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Entropic Communications, Inc. (NASDAQ:ENTR)

Q4 2012 Earnings Call

February 5, 2013 4:30 pm ET

Executives

Debbie Hart – Director-Investor Relations

Patrick Henry – President and Chief Executive Officer

David Lyle – Chief Financial Officer

Analysts

Ruben Roy – Mizuho Securities

Gary W. Mobley – The Benchmark Company

Aalok K. Shah – D. A. Davidson & Co.

Rajvindra Gill – Needham & Company

Sandy S. Harrison – Wunderlich Securities, Inc.

Daniel L. Amir – Lazard Capital Markets

Hamed Khorsand – BWS Financial, Inc.

Operator

Good day ladies and gentlemen, and welcome to the Fourth Quarter 2012, Entropic Earnings Conference Call. My name is Dorosel and I will be your operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session (Operator Instructions).

I would now like to turn the conference over to your host for today, Ms. Debbie Hart, Director of Investor Relations, please proceed.

Debbie Hart

Thank you, Dorosel and good afternoon everyone. Participating in today’s call are Patrick Henry, President and CEO; and David Lyle, our Chief Financial Officer. During the call, Patrick and Dave will present our fourth quarter and 2012 year-end results and our short-term outlook, and then we’ll open it up for questions.

Throughout this call we will be discussing certain non-GAAP financial measures. Today’s earnings release and the related report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present a reconciliation between the two for the periods reported in the release. We’ve also posted a schedule on the Investor section of our website, which includes our quarterly reconciliation of our GAAP to non-GAAP gross margins, operating expenses and taxes.

During this conference call we will make forward-looking statements regarding future events and anticipated operating or financial results of the Company. Actual events or results could differ materially from those projected in the forward-looking statements. Please refer to our SEC filings, including our most recent 10-K and 10-Q, which contain important factors that could cause actual results to differ materially from the forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

And now I will turn the call over to Patrick Henry.

Patrick Henry

Thank you Debbie and thanks to everyone for joining the call today. In Q4 we achieved revenue of $89.7 million, which was flat with Q3 and within the guidance range we provided in October. We also delivered $0.08 of non-GAAP EPS consistent with our guidance.

For the full year, we had record revenue of $322 million and we delivered $0.37 of non-GAAP EPS. Dave will take you through the Q4 numbers and discuss guidance for the current quarter, a little later in the call. But first I would like to provide a general update on our business and our long rage objectives. Our transformation to a broad based connected home platform silicon company is well underway following last years acquisitions. The integration of Trident’s Set-Top Box System-on-a-Chip business and PLX’s digital channel stacking switch product line are fundamentally complete. Operationally, we’ve implemented our new ERP system, rationalize our supply chain and completed transition services agreements. We have also absorbed our large new patent portfolio, hired a couple of key executives, reorganized into a functional organization with centralized R&D and realigned our product roadmaps.

Additionally, we’ve started to see the first fruits of our bundling strategy of our system-on-a-chip plus MoCA products with design wins and market share gains, a key OEM customers servicing Tier 1 Pay-TV service providers. Going in 2012, when we acquired the set-top box SoC business from Trident, we knew we’d have to make investments to improve gross margin, grow the revenue and improve overall profitability of the business. We are making significant progress on all these fronts.

However, we were still in the early innings of the revenue growth opportunity especially as it relates to the overall size of the market. Adding set-top box SoC technologies to our product line was an important component to broadening our connected home entertainment platform. We are now able to address a much larger slice of the overall connected home market and more fully monetize our investments in MoCA including MoCA 2.0 with our current bundling strategy and ultimately a product integration roadmap.

We believe we are now strongly positioned to be one of two key global suppliers in this multibillion dollar market. In 2013, will be a year of transition for Entropic as we invest in our integrated product portfolio, ramp product revenue from a discrete and bundled SoC plus MoCA design wins, grow revenue outside the U.S. across all of our product offerings and improve our gross margins.

With our broad product portfolio and a more complete product roadmap including solutions to integrate our SoC and MoCA technologies, we have won new strategic designs, some of which we have been able to announce, while others would be announced throughout 2013.

Our OEM customers and Pay-TV service provider partners are confident in our ability to be a key supplier in this market, and we are confident that these new design wins will translate into market share gains and significant revenue growth for Entropic.

As an example of our set-top box SoC and MoCA bundling strategy earlier this year at the International Consumer Electronics show we announced we have won significant designs for the new Comcast Xi3, IP-Client set-top box with both Humax and Technicolor. These design wins are very important strategic sockets because the Xi3 box is based on Comcast Reference Design Kit or RDK platform, and it enables us to be a first mover in the cable industry’s transition to gateway client architectures. The RDK is an important industry driver as it significantly speeds timely new markets for new client and gateway devices.

In addition to Comcast, Time Warner Cable, Charter Communications, BSkyB and Liberty Global are among the Pay-TV service providers who have publicly announced support for the RDK platform. As more operators turn to RDK driven platforms and gateway client architectures, we become a natural silicon source to power their IP-Client devices. We believe the Xi3, IP-Client will start to ramp later this year and grow to be a high volume runner within the Comcast footprint and with other operators over the next several years.

As a reminder there are now four TVs on average in a U.S. cable home, which should mean at least three client set-top boxes and one gateway device per home. In addition to our bundled offering, we continue to see strategic design win activity from our MoCA discrete business. We recently announced the first official MoCA 2.0 based Headless gateway design win with ARRIS for the Comcast XG5 Video Gateway. This new gateway also uses the RDK specification and incorporates transcoding provided by our partner Zenverge to write a clear technology path for cable operators to economically deliver more services to the subscribers across a broader range of devices.

We also gained a key design win with our MoCA and CSS products internationally. DIRECTV PanAmericana will be adopting both our MoCA and analog channel stacking switch technologies into its advanced produce line up.

Market research firm Infonetics reports that Latin America is the fastest growing Pay-TV market globally growing 23% in 2012 to top $23 billion. We are excited again to once again partner with DIRECTV to offer a comprehensive suite of all home entertainment viewing solutions throughout the region.

Moving back to our set-top box SoC business, we have made significant progress. The HD DTA is containing our set-top box SoCs continue to ramp with cable MSOs in U.S. market for analog reclamation. The strength of the platform is clear as we have won designs and are now shipping with both Motorola and Cisco.

Further we are expanding our share in the overall India market with our set-top box SoC as cable operators make the transition from analog to digital TV service. At the beginning of the year, we announced InCablenet, one of India’s largest cable MSOs has begun deployment of our set-top box SoCs to enable advanced digital broadcast and broadband services to their 8.5 million subscribers. These are just some of the design wins we have achieved with our bundled industry solutions. All of these design wins represent new business for Entropic and strongly position us for market share gains and sustainable revenue growth.

In addition, we won other key market share gain in design wins that we expect to announce throughout 2013.

On the R&D and product development front, our unified engineering strategy has enabled the global team to be highly focused to meet operator and OEM needs, from driving more processing power and performance for chipsets to reductions in silicon power consumption. The first new products from the combined company will be coming up this quarter, and our first integrated set-top box SoC and MoCA 2.0 solutions will be sampling later this year.

With the integration of our acquisitions from 2012 near completion, we are more focused than ever. In January, we updated our brand identity to reflect the shift in our vision to emphasize our role as the only pure play semiconductor company in the connected home entertainment space. While enthusiastic about the progress we’re making in the longer-term, for the growth prospects of the company, in the near-term, we’re seeing softness in Q1 revenue due to two factors.

First, we are entering most typically a seasonally softer period for our end markets. second, as we discussed on our last conference call, we’ve seen some share loss in our connectivity business due to designs lost back in late 2011 and early 2012 prior to the acquisition of our set-top box SoC assets. With our new product roadmap for both integrated and discrete MoCA, we expect market share loss to stem as we exit Q1 with new opportunities to gain share across the connected home entertainment market later this year, with our bundled silicon design wins.

We continue to show profitability and a solid balance sheet. We have strong technology leadership and world-class team to execute on our strategy. Entropic is addressing a large growth market with a strong product line offering a compelling value proposition and maintaining very strong OEM and Pay-TV service provider relationships. And for the first time in our history, we have the opportunity to outpace market growth with share gains.

Now Dave will review the fourth quarter results and provide our Q1 outlook. Dave?

David Lyle

Thanks, Patrick. Fourth quarter revenue of $89.7 million was flat with Q3 and within our previous guidance range of $89 million to $92 million. We had two customers who accounted for greater than 10% of our revenue during the quarter, WNC at 19% and Motorola at 11%. Our non-GAAP gross margin in Q4 was 51.5% similar to Q3, excluded from Q4 non-GAAP gross margin was about $300,000 in stock-based compensation expense and $2 million of amortization of purchased intangibles.

Non-GAAP operating expense in Q4 was $37.7 million, our Q4 non-GAAP operating expense exclude a $3.6 million of stock-based compensation expense approximately $900,000 of restructuring costs associated with our Q4 resource reallocation and $900,000 of amortization of purchased intangibles. Our non-GAAP operating margin came in at 9% in Q4.

Other income was about $200,000 for the quarter. Our Q4 non-GAAP results exclude charges of approximately $1 million relating to the fair value accounting treatment associated with our investment in privately held Zenverge and our acquisition of assets from PLX.

Our fourth quarter non-GAAP tax rate was 13%, which was favorably impacted by year-end true-up adjustments to our annual provision estimates. In Q4, we saw a small GAAP tax benefit of $57,000 due to a change in our reserves for uncertain tax positions.

Q4 non-GAAP net income was $7.6 million resulting in earnings per share of $0.08 based on a fully diluted weighted average share count of about 92 million shares. GAAP net income in the fourth quarter was about $50,000 and we were break-even on a GAAP EPS basis.

With regard to our cash position, cash and investments were about $169 million at the end of Q4. Our net cash increase of about $3 million. During the quarter, we generated approximately $9.4 million of cash from our business operations. DSOs for the fourth quarter came in at a solid 43 days, inventory turns were much improved at about 6.6 times.

For the calendar year 2012, we posted annual revenue of $322 million, up 34% year-over-year powered by both organic growth and the successful integration of the acquired set-top box SoC assets. Non-GAAP EPS was $0.37 and we generated approximately $37 million of cash from our business operations for the year.

Now I’d like to provide our guidance for the first quarter of 2013. In Q1, we expect Entropic’s top line revenue to be in the range of $79 million to $81 million, a 10% to 12% sequential decline from Q4. We expect to outpace seasonality with new product ramps and our set-top box SoC products, however we believe this product revenue will be more than offset by a decline in our connectivity product revenue.

Set-top SoC product revenue momentum is being driven by incremental HD DTA growth as well as growth from design wins internationally. Our connectivity business is seeing sequential revenue weakness on two fronts. First, we are seeing typical seasonal softness in our end-markets and second, we are seeing MoCA product market share loss from design loss prior to Entropic having a complete SoC plus MoCA solution.

Following our acquisition of the set-top box SoC assets, we have a bundled strategy and a path to integrated products and are now in a position to more effectively compete for these platforms in the next generation. Additionally, we are seeing incremental connectivity product revenue from our growth in Europe and Latin America with our MoCA and CSS products. At CES, we also announced our new MoCA multi-band adapter or MDA, which simplifies the installation of MoCA across telco, cable and satellite Pay-TV service providers in North America. Both the deployment of MoCA internationally and a retail opportunity represent ongoing market expansion for the MoCA market.

Moving on to gross margins, we expect non-GAAP gross margins for Q1 to be in the range of 48% to 49%. We expect a decline in gross margin from 51.5% in Q4 is primarily due to a shift in product mix towards our set-top box SoC products, which we expect to grow.

We’ll exclude from Q1 non-GAAP gross margin about $300,000 in stock-based compensation expense and $2.2 million in amortization of purchase intangibles. We expect Q1 non-GAAP operating expense to be about $37 million, an improvement from Q4. Our non-GAAP operating expense will exclude $3.7 million of stock-based compensation expense and $900,000 of the amortization of purchase intangibles. We expect other income to be about $300,000.

Our Q1 non-GAAP results will exclude a charge of approximately $700,000 relating to the fair value accounting treatment associated with the investment in Zenverge.

Our non-GAAP tax rate in Q1 will be about 17%, also reflecting our revised annual forecast. With regard to our GAAP tax rate, we will record a one-time benefit in Q1 of approximately $2 million related to the extension of the Federal R&D tax credit, and we’ll have an overall tax benefit on our GAAP net loss. Excluding this benefit our GAAP tax rate will be about 40% for Q1. Non-GAAP net income in Q1 is expected to be about $1.7 million at the mid-point of guidance resulting in earnings per share of $0.02 based on a fully diluted weighted average share count of about 92 million shares. GAAP net loss is expected to be about $1.5 million and the GAAP EPS of minus $0.02.

We expect our cash and investments balance at the end of the first quarter to grow by $6 million to approximately $175 million for $1.90 per share. We expect DSOs to be about 50 days and we expect inventory turns to be 6.5 times in Q1.

Looking out into 2013, we remain optimistic about our prospects for growth despite the short-term weakness. We expect the combination of second half seasonal strength, continued HD penetration, our growing upgrade market as well as international market expansion in Latin America, and Europe will continue to provide growth for Entropic.

We are also optimistic about gaining MoCA market share back with our bundled set-top box SoC plus MoCA design wins and opportunities like the Comcast Xi3 deployment, which we expect to see later this year.

Now I’ll turn it back to Patrick for some closing remarks.

Patrick Henry

Thanks Dave. Despite some near-term softness primarily due to seasonality and our end markets, we believe we are seeing the early signs of our strategy playing out. With our broader product portfolio of more complete integration product roadmap focused on the connected home, we are winning significant new strategic designs. We are confident that these new wins will translate into market share gains and revenue growth for Entropic. We’ve implemented the right long-term strategy, has strengthened our product portfolio, and have the right team focused on winning new design wins globally, and with our bundled and discrete solutions also integration roadmap.

That concludes our prepared remarks, now Dave and I will take any of your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Ruben Roy with Mizuho Securities. Please proceed.

Ruben Roy – Mizuho Securities

Thank you. Patrick, I wanted to see if you could give us a little more perspective on the connectivity business around some of the design wins. Number one, are most of these design wins, MoCA 2.0 I know you mentioned MoCA 2.0 in one instance, but I’m just trying to get some perspective on the scope of the design wins that you’ve gotten, and it sounds like these bundled design wins ramp in the second half of this year, so perhaps another quarter as we look out into Q2 of potential market share loss, and just to finish up that thought last call, you’d thought that your market share would stabilize this year, maybe at around 50%, has that perspective changed? Thank you.

Patrick Henry

All right, thanks Ruben. (inaudible) 2005 this one let me now, we think we are splitting the market pretty clear with Broadcom we have a lot of better and 50% market share, we don’t anticipate additional share loss in the Q2, the two main drivers for the MoCA share loss are DIRECTV moving from the HR24 and 34 to the HR44 design, and 24 we split the SoC business with our large competitor, and in the 34 we had all the MoCA business, but no SoC business, that’s probably the biggest test to share loss and pretty much is happening this quarter, we don’t see additional share loss going forward.

The other piece to a much less extend is Verizon moving to the MS Verizon media server and client architecture. Again we are historically in the MoCA business there. I think we are very strongly positioned going forward, with our integrated MoCA 2.0 plus SoC solutions to be very competitive and next generation designs with those operators as well as other operators and those are continue to be key targets for us going forward.

If you look at Q1 versus Q2 from a seasonality standpoint, typically Q1 is the softest seasonal quarter for cable and telco, Q2 for satellite; we are expecting Q1 to be the bottom. We expect to see secular growth outpace seasonality going into Q2 and both our SoC and connectivity businesses, as we are ramping business internationally. Although we think the biggest opportunity for growth still lies in the second half, with new designs ramping as we get into a seasonally stronger period.

If you look at our MoCA business from a design win standpoint, we are winning both MoCA 1.1 as well as MoCA 2.0 designs as an example of MoCA 1.1, the Xi3 IP-Clients with Comcast or MoCA 1.1 base; where we won both the set-top box SoC business with two of the three suppliers into the Xi3 business.

In the case of the gateway products like the ARRIS gateway, the XG5 that’s a MoCA 2.0 based solution where we are partnered with Zenverge and Intel. So it’s combination of winning both MoCA 1.1 and MoCA 2.0 business. The vast majority of design win is going forward are going to be MoCA 2.0 based and all the silicon integration work that we’re doing with our SoCs is MoCA 2.0 based, which obviously 100% compatible with MoCA 1.1, but the new designs are focused on MoCA 2.0 for the most part. Did that answered all your questions?

Ruben Roy – Mizuho Securities

Yeah, you covered it all, thank you very much Patrick. Just two quick follow-ups; one is around the 1.1 design activity that’s going on now, are you noticing any material ASP impact there relative to kind of the ASPs at this point last year, and then you’ve talked about moving forward to true integrated solution, I guess kind of a SoC type solution have you pulled that roadmap in at all based on some of the market share dynamics, and that’s it. Thank you very much Patrick.

Patrick Henry

Sure. On the ASPs I mean we are seeing the typical ASP erosion that we would see in the MoCA business historically, and from a gross margin standpoint, we are able to support that ASP erosion, because we continue to do cost reductions, we removed our MoCA 1.1 solutions from 65 to 40 nanometer, we are in the process of moving our MoCA 2 solutions from 45 to 28.

From an SoC integration standpoint, we are pretty much sticking with our plan of record which is to have our initial integrated SoC plus MoCA 2.0 products sampling later this year, but customers are not waiting for those to be available to award us design wins. They are giving us some credit for having everything under one roof, and we are winning bundled design wins based on the fact that we do have an integration roadmap probably the best example of that is the Xi3 design wins with Technicolor, Humax for the Comcast deployment for clients, so that’s what we’re providing both the MoCA and the SoC in a bundled passion as opposed to an integrated solution with the Pay-TV service providers and the OEM customers having confidence that we have a path to integration now.

Ruben Roy – Mizuho Securities

Great, thanks Patrick.

Patrick Henry

Sure, thanks Ruben.

Operator

And your next question comes from the line of John Pitzer. Please proceed.

Unidentified Analyst

Hi, this is Brian covering for John. Couple of questions so on the sequential OpEx improving, just talk about where those are coming, it sounds like R&D is going to be continue to invest for you guys, is that there was SG&A expenses, do you guys expecting to come out from the March quarter?

David Lyle

Yeah, the March quarter we said we guided there would be slightly improved over Q4, we are pretty disciplined about our operating expense especially going into a quarter, went to New Year, where flight tax typically increases, gets reset and increases your OpEx. We did have a realignment of headcount back in Q4, which is helping us a little bit going into Q1 also.

Unidentified Analyst

Okay, and then on the gross margin side, sequential decline, I think most of the expected this coming on as you guys sort of make shifted to some of the SoC products, can you talk about kind of where you’d see gross margin trends going for the balance of ’13, should we expect to be the trough or should we expect more gross margin headwinds as you guys makes into more SoC product throughout the year?

David Lyle

Yeah, the same dynamic, yes you’re correct, same dynamic as before where set-top box SoC hit that growth or its growth faster than connectivity. We’ll see more pressure on gross margins. That being said, our teams have done a lot on improving our COGS across our portfolio, which is going to help our gross margin, so I think this could be the trough, we’ll have to see how fast set-top box SoC grows over the year given that we do think it’s going to be growing.

Patrick Henry

We’ve definitely done with the cost improvements that we have going on across the product portfolio even with existing products to supply chain rationalization, bringing up second sources, yield improvement, things like that. So I think there’s definitely still room throughout the year, with the existing product portfolio as well as new products that we’re introducing this quarter that will help us with the cost of goods sold piece of it. And then we’ll have additional new products later this year, which well on how gross margins for 2013, that will help incremental improvement for ’14 as we get those products into production with customers. Those will be the ones with integrated SoC and MoCA 2.0.

Unidentified Analyst

Got it. Last question from me, you’ve talked about do you expect this revenue share loss to be mitigated by some of the share gains from new product ramps. I guess two questions around that, one can you quantify, the total revenue exposure you have to the share loss, do you expect to be mitigating or towards middle of the year, I guess the second is on these design wins that you are winning based on our roadmap and expectation for execution on this integrated solution.

Are there milestones, or I guess what are the milestones throughout the year that you guys need to hit in order for those design wins to stick i.e., is there a risk if something were to slip on the development side that those design wins would give back, would be opened up again, and I guess what are the timeframes for those. Thanks a lot.

Patrick Henry

Yeah. We don’t anticipate any designs that we won to switch over and these are products that are basically done at the hardware level in there, fundamentally down at the software level and going through a qualification phase. So we would like to think, the designs we won, we won, and we’re in a very strong position as an example at Comcast as they’re ramping to gateway client architecture with two out of the three client OEMs using Entropic based solutions.

In terms of DTAs, an example HD DTAs we won two out of the four suppliers there. So clearly, market share gain potential there in the SoC business. Wining channel stacking switch and MoCA business in Latin America with DIRECTV that’s both market expansion as well as the share gain opportunity for us, so we’ve got a lot of good things going on there.

In terms of quantifying it and we were down from a guidance standpoint about 10 million from Q4 to Q1. So about half of that is seasonality, now we’re more than making up for the seasonality in the SoC business, and we’ve got a bigger loss than the seasonality in MoCA business based on share loss primarily in the DIRECTV, DVR platform. So once that’s behind us, it’s pretty much new design wins ramping to production. Again, we still see seasonal softness in Q2, so not necessarily expecting a big spring back in Q2, but we do expect Q1 to be the bottom and some growth in Q2 and accelerated growth as we get into the second half.

Unidentified Analyst

Got it. Thanks a lot.

Patrick Henry

Sure.

Operator

And your next question comes from the line of Gary Mobley with Benchmark. Please proceed.

Gary W. Mobley – The Benchmark Company

So you provided some commentary regarding the revenue for the first quarter and the context of fiscal year ‘13 and mentioning that first quarter probably the bottom and you’ve mentioned as well maybe some seasonal strength or a bounce back in the MoCA business, because of seasonality in the second quarter offset by some down trends, because of the seasonality in the set-top box business. Should we take that to mean the gross margins in the second quarter, because of mix, might improve a bit on a sequential basis.

Patrick Henry

Q2 is still seeing soft, we don’t really see the seasonal strength until we get into the Q3 and Q4. So maybe I misunderstood there. If you look at going into Q2 the share loss piece of that is pretty much behind us.

So we have a seasonal softness, but we also have new design wins ramping in the connectivity business, and we’ll see a continued ramp and secular growth in our SoC business. As we get into second half that’s where we’d see some of the bundled design wins really ramping to production. So although we do expect to grow in Q2, target will be more modest than we’ll see in the second half, because we get into a seasonally stronger period in the second half.

Gary W. Mobley – The Benchmark Company

Okay, okay. But nevertheless, if we’re looking at $10 million delta from Q4 to Q1, more than that in terms of the delta for the MoCA business about half of that might eventually come back, because of the seasonally trends. The other half won’t because of market share loss, correct?

Patrick Henry

If you look at it clearly (inaudible) fashion that’s correct however from a MoCA standpoint with market share, we’re growing in the international markets in MoCA as well as the rest of our connectivity business with the SoC with the outdoor unit business as well as the broadband access business. And we’re going in North America in the second half with our bundled strategy. So we have new design wins go into production and ramping throughout the year that should allow us to grow MoCA market share throughout the year and even into 2014.

Gary W. Mobley – The Benchmark Company

It’s a good segway. Moving on to your international career deployments, if you look at DIRECTV, Latin America, some of the satellite operators in Europe and some of that Chad telcos, to take all those and sum what percent of revenue is that now. And then looking specifically DIRECTV Latin America, how earlier we in the deployments there, and how much of growth candle for that be to 2013 revenue?

Patrick Henry

Yeah, we’re not going to break it down to that level of granularity. If I look at our international business form an SoC perspective historically it’s about 50-50 North America and international and the connectivity businesses has been more about 90%, 95% in North America. So there’s definitely big growth opportunities in our international across the product lines. That kind of go across the globe, Latin America opportunities for growth, and our channel stacking switch and MoCA business in Europe growth opportunities and our channel stacking switch and MoCA to a larger extent SoC business in Eastern Europe. In India with the transition from analog to digital, we have a pretty big growth opportunity in our SoC business.

Similarly in China as they move from standard def to high def and Korea with android-based set-top boxes, we see growth opportunities for SoC there, and our connectivity business in China, we see that finally, our broadband access business is getting to a scale and growth that’s looking very interesting for us throughout 2013, and even into 2014, so we see a lot of growth opportunities out there.

In addition to that, we’re seeing share gain opportunities, the ones that we can talk about at this point based on announced design wins are the HD DTAs ramping in North America, where historically even in Trident, they didn’t really have any business in North America cable, so that’s the big growth opportunity for us also the Xi3 client devices with Comcast where we won significant design wins for both MoCA and SoC there.

Gary W. Mobley – The Benchmark Company

Okay. All right, and could you talk about your gross margins on the Trident associate business, what were the gross margins, just prior to bond that set of assets and how much have they improved, and how much more room did they have yet to improve. That’s it from me. Thanks.

David Lyle

I’ll take that question on the set-top box SoC business, prior to us owning the business, public information out there that they posted back in 2011, was that they were somewhere in the 30% gross margin range throughout that year on a quarterly basis, when we have the business four months after that time period back in April 22012, this year we also talked about like you said having to fix a lot of the gross margin issues across the set-top box SoC product line.

There wasn’t lot of investment at the time in 2011 in terms of product cost reduction efforts, because it wasn’t under the Trident parent company, which was struggling a little bit. So and eventually declared bankruptcy. So by the time, we got our hands on it. We had a lot of things to do, but there is a lot of low hanging fruit to start with. Although we won’t break-out the margin between any of the various main product lines with set-top box and connectivity, we still have a lot of improvement to go. We’re making incremental gains in terms of gross margins on a set-top SoC product line but we still have to kind of wait for new designs to start producing revenue, which we’ll see some of that this year with a lot more as we get into integrated products in 2014.

Patrick Henry

Under any kind of reasonable scenarios of mix really don’t see gross margins dropping below the high-40s for us as a corporation, with a good possibility, we’ll get back into the 50 sooner rather than later, but definitely our goal to get into our long-term business model of 50% plus gross margins and kind of high teens operating margins by the end of 2014.

Gary W. Mobley – The Benchmark Company

All right, thanks guys.

Patrick Henry

Thanks, Gary.

Operator

And your next question comes from the line of Aalok Shah with D. A. Davidson. Please proceed.

Aalok K. Shah – D. A. Davidson & Co.

Hi guys, just a couple of quick questions, I know you’ve answered this already, but maybe you can give us a better sense of how we should think about the trajectory of growth with the US Cable guys this year especially on the Comcast platform, I mean is it I know you said Q2 is kind of bounce back but not much assuming more Q3, Q4. How do we kind of size up the opportunity at this point, and then also how do we look at the DTH space, that’s my first question and I will follow-up with some more?

Patrick Henry

Okay, so US Cable is kind of bifurcated, you’ve got the basic subs and the premium subs, our strategy with the basic sub is really HD DTAs and its’ around analog reclamation of bandwidth, so that the cable operators can deploy more broadband services, higher speed broadband, more HD channels. That is underway we’re shipping with Motorola and Cisco into various different cable operators that business is growing. It’s growing in Q1 and we should expect that the growth throughout 2013 and even into 2014.

On the premium subscribers, they are going to move to a gateway client architecture Comcast and its likely that other operators will follow that architecture, with one, two out of three Xi3 client OEMs for the Comcast deployment, we feel like we can leverage that into other cable MSOs, and possibly even other Pay-TV service providers and our cable MSOs internationally, and maybe even domestically over time.

So that business with Comcast, which is really the most aggressive at this point, we’ll deploy second half this year. We’ll see a ramp throughout the second half plus, we are getting into a seasonally stronger period for our overall business in that timeframe. And those businesses should continue to ramp throughout 2014 even in 2015.

We also are participating in the portions of the gateway business for those client gateway architectures, the design that we’ve announced there with ARRIS with XG5, where we have MoCA 2.0 designs there although we only about to see the designs there that’s going to be growing in the second half and continuing to up beyond there.

Aalok K. Shah – D. A. Davidson & Co.

And Patrick how do you tell or give me what’s the – what are you hearing from the customers at this point in terms of how they want to roll out, can you give any indication as to how used to refining you forecast, I’m not asking you to give it to us, but I’m just trying to get a sense of how far down the road, do you guys have visibility in the second half of the year at this point.

Patrick Henry

We have an initial visibility based on their plans, and I think that from a qualitative standpoint there is a lot of aggressiveness out there around analog reclamation and there is a lot aggressiveness out there moving to gateway client architectures for a variety of different reasons, really it’s kind of leverage the existing CapEx that they made from a infrastructure standpoint, and then allow them to deploy more advance services, it allows them to reduce subscriber acquisition cost, lower cost platforms in the home, and our low power and high performance. So these are big initiatives within the cable MSOs and we are fully supportive of doing that making sure that we are getting everything, we need to get down so that we get to the deployments ramping as quickly as possible.

Aalok K. Shah – D. A. Davidson & Co.

Okay and so if I look at your three opportunities this year, you’re going to get the PanAmericana business that could ramp, you’ve got HD DTA and you’ve got the premium cable site, of those three which one do you think we should be really focused on in terms of growth in back half of this year?

Patrick Henry

Well, I think from a silicon content standpoint and the broad based nature of the deployments US Cable off the stuffs that we have announced is a very big opportunity HD DTA growth as well as for Xi3 growth with both MoCA and SoC, I think the Latin American opportunity is going to grow. I think it initially deployed on a high end so with premium service subscribers, and there is other stuff that we’re continuing to pursue and other things that we’ve already won, and we haven’t announced that should contribute to growth in the second half of 2013 as well. So we are just able to talk about the things we’re able to talk about that have been publically announced, but I feel like we are getting great traction and great momentum not only in things that are in the pipeline, but with things that we already won, we haven’t announced yet.

Aalok K. Shah – D. A. Davidson & Co.

And Dave just quickly for you, I know when you guys made that the Trident acquisition, Trident goal to get back to kind of where you were and exceed kind of get back to a new long-term goal, I guess Q4 ‘14, any chance that could come up a little bit earlier given all these drivers for growth, we are sitting here with today.

David Lyle

We still have that same goal, we haven’t reset it, we feel pretty good about hitting that time period.

Aalok K. Shah – D. A. Davidson & Co.

Okay, great. Thank you.

David Lyle

Thanks.

Operator

And your next question comes from the line of (inaudible). Please proceed.

Unidentified Analyst

Hey, guys good afternoon and thanks for taking my question. With the wins under Comcast RDK architecture with Humax and technical Xi3 boxes, I guess the question here is you’ve won two out of the three boxes, which is great. Does those certification guarantee a certain amount of volume share? These boxes I think the question is three boxes maybe one of them announced big and other two may be not so much, so I guess the first question is, does the certification guarantee a certain amount of volume and is your view on the return to growth in Q2 being driven partially by the initial ramp of the Xi3 or is that more of a second half, then I have a follow-up question?

Patrick Henry

Yeah, from a certification standpoint, Comcast will have three certified suppliers assuming the (inaudible) and we have a high level of confidence that we are in a very good position with Humax and Technicolor. And based on that we have to compete our OEM customers have to compete for business, so there is no guarantee chair as far as I know, it might be a better question for Comcast they are one of the OEMs.

As far as the volume associated with those design wins, it’s really a second half opportunity HD DTA will continue to ramp in the first half, and we’ll see some of these other designs ramping in the first half that we’ve announced on our connectivity, but specifically on RDK Xi3 clients, it’s really a second half opportunity.

Unidentified Analyst

Got it, thanks Patrick. And then your SoC set-top box business has been more cable focused and kudos to the team for focusing on continuing to capture share here, if you can just give us an idea on how you’re leveraging your strength in cable, and going after some of the four opportunities in satellite, and when might we expect to see some of the traction with your satellite SoC products.

Patrick Henry

Yeah we the old can accent SoC business which became an XP, which became Trident, was definitely one of the leaders in satellite SoCs, where they had business with the big guys with DIRECTV, with DISH Network, with BSkyB. We have all the necessary technology building blocks and pieces to pursue that business, and that business is part of Entropic we also have the MoCA component. So nothing to announce today in terms of design wins, but definitely the global satellite market with a specific focus where we have an incumbency position around MoCA, is a big opportunity is that we are aggressively pursuing.

Unidentified Analyst

Okay, great. And then question for Dave, so how should we sort of think about the OpEx trends beyond Q1, I know you’ve previously said that OpEx should grow sort of low single-digit percentage points quarter-on-quarter through 2013 is that still how you see it?

David Lyle

I think we’re going to keep kind of within this zip code about 37 plus million dollars and throughout the rest of this year, of course there are always sometimes you get spike out the X when you have data especially deep sub micron take outs that we have. But generally speaking you’re correct.

Unidentified Analyst

Okay, great thank you.

Patrick Henry

Thanks Alan.

Operator

And your next question comes from the line of Raj Gill with Needham & Company. Please proceed.

Rajvindra Gill – Needham & Company

Yes, thank you for taking my question. I’m just Patrick going back to the share loss situation, you’d mentioned that these were old programs 2012, 2011 related to DIRECTV and Verizon, I was wondering if you could elaborate a little bit further on the DIRECTV part, you’d said that, you’ve got the MoCA business, but you do not get the SoC business, just move to get elaborate what’s going on specifically at DIRECTV, was this when you say share loss, was this related to Trident business they had won and they had lost because to Broadcom due to their integrating offering or just say other factors. And then on Verizon, you said moving to Verizon media architecture, I was just wondering what’s going on there, when you said there is no longer a MoCA architecture, can you just describe those two issues that would be great?

David Lyle

Yeah, so first-off the Verizon media server is still a MoCA based architecture, and VMS the Verizon Media Server and the associated clients are large competitor with integrated solutions as one both the server and client business historically. We are sitting next to them, or they were the SoC and we were the MoCA piece, since we didn’t have both pieces, we didn’t have an integration roadmap prior to the integration with Trident now we do have that. So as we are competing for next generation designs at Verizon, I think we are very strongly positioned there. Now obviously nothing to announce today in terms of design wins, but they’re clearly a key target for us especially for client business, which is where the big volume is relative to servers.

At DIRECTV, back-end like 2009 and 2010, we jointly won business with Trident, initially with NXP, which was sold to Trident for a portion of the HR24 DVR products, in some cases Broadcom was the SoC in some cases, Trident was the SoC, we were the MoCA solution across the board for HR24. The next generation DVR after that was the HR34, which is the first version of the Genie home media server. We had the MoCA business, 100% of the MoCA business in that, Broadcom had a 100% of the SoC business. Both the gateway server architecture as well as traditional DVRs have been shipping at the same time over the last year.

The HR44, which is the next generation Genie home media server, we didn’t get SoC business or MoCA business. Broadcom has an integrated solution for that. Starting last quarter and into this quarter, DIRECTV has been converting from HR24 and HR34 to 100%, HR44 that’s where the dominant portion of our share losses occurring, and then occurring primarily predominantly in MoCA but to a lesser extent in SoC.

Going forward, we feel like we have a very strong product roadmap in position with all the technology building blocks and then an integration roadmap and short-term bundling strategy to aggressively go after business with that end-customer as well. Nothing to announce today, but they’re definitely a key target.

Internationally in DIRECTV, we have one business from MoCA and CFS standpoint, the design that we announced in the Consumer Electronic Show was with PanAmericana, which is part of DIRECTV and that business we’re starting to shift both MoCA as well as CFS, although it’s relatively small today, from premium subscribers, we have big aspirations for that longer term as the premium boxes and outdoor units going to more of the mainstream.

Rajvindra Gill – Needham & Company

I appreciate that insight, but would DIRECTV being one that your largest end customers, why don’t you think that the share loss situation might not exacerbate, unless you’re unable to sell bundled solutions, which you currently do have two DIRECTV and therefore you’re waiting for an integrated solution, which will probably be sometime in 2014, within that DIRECTV business, continue to be weak, bearing in mind all the international opportunities and some of the other products that you’ve talked about?

Patrick Henry

I mean there’s no more share loss opportunities other than, if there is something that comes and competes with us from a adapter standpoint, a MoCA adapter standpoint, I think we’re very strongly positioned there, maybe we’ve got the strongest roadmap in the industry. So I think we’re in a strong position there as far as 2013 awards, they’re pretty much have been made, so I don’t really see anything narrow, relative to DVRs and servers and clients and non-DVR set-top boxes and there is no business to lose there, I mean…

Rajvindra Gill – Needham & Company

Based on the next generation DIRECTV platform, that will be sometime in 2014 that could…

Patrick Henry

Yeah. I think that there is definitely opportunity for share gains for us.

Rajvindra Gill – Needham & Company

Right.

Patrick Henry

In those opportunities and more aggressively competing for opportunities where we have the right solutions.

Rajvindra Gill – Needham & Company

Okay. Thanks for that. And just on a question on the DIRECTV Latin America, recently DIRECTV said that they had kind of a record fourth quarter something in the range of kind of 650,000 net ads and Brazil, then PanAmerican, how would you kind of assess there’s the PanAmericana opportunity in terms of the existing subs, I believe the actual thing $4 million to $5 million and how many net ads. How do you assess the PanAmericana opportunity to handle the transition over and also describe Brazil, what is also similar in $4 million to $5 million range in terms of the existing ads that are adding kind of 250,000 to 300,000 net ads?

Patrick Henry

Yeah. So I guess there’s two ways I would look at that, first way is with the PanAmericana design win that we want and announced with MoCA and the channel stacking switch, I think they’ll ramp throughout 2013, and it’s primarily premium service subscribers this year, that that gives us a strong VCHAD for as premium services go more on the mainstream, there is a big opportunity there.

So I think just generally Latin America is the fastest growing Pay-TV market right now globally. We are winning market share down there, initially we were a connectivity business definitely Sky Brazil as well as Embratel as well as Sky Mexico and PanAmericana and DISH Mexico and all these opportunities are things that we feel like we have strong solutions, and we wanted to pursue those, again nothing to announce from a design win standpoint today that but those are definitely key targets for us where we feel like we have the right system solutions, and we should be able to not only grow with that market, but outpace market growth as win share, as we don’t really have much down there. I think those are very big opportunities for us although primarily in late 2013, 2014 as far as the opportunities, because we haven’t announced anything today for the most part.

Rajvindra Gill – Needham & Company

Got it, very good. Thank you.

Patrick Henry

Sure.

Operator

And your next question comes from the line of Sandy Harrison with Wunderlich. Please proceed.

Sandy S. Harrison – Wunderlich Securities, Inc.

Thanks. So following up on line of similar questions on Verizon, if you look into Q1 after the share gains that you talked about, where do you see Verizon as a customer as a percentage, my calculation is a relatively low number, and then as you exit this year, where do you see Verizon as a customer, as a percentage?

Patrick Henry

Yeah. We really don’t breakout the Pay-TV service providers in the percentage from an end-market perspective, I mean they’re still relevant relative to kind of five years ago, when they were our dominant end-customer. They’re much smaller than that today. We still continue to have good business at Verizon and with adapters with ONTs, with BHRs, I think we’re in a strong position to win next generation designs there, and as they move to this client-server, gateway-client architecture, I think with our bundled solutions and integrated solutions longer-term, I think we’re well positioned now to win new business there over time. Again, we’re not winning in this current generation, it was awarded probably a year, year and a half ago, but I think we’re in a strong position to compete going forward.

Sandy S. Harrison – Wunderlich Securities, Inc.

So if you look, you talked a little in last conference call, Patrick about your team and where are you seeing it and what the opportunity is there. If you look at your team today, has that changed dramatically one way or the other from when you last talk about it, remind us I think it was close to $4 billion to $5 billion, and then would you see as your CAGR here as we go through and 2000, 2014 and beyond.

Patrick Henry

Yeah. The latest market data is still coming in as far as analysts reports, but I think we talked about our team or our server developer being about $2.2 billion in 2013, growing to maybe for $4 billion in 2015, with kind of what’s going on with the general macroeconomy, I wouldn’t be too surprised if that’s coming a little over in the next wave, but I’m pretty sure it’ll be in the $3 billion plus probably $3.5 billion plus range in 2015, so the markets growing in the nice clip, and we should be able to grow faster than that, we’re not going to provide a long-term objective, but over time, we think that we can grow both with the market as well as gain market share.

Sandy S. Harrison – Wunderlich Securities, Inc.

Gotcha, and then you talked a little bit about your new, some of your new process geometries and transitioning there, have you changed your supply chain for your set-top box SoC space and do you plan on doing it or are you going to stay with what you have currently and continue to work with it?

Patrick Henry

Well, I mean somewhere in (inaudible) throughout the year we’ve made pretty substantial changes where NXP was using, or Trident was continuing to use the NXP back-end supply chain, NXP owned assembly and test houses, so we have moved the vast majority of those products to our more conventional test houses and assembly houses, and we also gone to a multiple sourcing strategy there. TSMC remains our primary foundering partner for CMOS technologies, which all of our SoCs are CMOS and we’ll continue to use (inaudible) on our high performance mixed signal RF products in some cases.

We are looking at alternative sourcing strategies, to continue to lower our cost structure on the foundry side, and nothing to announce today, but we definitely have a multiple sourcing strategy that allows us to continue to enjoy cost improvements on the products. And the other thing is we’re investing in advanced process geometries, the vast product that we kind of fast track to get out, which will be an outplay to this quarter was still on 40 nanometer every product that is in development subsequent to that is on 28 nanometer as far as SoCs and MoCA goes and transponders.

So the products will be coming out later this year including integrated MoCA plus SoC solutions, will be on 28.

Sandy S. Harrison – Wunderlich Securities, Inc.

Got it. And then a quick question along those lines for maybe Dave, a lot of other tablets comments you guys at 28 nanometers are not expecting the full costs of the mask in that particular quarter, just spreading it out over a longer period of time, as it is up to heavy costs compared to the revenues that you’re driving in the near-term, is that something you’re looking at potentially dealing or do you expect to continue to express the full costs in that particular quarter.

David Lyle

Yeah. At this point, we expect to continue to expense the full costs in the quarter, it is something we’ve been looking at more recently, but that change is unlikely at this point.

Sandy S. Harrison – Wunderlich Securities, Inc.

Okay, great. Thanks guys.

Patrick Henry

Okay. Thanks, Sandy.

Operator

And your next question comes from the line of (inaudible). Please proceed.

Unidentified Analyst

Hi, guys. Thank you for getting me in here. Getting back to in your prepared remarks and through most of the Q&A, you’ve talked to a lot of about second half strength, and what gives you that confidence given the nature of the cable industry and it tends to be timing delays and push outs and that sort of thing.

Patrick Henry

Well, we’ve been in this business for a long time. So I think we’re using, we’re applying our judgment to the situation, and we’ve got enough stuff in the pipeline that we think that new design wins are going to ramp. The other thing is second half we entered a period of seasonal strength, we’ve seen that in our business for the long-term, we also see that we’re not in a situation going forward where share losses is likely to happen as mainly share gains. So if you look at puts versus takes it’s much more positive situation.

Unidentified Analyst

Okay, thank you. And on the sea link access business, that’s you’ve talked about that over the years and it seems like it finally might start to see an inflection here. Can you just give us an update on that and walk us through the dynamics that might lead to higher adoption for that technology?

Patrick Henry

Well, we have millions of (inaudible) paths now with our network adapter solutions, a number of different Tier 1 cable MSOs in China deploying our solutions, and are getting a lot more aggressive around the broadband initiatives. From an alternative technology standpoint, there is the China version of DOCSIS, there’s the Powerline solutions and our sea link solutions, which are basically MoCA with a different software application. Those are well the three kind of de facto standards that are out there. We’re also very closely with the China government on their next generation standard activity called HiNOC. So I think the markets moving in the right direction, we’re positioned well from an incumbency standpoint, and I think we’re working very closely with the China government on next generation standards. In addition to that the OEMs and the MSO that we’re working with closely are giving us a good sense that that business is ramping.

Unidentified Analyst

Great, do you think that might be something that could be a meaningful contributor at some point in ‘13, or do you think that that’s pushed out and it was still kind of waiting for that?

Patrick Henry

I mean that will be coming in ‘12 I mean those would be the first year that will be north of $10 million revenue for that product line again, from an overall Entropic standpoint that’s still moving them the needle at the top line but is becoming more important and more significant over time…

Unidentified Analyst

Thank you.

Operator

And your next question comes from the line of Daniel Amir with Lazard. Please Proceed.

Daniel L. Amir – Lazard Capital Markets

Great, thanks a lot of for squeezing me in here, so a couple of questions, first of all, from an integrated solution, when you have it, is there any visibility on margins with that product, would that product be similar to corporate gross margins that would be better than margins and I’ll have a couple of other follow-ups?

David Lyle

Yeah. We’re really not going to break out from the product line gross margin standpoint, but from a design win opportunity standpoint both ramping today as well as new products. We think on a blended basis, we’ll be able to be in north of 50% as we get those products ramping the production.

Daniel L. Amir – Lazard Capital Markets

Okay. And then in terms of visibility, I mean if you stand here today, I mean compared to where you were six or nine months ago, I mean is your visibility similar to what it was, is it worst or better, I mean can you comment a bit on that, given that you do sell into customers that tend to give you a little more lead time, but it does seem like you have more moving parts now in your business.

David Lyle

From a macro standpoint, we’re in a very difficult situation in Q4 with the election with the fiscal cliff, with a lot of our end customers really ratcheting down inventory levels very tight, so I think inventories in the channel are very lean. There’s still a lot of concern around the macro as I talked to OEM customers as well as our Pay-TV service provider customers, if you look at kind of the some of the guidance that they’re providing their own subscriber ads, it’s a little bit more conservative. So depending upon what happens with the macro, things could get pretty good, super-fast or reasonably fast, and it could be both from the standpoint of inventory replenishment as well as real growth.

If you look at our longer-term visibility from the design win pipeline standpoint, we’re winning share. We’re winning big designs, some of them we’ve announced, some of that we’re not able to announce yet. So I think we’re strongly positioned, so the market does rebound and the economy does get stronger and as we enter a seasonally stronger period, we’re very well positioned, I think some of the things we talked about historically about HD attach rate and about upgrades and things like that, they get a little bit weaker in a weak economy, but the economy gets more reasonable even on a slow growth economy, those provide growth opportunities for us.

So I think we’re strongly positioned even if this revenue level we’re still profitable, we’re still generating cash and I think we’re strongly positioned to the things do come out, both from a macro as well as the specific design win pipeline, we’re in a good position.

Daniel L. Amir – Lazard Capital Markets

Okay. And my final question, just on the international business, you have any thoughts of what percentage of your business could come from international a year from now?

Patrick Henry

You have a sense of that Dave, maybe in 2014.

David Lyle

It’s definitely changing, it’s just that the end customer, I think you’re talking about end-customers, because our direct customers are mostly international. From an end customer standpoint, service providers for instance in Latin America will definitely provide growth for us, it’s just off a smaller base, although the opportunity is huge in the rest of the world in places like that they still have a different demographic where even in with 5 million subscribers, there is a 20%, 25% HD penetration rate, that’s all changing, and that’s why some of these technologies are starting to be launched there, but it’s coming after smaller base, so it can take some time before it really becomes meaningful like the North American service providers provide us.

Daniel L. Amir – Lazard Capital Markets

Great, thanks a lot.

Patrick Henry

Thanks, Daniel.

Operator

And your next question comes from the line of Hamed Khorsand. Please proceed.

Hamed Khorsand – BWS Financial, Inc.

Hi guys, just follow-up on the last question on the international, can you break out what’s international consist of right now, as far as the percentage of your connectivity revenue?

Patrick Henry

It’s relatively small part of connectivity historically it’s been less than 10% on the SSE business. It’s historically been about 30%. So I think there’s growth opportunities in international as well as in North America. So as we get into kind of the 2014-2015 timeframe, I think that the growth in international versus the growth in North America is pretty good, I think we have tremendous growth opportunities in North America as well, some of it is based on share gains.

Hamed Khorsand – BWS Financial, Inc.

Do you still have the confidence that you can retain above 50% market share in MoCA?

Patrick Henry

We’re above that now, we don’t expect to lose anymore.

Hamed Khorsand – BWS Financial, Inc.

Okay.

Patrick Henry

We expect to gain share later this year.

Hamed Khorsand – BWS Financial, Inc.

And my last question is talking about your loss in connectivity, usually a long run way before you get back into next generation that sounds on this call, you sound like a little bit more confident, you can get it faster, what gives you that confidence?

Patrick Henry

We’ve already won the designs.

Hamed Khorsand – BWS Financial, Inc.

Okay. And the designs will come in the second half ‘13?

Patrick Henry

Yeah. For the most part, I mean we’ve got some things that are ramping right now, but we continue to have second half ‘13 ramping and then into ‘14 and ‘15 as well.

Hamed Khorsand – BWS Financial, Inc.

All right, thank you.

Patrick Henry

Sure thanks, Howard.

Operator

I will now turn the call over to Mr. Patrick Henry for closing remarks. Please proceed.

Patrick Henry

Thank you, Dorosel. Just to close despite the near-term softness we’re seeing primarily based on seasonality in our end markets, we are very optimistic about Entropic’s growth prospects over the coming closing years. Now we’re much more complete and compelling product line and product roadmap than we had historically, one of the key elements of this is our MoCA plus SoC bundling strategy near-term in our integration roadmap at MoCA 2.0 plus SoC longer-term.

We expect to announce additional Tier 1 design wins throughout 2013 and we feel like we’re strongly positioned for revenue on earnings growth. Thank you for joining the call today and have a good evening.

Operator

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

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