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Corning Inc. (NYSE:GLW)

2013 Citi Global Technology Conference

September 4, 2013, 11:15 AM ET

Executives

Wendell Weeks - Chairman, Chief Executive Officer and President

James Flaws - Vice Chairman and Chief Financial Officer

Analysts

Jim Suva - Citi

Jim Suva - Citi

Good morning, ladies and gentlemen, and thank you for joining us for day two of the Citi Global Technology Conference. This fireside chat is with Corning Incorporated. I'm Jim Suva, the IT Hardware and Technology Supply Chain Analyst. We're very pleased to have the entire management team here of Corning.

Sitting immediately next to me is Wendell Weeks, he's the CEO and Chairman of the company. In the middle of the stage here is Jim Flaws, the Chief Financial Officer.

To begin things, Wendell has a couple slides he wants to go through, as the company did have a press release of reiterating guidance this morning that just went out. And we know many of you who have been busy in meetings may not have seen that, so he's going to go over that and a few slides about the company. And then we're going to have a lot of time for investor Q&A.

So without further ado, I'd like to turn it over to Wendell Weeks, the CEO and Chairman of Corning. Wendell?

Wendell Weeks

Thank you, Jim. Good morning, everyone. We appreciate being one of the speakers here today.

First, before I begin, I am obligated to tell you that this presentation does contain forward-looking statements and that actual results may differ materially, and the slide gives you that information in more detail, if you had a hard time following that.

So I'll begin by defining who we are. Corning is a special company with a long history, a 162 years to be exact. Over the years, we've developed a very distinctive identity as the world-leader in specialty glass and ceramic. We invent, manufacture and sell keystone components that enable high-technology systems for consumer electronics, mobile emissions control, telecommunications, life sciences and then in turn new industries that we create.

We succeed through sustained investment in research and development with deep material science capabilities and a distinctive collaborative culture. We evolve with the technology and with customer needs, which is why you've seen Corning's business mix, change so dramatically over time.

We currently have five operating segments: display, telecom, environmental, life sciences and specialty materials. Now, I won't discuss each one of these in detail today, we'll leave that for your questions, but I do want you to know the diversity of our market.

Now, we believe Corning is a strong investment; first, because of our competitive strength and stability; second, our fortress balance sheet; third, our market, technology and cost leadership in each of our businesses. If you were to look out over the last three years at each of our business segment, we have grown much faster than our competition at the net income line.

Second, we can deliver our earnings growth in increased dividend and stock buyback afforded by our very strong operations cash flow. For example, we have doubled our dividend over the last two years and began $2 billion stock buyback program this past April, after completing a $1.5 billion program in 2012.

And finally, is our prospect for growth. I'm not going to dig in to these first two bullets in any detail today, but of course Ann's available to cover any questions for you after this session, as am I.

Today, what I'd really like to focus on quickly just for a few minutes is the third bullet point, growth. We have the potential for significant growth, both from the businesses we are in today and from entirely new product. Our businesses are all tied to key strengths, and more on that in a minute. Plus, we've got a very rich innovation portfolio, which creates the opportunity for explosive growth beyond our existing businesses.

Our these key trends are the trends that are really fueling our growth from a consumers' thirst for information to making our environment greener, the tools for biologically derived therapies, Corning is engaged with customers solving very difficult and valuable problems. Our unique combination of our capability set and relationships with leading customers, positions us very well across many of these advanced applications.

Now, I'd like to just dive into the first trend in a little more detail. We all know that consumers are demanding a world with seamless delivery of real-time information at their finger tips at work, at home and on the go. What this translates into is bigger higher performing displays and much more pervasive touch technology.

Manufacturers are creating more advanced displays for a more immersive life-like experience. These are high pixel-count liquid crystal display and OLEDs. In short, we call them high-performing displays. The resolution of your TV set will grow from an average of 2 million pixels today for standard high-definition to 33 million pixels for ultra-high definition.

We believe the high-performance display markets grow at approximately 47% compound annual growth rate over the next few years. High-performance displays require new specialty substrates that remain thermally and dimensionally stable during higher panel processing temperatures, and our family of Lotus glasses are designed specifically for these highly advanced displays.

Another aspect of this trend is the proliferation of touch. We are really, right in the very beginning of touch technology, which most like flat panels technology started in small and is constantly growing. Our touch smartphones entered the market only in 2007, just six years later, touch smartphones are about 60% of all phones sold.

Corning's Gorilla Glass is the cover glass of choice of four of the growing smartphone and tablet market, and these categories have almost 30% (technical difficulty) over the next few three years. Recently, touch-enabled notebooks have made an entry into the market and are projected to be about 15% to 20% of all notebook sold by the end of this year. Our touch notebooks are a new and sizeable opportunity for Gorilla Glass.

To summarize, this trend for consumer electronics and its impact on Corning, we expect continued volume growth in our display glass business and the potential for Gorilla to double by more over the next several years, as touch infiltrates all of our lives. We'll touch more on Gorilla in a second.

Our greater communication collaboration and connectivity is straining our network. This always on world produces incredible amounts of data to store, move, access and display and this is placing huge demands on communication networks and their operators. You can see some of the projections on this slide.

Operators continue to invest in network bandwidth with optical, becoming a larger and larger portion of the spent. Corning is uniquely positioned here with leading-edge optical solutions for this growing portion of communications network. Now, we expect to see continued growth in these businesses over the next several years.

So I've been talking about the future and I suspect many of you in the audience have a shorter time horizon, so what about this year, we've made headway with new products again for this year. I am pleased to share with you these highlights of very recent successes.

In July, we launched Gorilla Glass NBT for the touch notebook market. The glass that is developed aimed specifically at touch on notebook technology. And we're pleased that Dell has announced a pretty sweeping program to put Gorilla on their PCs, their touch-enabled notebooks. The device actually is right in front of Jim right now is the Dell Latitude 7000, will be introduced shortly and if you put that around, Jim, right, that is all touch-enabled and all Gorilla.

Gorilla Glass for notebook has eight to 10 times the scratch resistance of soda-lime glass displays and is way more resistant to all sorts of abrasions caused by cleaning, wiping or careless handling. We have brand beginning to use our anti-reflective Gorilla Glass in products now and we're progressing to commercialization at a larger scale.

In March, we launched our SMF-28 Ultra fiber, which provides carriers significant benefit in the critical areas of loss and bend performance. This industry leading single-mode fiber has 10% lower loss than the typical single-mode fiber, better macrobend performance and is totally backwards compatible. Customer response has been extremely positive.

In May, we launched the product that I am really excited about. It's our ONE Wireless solution. It uses the virtually unlimited bandwidth of fiber. This all-optical platform enabled the network conversions of Wi-Fi, cellular and Ethernet backhaul while lowering the total cost of ownership by 20% to 40%. And we're seeing 15%-plus growth of this overall Distributed Antenna System market over the next few years.

And finally I just like to quickly close on why we believe there is going to be growth in entirely new businesses for the company that we haven't really even discussed with you yet and why we're so excited about our future. Glass has been used for thousands of years by artists and designers because the way it forms, it's light handling capabilities and the way it feels, but also because of it's technical performance and its proclivities like enhanced stability, transparency, impermeability, and strength.

We've been innovating ourselves in this material for 160 years. We understand both, the artistic as well as the technical properties of glass and our scientific and engineering capabilities in combination for our uniquely collaborative culture position us to participate in advanced applications across many, many industries.

We're a company with a long history of innovation. It has evolved to win an entirely new industries and I think we're well positioned to grow earnings consistently in a near-term and that our culture capability and our mission will help us sustain successful growth far into the future.

And so next I will hand it over to Jim Suva for Q&A.

Question-and-Answer Session

Jim Suva - Citi

Thank you, very much. I have a few opening comments, but the majority of the time is going to be for you as investors, so I am going to keep my questions pretty short and sweet.

First of all, according to the lot of different things, life sciences, TVs glass, specialty glass and my family, personally are thankful that's why we have twins is because of life sciences and all the development and what Corning has done, I am in the health services and life sciences, which is great, but the twins just turn two and they like to watch TV, so let's talk about TV trends. China have some subsidies, they were on, now they are off. There is chatter that they may come on again. This morning you reiterated guidance, for those of you who may not see it. Can you about TV trends that you're seeing now? Are you baking in a expectation for China subsidies to come back? How important is China subsidies and what is going on with TVs globally?

Wendell Weeks

So I'll start, then Jim, maybe you can add. What you would've seen and our announcement today is that we reiterated our quarter three, so we think that that continues to be strong and that some of people's concerns about China subsidy ending were overgrown. We're seeing the market evolve this year, much as we predicted. Unit growth was little slower, but area growth is higher, which has more than made up for it.

And we expect the growth to continue. In terms of supply chain, what we would like to see happen is that in quarter four, what we'd like to see is some of our panel maker customers to feather some of the utilization, to take advantage of the sort of the natural seasonal upswing and market demand to lower supply chain inventory going into next year. That's what we'd like to see happen and that would be the cycle that we would look to.

James, would you add any.

James Flaws

I think that the fears about China subsidy were I think a little overblown. Unit growth is negative in quarter two. Area growth in China is still positive. And we are not making in any return of subsidy, so if that comes about, it would be a positive to us, against our own expectations.

Jim Suva - Citi

That's really good note, thank you so much for the detail. So that's a lot on the demand side. The other part of the economic equation is on the supply side. Can you walk us through about the supply? Corning opened up some recent manufacturing in China over the past year or two, what do you see from the supply side, both from Corning as well as the industry? Because I would imagine, if I am working in your plant, each year you want me to be more efficient and have more output and pour glass thinner and faster. It's not status quo for Jim Suva working in your plant, you want me to keep doing more. Can you talk about the supply side of the equation?

Wendell Weeks

So in terms of capacity add, we're not going to be doing any more. Our capacity growth will come through productivity. We've got a really strong track record of being able to do that. And also that productivity creates more and more capacity going forward, which in turn we're developing new markets to take care of. So we're not going to put any new iron in the ground, at least in the near-term. And if we did, it would be a great signal, because it would mean that market demand was incredibly strong.

We can't really speak for competitors, but we've noted some, okay, discipline there as well. And we think supply and demand is going to be in balance for the coming period of time. That is what it feels like to us.

Now, we have Jim Flaws here in the middle of us, and he is a big peacekeeper. And the reason why I mention that is, everyone in the audience want dividends and stock buybacks right away now, and you're CEO, you want to grow the business and you want to grow sales and maybe make some acquisitions. So I'm going to ask Jim, Jim, what's your strategy for capital deployment for keeping both sides and everybody in this room happy.

James Flaws

Well, actually in a period of time, where our capital spending is going to be lower for few years. So combined with strong operating cash flow, we have the money to hopefully satisfy all our customers. We raised the dividend, as Wendell mentioned, 3x in the past two years. And we're on our second big leg of buyback.

We're not planning any large acquisitions. We've done some smaller ones. So I think we actually have the cash flow to continue to support the buyback. Obviously, we want to keep the dividend going in any capital needs that we see right now. So operating cash flow is really good. And after about thee years of very heavy capital spending, we're in a period of time for two to three years where capital spending looks pretty low.

Jim Suva - Citi

And to keep Wendell in check, what type of hurdles do you make him as far as strategic M&A that he may look at, whether it's returns on capital, profitability, accretion, payback or do you say we already have too much in display, we want to diversify the company. What type of discipline do you put in for the M&A strategy?

James Flaws

Well, clearly we like to get to accretion as fast as possible. And so for example, our big life sciences acquisition that we did last year, that's actually right on track and we're going to get to accretion on that very quickly. In terms of balancing the company, it's really relatively hard for us to buy another display glass company. So I don't think you expect to see that, but life sciences and telecom are the places where we've concentrated our acquisitions. But getting to accretion, depending on the size of the deal, in year or two is really a goal that we have.

Wendell Weeks

For us, acquisitions struggle against a really good internal benchmark, which is deploying cash for our shareholders. So that's got to be really attractive for us to do it.

Jim Suva - Citi

And Wendell, you mentioned you have a really nice look in laptop here that has a Gorilla Glass on it.

Wendell Weeks

Yes.

Jim Suva - Citi

Can you lay out some expectations about? I believe, if I remember, on your Investor Day or a while ago, you made the comment and I think you expected about $100 million in sales for that in the second half of the year, is that correct? Are we on track for that or are you talking more units? Or what should we think about for your expectations for the trajectory of the specialty glass?

Wendell Weeks

So we're thinking it will cover about 15% to 20% will be touch-enabled notebooks and it will get the lion share of those. The deployment of the windows operating system has not gone as well, as I think everybody in the ecosystem would have wanted it to, all right. So people are still working through how fast to go in touch, how far to go in touch.

We still fundamentally believe that for notebook to be buyable long-term play, they are going to have to enable some form of touch. But it can't be sort of kludgy as just sticking touch and keeping all the other complexity, because one type of touch interface needs to be fundamentally simple and intuitive. And you can do that in a touch, but then if you want a crunch too, then you need to be able to seamlessly go to crunch.

And so getting that dynamic right and what exact products, we're going to do that whether it's convertible, whether its traditional laptops, I think all of that is still ahead of us to workout. But people want to work with touch, when it is the appropriate way to do it. And I think we're going to continue to see that.

I've been very impressed to how the prices of touch-enabled items have really been coming down so much to make the affordability of them really important. So now things are going to get very interesting, because I'm going to be hosting the lunch here in a few minutes and I have to go get a bunch of makeup, put on my face physically, so I look good on stage, in front of everybody doing lunch.

And this is the time that we're going to open up to investor Q&A, and in doing so, we're going to start to circulate the microphone amongst the audience in the room and anybody whose on the webcast should know there is literally people standing in the doorway, who can't fit in the room, it's such a packed room, which is fabulous.

And in doing so for the Q&A, I'm actually going to invite my associate [indiscernible] up on stage to help host some of the Q&A also. So investors, ladies and gentlemen, if you could please raise your hand, we'll get the microphone circulated to you, as this is being webcast and it's important for everyone. There's a question here in the front of the room, and I'm just going to politely exit, and then we'll go over to the other side of the room after this gentlemen.

Unidentified Analyst

This is -- again, I am not that close to your company, but I've heard discussions of bendable glass, maybe you could talk about that. Where we are with that process, when it might come out, what are the major application?

Wendell Weeks

So in terms of bendable glass the product that you're referring to, we call Willow Glass, sort of appropriately I think. And what this is, is that it's a very thin glass substrate structures, so thin that we manufacture it on big rolls and we would love to be able to develop full ecosystem, where value chains now process glass in roll-to-roll manufacturing.

Its potential applications are broad. One of our biggest challenge is this is a brand new to the world material capability and it's prioritized and you have everything from consumer devices of doing things like conformable displays to doing large area touch-enabled systems to doing something as simple as transparent coatings on the backs of devices, so that they become much more damage resistant to a lot of non-consumer electronics type applications.

Areas which you created with this product is what is essentially close to a perfect coating, when it is thin, we used to think it as a discreet product, but really when you get glass to a 100 micron thick, you've created a coating which you can add to another material that is totally hermetic, that is impervious to chemical, highly damaged resistant that you can print on and that you can write electronics on. This is the unique thing that the world hasn't seen yet.

That could potentially open up applications in markets and will open up applications in markets that we're not in today. So it's pretty broad applications that -- the thing I would urge people as one thing Jim says is, perhaps we shared too early with some of the stuff that we're doing. This is the big idea and as a result it's being changed for the various value chains that we're trying to enter. So as a result, it does take time.

Unidentified Analyst

Average time, is that to one, three, five years?

Wendell Weeks

Yes. It depends on the market really.

Unidentified Analyst

Your first app to market would be in the next 12 months or next three years?

Wendell Weeks

We would hope -- our internal goal to have first sort of apps to market more in the nearer-end range of that, right, but we'll know when we get it a little further alongside.

Unidentified Analyst

Just one more application question, one of the things from the Investor Day that was really interesting with the anti-glare glass. And it seems like low-hanging fruit to roll that out for commercial applications, it would drive a huge upgrade cycle for tablets, can you say anything about that.

Wendell Weeks

We're seeing it now on our first app. The first companies are trying it out. And what they are going to be looking for, is okay, I've done it. Now how have I impacted durability and impacted all those other things? So we're hoping that this does become a pretty broad use, but they are going to start with, let me try it here, make sure that I understand the user experience because even though it is low-hanging fruit, in a way they have touch a powerful value prop, at the same time that is the most the important peace of the whole device, is that piece.

Right there, that glass, that you're looking at, that you see everything through, that you touch and handle, so it's got to go through a lot of reliability testing. And they've got to figure out exactly how it does what on color shift. So but -- we like the innovation that's why we came up with it, right. So it's marching ahead, people are excited about it. There are some bigger change than you think, but it does -- I agree with you it creates a lot of value when you have more sunlight readability, I think it's terrific.

Unidentified Analyst

How do you knew either newly released or soon-to-be-released offerings, whether it'd be Willow Glass or that's anti-reflective Gorilla Glass, which of them do you think will offer the company as sustainable competitive advantage and thus enhances revenues or pricing because you'll effectively be a monopoly for a while.

Wendell Weeks

Well, Jim. It depends, different of our executives will have different opinions on which one, so why not let Jim start.

James Flaws

Well, I think the anti-reflective and anti-microbial will -- I believe that they will be well-liked by consumers and it will be sustainable. I just came off of a nice vacation and it's really hard to take a picture in sunlight without that anti-reflective. And I personally think that people will once anti-microbial is introduced, then people will get a sense of really how dirty their touch devices are, that will be a sustaining one too. So those are my personal two that I think give us that it will be a sustaining market and we'll have a competitive advantage.

Wendell Weeks

And I don't disagree with those. I'd add one that wasn't on your list. That actually we've just introduced. That I am really excited about in a different segment, and that's our ONE Wireless product that I just touched on. You have to think about is that in buildings like this or in any sort of large venue, how do you get your wireless signals and how many you want is really an important problem to solve. To do that, you build things called distributed antenna systems, right, and we're in that business.

So product that we introduced is an all-optical RF system that offers the opportunity of the unlimited bandwidth for fiber optics that end up with a lower first installed cost and 30% to 40% lower lifetime cost, because the way you do one today is when you upgrade to want to add MIMO technology or you want to go from 3G to 4G in the systems, you have to rip out all that infrastructure you put in. It'd be like saying I'm going to have to replace the plumbing in my building every three years.

What we have the ability to do by taking advantage of an all-fiber optics system to be able to capture a very high growing hunk of the wireless market and be able to offer something that has tremendously better value, and also over time to be able to add some proximity sensing to it as well. And we're really excited about that one and I think you'll feel that pretty near-term.

Unidentified Analyst

I was just wondering, you mentioned in there that you're asking some of your vendors to maybe feather back to you -- I think you said feather back utilization.

Wendell Weeks

We would like to see that.

Unidentified Analyst

Like to see that, right. I guess, I was just trying to get a little better definition, what you mean by that, because at the same time you also said that you thought supply and demand would be imbalance for sometime to come.

Wendell Weeks

Yes.

Unidentified Analyst

So I'm just sort of trying to get an idea of how those two work?

Wendell Weeks

So we talk about supply and demand being imbalance, we're talking about of blocks of time like a year et cetera, but our glass is consumed in shorter periods of time than that, right. So what can screw up supply and demand being imbalance on an annual basis, let's say, is people overbuilding and filling the supply chain, right. And then therefore having to overcorrect which can create short periods of time of not being imbalanced, even its macro imbalanced.

So what we would like to see is that to see in quarter four, you know, slight -- and at least in customers, we'd like to see a slight back off in utilization, start relatively early in the quarter, so that we don't see carried into next year any excess supply chain or at least low level. And that would be our desired outcome, because you're in a period of supply and demand being imbalanced, what you'd really like to do is have even the shorter periods of time not get overly mixed up with supply chain volatility and that's what we're saying. Does that make sense?

Unidentified Analyst

It is slightly more than that, I think you guys said, it was 18 weeks, if I remember right in Q2 or something close to that, is it slightly more than that now or is that?

Wendell Weeks

We would expect -- I don't know the exact numbers, but we do really expect the supply chain to shrink as we exit three -- quarter three.

James Flaws

So the number of weeks will be lower at the end of quarter three than the 18, remember that's partially driven by the fact that demand is stronger now. And then the absolute amount of glass in inventory goes down dramatically in quarter four, simply because the seasonal nature and the weeks will come down again slightly in quarter four.

Unidentified Analyst

So the return on invested capital looks pretty lower whichever way I look at it, what's the reason for that, especially in light of low percentage?

James Flaws

So we do have a fairer chunk of cash on our balance sheet that isn't earning very much, so that's a part of the return on invested capital. And we've invested quite a bit in 2009, '10 and '11 in building capacity that's relative -- that is for the glass business. And that is now -- we don't have to do that, so that will depreciate down and we're utilizing that capacity. And then third, we've just done a large acquisition in life sciences that we haven't got the full earning power of it yet. So those are the things that I think that has influenced this, but we -- in our own plans, our return on invested capital climbs over the next few years.

Wendell Weeks

The other one that you've always -- for us that people don't always track because it's in our asset base, you think it's going to depreciate, if doesn't, we use platinum to make our glasses, so you've got a pretty sizeable amount of platinum, which does not get destroyed, you can recapture it all, right, but it also doesn't depreciate. I guess it's good.

Unidentified Analyst

Corning a few quarters ago, articulated a pretty public change in how you got our pricing. And I know that you've been sort of observing the early results from that. Just curious kind of how that that change has influenced the rest of the industry? And to what degree you think that you're setting kind of a new pattern for how pricing in the industry works and how much the industry is kind of coming along with you? And to what degree kind of changes the sort of price deflation you're going to see over the next few years, relative to what we've seen historically?

Wendell Weeks

We made those series of changes, I think October of last year. So we've got a good amount of time under our belt. And I would say, so far, so good. I mean we feel pretty good about the changes that we've made. Everything is not perfect, we can always do better, but we feel pretty good about where we're at. What we can control is very much what we do and what levers we pull and we'll be engaged in a deep evaluation here over these coming -- over this coming month.

And is there anything we'd want to change about this, do we like it the way it is or not, but so far, I would say, so good. And then we'll have to -- we'll be able to continue to view the results going forward. It's hard to point to any one thing, that said, okay, just that change in the way in which we approached our customers that led to the relatively stable time period we've had here in glass pricing. So it's a more complicated formula in that, but we certainly think it helped.

James, would you add anything?

James Flaws

No, I think it's good.

Unidentified Analyst

We have time for couple more questions, if I can add in one about margins. You've talked about revenue growth in new application. Can you help us look forward and kind of see where margins are trending? You reiterated the gross margin guidance today for the third quarter, longer term how should we look at some of the margins guidance today for the third quarter, longer term how should we look at some of the margin especially in the Specialty segment as well.

James Flaws

So I think that I will take them segment-by-segment. In display, if we choose to -- continue to achieve the more moderate price declines, we think we hold margins in display. Environmental, we think margins will grow, particularly as the -- hopefully the diesel -- heavy duty diesel business grows and the auto business margins are quite strong right now getting back to where we had been almost a decade ago. So we like the margin improvements there.

Our margins in life sciences will improve as we get the benefit of the integration over in -- with the acquisition we did. And then specialty materials, which was largely dominated by Gorilla now, is that as we are improving the cost, our performance of Gorilla dramatically. Thin is helping there now. We are driving Gorilla thinner, so we should see margin improvements over time in that.

So what I like about it is all five segments had the potential or four of the five have the potential for margin improvement. And display, we get pricing right holds. For the corporation, it will depend on the mix of the sales, but you can't have a bad outcome if you're -- if you are holding in one and growing in the other four.

Unidentified Analyst

What are some of your competitors doing on the specialty on the Gorilla Glass type opportunities there? How are they positioned relative to your offerings?

Wendell Weeks

So we've been at this a while now, as I said this is about 2007, our competitors have been actively seeking down to through that time period. And we continue to have a really enviable market position that we'd be do our best to continue to innovate and keep.

Unidentified Analyst

And as it still -- I mean, I've heard something about north of 50%, 60% in some of the consumer electronics, so we're still at that level as far as cover glass?

Wendell Weeks

We don't comment on market share, at least I don't to use it.

James Flaws

Our market share remains very, very strong in core consumer electronics. I think that the challenge is we really have new entrant in notebooks, and that is soda-lime glass and that's why we developed the NBT product that Wendell talked about. But in terms of a highly-engineered specialty glass and we're feeling that to be a competitive issue.

Unidentified Analyst

Time for one quick one. If I may on the telecom equipment, I know we spoke briefly about it. But sort of help us understand how we're trending in that segment, you spoke about the ONE Wireless solution today and how should we look -- there has been some puts and takes in that segment. Growth was a little bit more muted last year, it's looking better this year. Sort of what are some of the puts and takes and how should we think about a longer term CAGR for that particular business?

Wendell Weeks

So what we try to do in this business is we try to grow about twice as fast at the overall segment growth for telecom equipment. And we are to be able to do that because we're on the right side of the various technology curves. And that's what you pay us for, we're better at it, right. So that's the way we think about it in long-term. And then you'll have your own point of view of what that sort of heartbeat is on the segment overall, but we'll be about twice the industry rate.

Unidentified Analyst

Okay, right. Thank you, Wendell.

Wendell Weeks

Thanks.

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