what we’re going to able to do.

Nick Clare – Robert W. Baird & Co.

Okay. I guess then specifically sticking with the BCD side of things, given that the China business is so significant there versus Diodes business that’s more spread out. How meaningful can it be for the BCD business in terms of the North America or the Europe exposure, you know is there any – I guess what’s the kind of what you’re looking at the opportunities or how substantial they are in terms of moving outside of just Asia based business?

Keh-Shew Lu

Well, Mark, I’ll let you answer this question.

Mark A. King

I mean, there is substantial synergies out there. We do a great deal of that – the work that we do in North America and Europe is actually design work at multinationals that may not that BCD historically would not have had, maybe possibly enough coverage for or scale for. So we see a lot of opportunity there and then just general products, the depth and breadth addition for our channel base in both North America and Europe is quite an opportunity. So we believe we can do a lot with bringing their product into North America, both at multinational level and then at the local level. So I think it’s a great opportunity for us in that area.

Nick Clare – Robert W. Baird & Co.

Okay, great. And then just one more clarification, Chi did you say, you’d expect for the Diode’s products really would be up in running and the BCD fabs, you said until 2014, correct?

Chieh Chang

I think so.

Nick Clare – Robert W. Baird & Co.

Okay great. Thanks guys. Congratulations again.

Chieh Chang

Thank you.

Operator

Your next question comes from the line of Shawn Harrison from Longbow Research. Please proceed.

Shawn Harrison – Longbow Research

Hi, few questions, excuse me, I have a cold too. Just Rick going back to the financing aspect, how much do you have on your credit facilities available well you have coming into the New Year? And should we expect you to use all the credit facilities out there?

Richard D. White

Yeah. we’ve got credit facilities with BofA, and we also have credit facilities with numerous banks in Asia. So we think there’s plenty and we’re – that’s not really an issue right now.

Shawn Harrison – Longbow Research

The BofA one is $20 million, is that correct?

Richard D. White

No BofA is actually $60 million.

Shawn Harrison – Longbow Research

Okay.

Richard D. White

And currently we’ve borrowed I think $40 million.

Shawn Harrison – Longbow Research

You said $20 million available.

Richard D. White

Right.

Shawn Harrison – Longbow Research

And then Asia how much do have available to borrow?

Richard D. White

I don’t have that number right on the top of my head right now.

Shawn Harrison – Longbow Research

Gotcha. But these are all LIBOR Plus a 100 to maybe 150 basis points.

Richard D. White

Right.

Shawn Harrison – Longbow Research

In terms of the costs?

Richard D. White

Right.

Shawn Harrison – Longbow Research

Okay. I guess maybe the second question I have then is, just post the close of this transaction, how much of Diode sales will be analog versus kind of just traditional discrete or maybe if you can break up the product sets that they will be post the transaction?

Keh-Shew Lu

Well we do not break out analog versus discrete in (inaudible) in Diodes. So I cannot really give you that information, and the reason is, they boast here the same capacity, the same packaging capability and capacity and therefore we switch the product between analog and discrete, depending on which one give us a better GPM. So it’s really we don’t disclose the percent between these two beginning.

Shawn Harrison – Longbow Research

Okay. And then two follow-up questions just on the synergies on the packaging side. Is that something that’s two to three years type of synergy builders that 3 to 5 or beyond 5 years will you be able to bring in lot of that BCD’s packaging in-house?

Keh-Shew Lu

No, we don’t need to take it at all. Packaging is much easier to move instead of wafer fab. Wafer fab will take longer.

Shawn Harrison – Longbow Research

Okay. So only a few years would be before you get to kind of where you would like to be?

Keh-Shew Lu

Even shorter than that.

Shawn Harrison – Longbow Research

Okay. And then just one final question, the one concern I have, I guess I’ve got from the investors this morning is, while the deal gets you a lot more exposure on the analog side to your power supplies where hadn’t been before, it significantly increases, I guess your exposure overall to PCs and TVs where that is taking market share, those markets are seem to be in a secular decline. So I guess kind of your thought process in terms of increasing your exposure to both TV and PCs given the markets are declining.

Keh-Shew Lu

Now that is not just PC, if you look at a consumer way of – that you know – the shareholders and all those using that exactly. So it’s not just BCD.

Shawn Harrison – Longbow Research

Okay. Thanks a lot.

Keh-Shew Lu

And TV, is really another one that’s not – it’s not that you’re in the high-end. They’re now really going to the (inaudible).

Operator

All right. Your next question is a follow-up question from Steve Smigie from Raymond James. Please proceed.

J. Steven Smigie – Raymond James & Associates, Inc.

Great, thanks a lot. I was wondering if you could go into little bit more detail on some of the how much is a pure product overlap, or you can really get synergy versus how you can sort of talk about where the new products from BCD mixing with the Diodes just create the opportunity maybe even more for the solution opportunities that you talked about?

Keh-Shew Lu

Okay, one discrete one, I said in a slide because they are (inaudible). From analog point of view, you know we focus on power management and they focus on power management, okay. Majority of your – majority of revenue is coming power management, there we go and they are focused entirely and I do not go into the detail, but if you look at that the current short future product, different (inaudible), you can see from analog portion, almost complement each other and some area they are very strong. They have a larger product portfolio, some areas we have more product portfolio. And so, thus if we can – if not much majority we give hand to each other and complement to each other. Then there is one area which is that (inaudible) that’s the one we don’t have it and they are very strong in that area, you know that AC/DC, we are very strong in DC/AC, so we complement each other. Moving forward, obviously they have a very strong, very expensive design people in China, and we have a very strong design people in Taiwan and U.S. so we’re going to just separate the work and their focus on the one they are very strong and we focus the one we are very strong and diverse I thought, I think move forward or always try to sit for our job and get view much (inaudible) tribute from product portfolio in the [ALS] side.

J. Steven Smigie – Raymond James & Associates, Inc.

Okay, great. Thanks. And then Chi, I was wondering if you could just comment on why now is the right time for you guys to agree to a merger and why this is the right place for you guys to select?

Chieh Chang

Well, I think what a BCD shareholder, I think you know that some are already million investors still are our shareholder and the liquidity of our company just not there. So I think being for them this is a way for them to get liquidity. So some of those we see there, they are really get all their fund probably, life will come to an end now. So I think this deal basically allows to keep them and liquidity to exit. And also I think it’s a good deal for the employee and the customer, because this will be a much stronger company to serve then. So by now, well, I guess it just happened.

J. Steven Smigie – Raymond James & Associates, Inc.

Okay, all right, fair enough. Thanks again.

Chieh Chang

This is very difficult, it’s very difficult.

J. Steven Smigie – Raymond James & Associates, Inc.

Okay. Thanks a lot. I appreciate it.

Keh-Shew Lu

Thanks.

Operator

Ladies and gentlemen, that ends the Q&A session. I will now like to turn the conference back over to Dr. Lu for any closing remarks.

Keh-Shew Lu

Okay. Thank you to everyone for joining us today. We’re looking forward to providing additional update regarding the integration of the BCD and expand the opportunity for Diodes. Operator you may now disconnect.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Diodes' CEO Presents at Acquisition of BCD Semiconductor Manufacturing Limited Conference (Transcript)
This Transcript
All Transcripts