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Executives

Brad Feller – Interim Chief Financial Officer

Sukhi Nagesh – Investor Relations

Analysts

Ross Sandler – Deutsche Bank

Marvell Technology Group, Ltd. (MRVL) Deutsche Bank dbAccess Technology Conference September 11, 2013 6:20 PM ET

Ross Sandler – Deutsche Bank

Alright, everyone, let’s start off with the next presentation or just a listen since it’s the fireside chat format. We have Marvell Technology, both Brad Feller who’s the Interim CFO as well as Sukhi Nagesh on the IR side of things.

So guys, the way that I’ve been starting off with most of the companies is just talking about kind of the macro environment to start. The last couple of years have been tough in a broad-based sense in the back half of the year. Talk a little bit about what you’re seeing this year and whether it’s from a kind of cyclical framework year-over-year or even a seasonal framework – how it compares to what we’ve unfortunately gone through in the back half of the last couple years.

Brad Feller

Yeah, so for us I think it’s a little better than it’s been in the past, and part of that is just the product cycles for us. So whether it be the mobile side of things where we’re really seeing good traction with our unified platform, so you’re seeing more and more devices launched with our dual-core architecture, you’ll see more and more devices with our quad-core architecture in the back half of the year. We have the gaming platforms that will launch likely in time for Christmas that will have some nice uptick for us. So it should be better and we have better visibility in the second half than we had maybe a couple years back.

Ross Sandler – Deutsche Bank

And have you seen anything as far as, and I know it’s different for your three very different parts of your business, but anything on a lead time perspective or a supply side inventory perspective that has you either excited or worried?

Brad Feller

No, not really.

Sukhi Nagesh

One area where I think it’s been a very positive surprise for us, Ross, is the Chromecast. That was recently introduced and the demand’s been so overwhelmingly positive, it’s been a definite positive for us.

Ross Sandler – Deutsche Bank

And just remind people, the way you play into the Chromecast.

Sukhi Nagesh

Yeah, we provide the actual processor inside, we provide the connectivity and two power management chips with pretty good content to drive the entire device. And so even until I think a few months ago, from everything we know it’s still pretty hard to get a hold of – pretty strong demand.

Brad Feller

Yeah, it’s still sold out. You can find it on eBay but it’s at a significant premium. So the demand has been very strong. It’s a very compelling device.

Ross Sandler – Deutsche Bank

Great. And you guys probably aren’t going to answer exactly, but if you talk about the dollar components you have in there?

Sukhi Nagesh

No, we don’t [disclose] that. [laughter]

Ross Sandler – Deutsche Bank

Why don’t we start on the storage side of your business first since it’s the biggest. Even though wireless I’m sure gets most of the questions we’ll hold off that fun for a little bit. From the highest of levels talk about how you guys are playing into the storage market given what’s happening in the PC market with the softening, and then some of your hard drive customers in general deciding that controlling supply is a very valid way to create shareholder value on their side but potentially hurt the unit side for you.

Brad Feller

Yeah. So at a very high level we believe the storage need in the world is going to increase, and where that is… We’re really agnostic to it, so we have a very strong presence on the HDD side of things. We started investing in SSDs very early on so we have a very mature SSD product today. So as that market continues to grow that will be a great thing for us. And then the thing which we think is in the future probably next year and the year after is more the hybrid side of things, and in each one of those individual areas we’ve seen great traction.

So if you take HDD in and of itself, a couple things helping – one, we have share gains at some significant customers that will continue to come to us over the course of this year. To touch on your point, Ross, about the PC market, you’ve heard from our customers that more and more their drives are going into non-PC applications. So for example, you see the new game consoles actually have drives – that’s helping offset some of the weakness from a PC perspective. So on the HDD side of things it’s hard to say what that TAM will do but whatever it does we’ll do better.

From an SSD perspective we continue to be very focused on the client side of that and partnering directly with [the NAND] OEMs who have access to [the NAND] and that has proven to be very successful. If you listen to what our customers are saying that business should grow very nicely this year as well. And then as I mentioned, hybrid is kind of the future and we believe we’re strongly positioned there as well.

Ross Sandler – Deutsche Bank

To the extent we focus just on the HDD side of things, and we can get into some of the share gain side in a bit, but if you just look at the TAM your guess is kind of as good as ours. But are you getting the sense that computing is finally starting to bottom, some of the secular threats from low-cost tablets, etc., etc. have come in? Or are you not ready to make that call yet?

Brad Feller

I would say I’m not ready to make that call. I mean there seems to be signs there but there’s signs either way, and so I’m not willing to necessarily declare victory there yet.

Ross Sandler – Deutsche Bank

And you mentioned about the share gain side of things. Talk a little bit about the form factors that those are occurring within – the enterprise, desktop, notebook, etc. – and how far along do you think we are in that process?

Brad Feller

Sure. So there’s the mobile side which is notebooks – that is in the later stages. So that started last year. There’s still some amount to go there. The other piece is on the enterprise side of things and that is something that has just started to ramp in our Q2, and those gains will continue over the course of this year and probably into next year as well.

Ross Sandler – Deutsche Bank

Your primary competitor in this space I think for quite some time has talked about potential share gains at one of the customers that’s sole-sourced to you right now. How do you envision the share loss potential?

Brad Feller

Yeah, so we’ve obviously heard the same things from many investors, we just haven’t seen it. We are very tightly aligned with that customer as well as all of our customers, and so we feel as long as we continue to execute, which we have, there’s not a big concern there.

Ross Sandler – Deutsche Bank

And if we talk, the last thing on the share side of the equation – historically a few years back Seagate had two suppliers, neither of which was Marvell. STMicro kind of went on its way and they’re reallocating between yourselves and LSI. Has that reallocation process reached the equilibrium in your opinion or are some of the notebook and the enterprise gains that you’re talking about getting you more than your fair share?

Brad Feller

Yeah, it’s the latter of what you said. So it’s getting us more than the share we’ve had historically. There’s still a piece to go on the desktop side that is still with our competitor but the other two pieces are, once those gains come across we will have more than the share that they have overall.

Ross Sandler – Deutsche Bank

And remind us on the notebook side of things, the density of the platters has been something that has given you an advantage as well as some of the form factors. Talk a little bit about how that’s played out. And you mentioned that notebook you’re in a bit of the late innings – is that part and parcel with that technology?

Brad Feller

Yeah, so one of the things that was a key enabler for them to grant us that design when they did a couple years ago was the 500 GB per platter technology. So they’re seeing that as really the sweet spot for notebooks. And so they looked at our solution and the capabilities it had and switched that solution to us. We think that’ll continue to be the sweet spot for some period of time and that’s what we’re hearing from our customers.

Ross Sandler – Deutsche Bank

The last question on that: how much longer do you think the enterprise share gain process takes? I know you said it just started in Q2 – is it two quarters, two years?

Brad Feller

It’s hard to say, Ross, because it’s probably another four quarters or so I’d guess. It tends to go a little bit slower than say the mobile piece did and I would guess you’re going to continue to see some of it next year.

Ross Sandler – Deutsche Bank

On the competitive front and then we’ll move beyond the HDD side of things, once you reach that equilibrium or you’re more than your fair share at Seagate, do you expect there to be any pricing dynamics in the competition between you and LSI on that front? Or with just two guys in the game you don’t really have to worry about that too much?

Sukhi Nagesh

Pricing’s always competitive in this market. We don’t see that changing anytime soon.

Ross Sandler – Deutsche Bank

Worsening or just pretty much consistent?

Sukhi Nagesh

It’s been stable within a certain band but it’s always going to be competitive.

Ross Sandler – Deutsche Bank

Let me switch gears over onto the SSD side of things. I know in general you guys have, it depends on the quarter but roughly 50% of your business is what you call storage. Any way to ballpark the size of the SSD business within the entire company or as a percentage of your storage?

Sukhi Nagesh

So what we said, Ross, is last year, at the end of last year we had about 50% of the merchant silicon market – last year I think the existing market was about 35 million units or so. Roughly one-third of that market was captive; the remaining two-thirds merchant, and we had about 50% of that on a unit basis. So this year we expect to see our share increase exiting this year in SSD in the merchant market and if you did the math, if you talked to some of our customers on the SSD side they’re expecting growth in the range of 50% to 60% year-over-year and we’re going to gain share, so…

Ross Sandler – Deutsche Bank

That’s what I was going to ask.

Sukhi Nagesh

So we expect our [float] to be stronger than the market this year.

Ross Sandler – Deutsche Bank

If you think about that two-thirds/one-third merchant versus captive, do you believe that percentage stays the same or does it move more into your favor?

Sukhi Nagesh

At least in the near term we don’t see any movement. It’s hard to say how that’ll shake out two years from now let’s say, but at least in the near term and heading into 2014 we don’t see any difference.

Brad Feller

Yeah, and I think at some point there’s a potential opportunity for that other piece of the market that’s captive today to become merchant as well, and that’ll be another opportunity for us.

Ross Sandler – Deutsche Bank

So if you have 50% of the two-thirds of that market exiting this year, is there…. Getting it up to the kind of 65% share that you have on the HDD side, is that kind of your goal?

Brad Feller

It should end up in the same kind of space, yeah.

Ross Sandler – Deutsche Bank

Okay.

Sukhi Nagesh

Clearly.

Ross Sandler – Deutsche Bank

And remind people what your advantage tends to be on the SSD side. You guys went about it in an organic fashion; your primary competitor did it via acquisition and both can work just fine. But just talk about what has been the driver on your side, and especially if I remember right in the last year or so whatever you have is actually starting to differentiate itself quite nicely after they seemed to have a much better 2012.

Brad Feller

Yeah, so there’s a couple different things going on there. So there’s, we chose to go partner directly with NAND OEMs, so the Sandisk’s, Micron’s of the world and really worked with them directly and allowed them to write software on top of our chips so that they could really differentiate themselves from their competitors; versus our competitor went with more of a turnkey solution. And so it was very difficult for them to differentiate themselves in terms of an SSD for that OEM to differentiate themselves.

So we saw good traction from that perspective. What we’ve seen recently in some applications is the PCI Express side of things – getting into the client’s side. It was out there on the enterprise side of things; it was a challenge for people to get the power envelope right for the client market. We’ve achieved that and we’re seeing a lot of people really excited about that type of technology. And some of the wins we’ve had in that space and some of the growth we’ve had is with OEMs who are very much adopting that technology.

Ross Sandler – Deutsche Bank

Do you believe that there’s risk for other competitors to enter this market as the SSD market becomes more and more kind of client- or consumer-based?

Brad Feller

Yeah, I mean the barrier of entry is high, right? So much of the patents are very similar to the HDD side of things. I don’t see necessarily another guy getting in. And what we’ve seen is on the enterprise side you’ve seen some customers having their own internal teams and their own [ASIC] teams. What we’re seeing though is on the client side of things, if you think about the cost of an SSD most of that is in the Flash. And so they’re focused on making sure they do the best they can on building those flash cells and going with the best controller that’s out on the market which is us.

Ross Sandler – Deutsche Bank

So your competitor, the good news for them was they had a good time to market advantage because they had the entire kind of reference design. The bad news was it wasn’t customizable in any way.

Brad Feller

Right. So if you take Sandisk, Sandisk has spent multiple years building software on our chip so there’s some good stickiness there as well.

Ross Sandler – Deutsche Bank

Right. So if I think about summarizing on the storage side of the market, it looks like even if you’re flat in the back half of this year from a sequential point of view you’re kind of going to be up 10%, 12% year-over-year in this fiscal year. You have the share gain side of things going in your favor, the market as a whole clearly didn’t for HDDs; and then the SSD side was a big positive. Is there anything else going on that drove that because I think that was a positive surprise for most? I know it was for me.

Brad Feller

I think you touched on the biggest pieces that are there.

Ross Sandler – Deutsche Bank

So do you think going forward it seems like you said the share gain side incrementally still, but the biggest driver is either going to be resurgent PCs or probably more likely the SSD side?

Brad Feller

Yeah, so the SSD side, what’s going to happen with the HDD TAM is hard to say. If that grows that’ll be an increase for us. We think the SSD will continue to grow nicely but then next year you’ll start to see a lot more hybrids. So there’s some hybrid technologies on the market today which are really largely dual drives. We will have a single chip controller that can control both the SSD and the HDD. That’ll get the cost and performance points to where it becomes very compelling for hybrids to take off. You’ll start to see more standard architectures around hybrid drives and we think that’ll be a good growth driver for us as well.

Ross Sandler – Deutsche Bank

How does the content story play out when you have hybrids like that? Is it one plus one is two for you?

Sukhi Nagesh

It wouldn’t go up that high, Ross, but I think we’ve said our ASP could increase by 20% on the hard drive.

Brad Feller

An HDD today is going to be a significantly higher ASP. Obviously as that market grows that will come down. Hybrid is going to be in the middle.

Ross Sandler – Deutsche Bank

Are you talking about for the controller?

Brad Feller

For the controller, yeah.

Ross Sandler – Deutsche Bank

Gotcha. And I would assume the competition there is probably even further behind.

Sukhi Nagesh

Well, we have very strong engagements with all three of the drive guys. And I think if you look at where we are on a single-chip solution compared to what our competitor is providing right now – two-chip solutions – we’re way ahead. They’re more engaged with us on the single-chip platform than they are with our competitor.

Ross Sandler – Deutsche Bank

And when you’ve mentioned that the pricing for the controller on the SSD side is a significant premium to the HDD side of things, do you expect to feel the pricing pressure on that side? Or is it the fact that the NAND pricing is actually so high it moves the needle significantly more than anything the controller would do?

Brad Feller

Partially it’s a volume play. So when markets are small and it’s a newer market you tend to come in at higher ASPs. But as that market grows the pricing just naturally comes down a bit.

Ross Sandler – Deutsche Bank

So either way the netting of that should be a positive – either you grow faster, lower price; or high price and less growth.

Brad Feller

Absolutely.

Sukhi Nagesh

We do expect pricing to come down as the volume goes up and we’re prepared for that.

Ross Sandler – Deutsche Bank

And the final question on that front: how should we think about the goodness as far as from maybe the year-over-year growth rates I was talking about – the gaming refresh and what that could mean for you?

Brad Feller

Yeah, so as we mentioned earlier the new consoles that we participate in have drives. So what we’re seeing is that helping to offset some of the softness on the PC side of things. So whether it’s those gaming systems or set top boxes – that’s helping our customers differentiate away from the PC side of things which has really had more of a stabilizing effect. It’s hard to say how successful the gaming devices are going to be in terms of sell through. If that is very strong and very compelling that will be a nice uplift for us.

Ross Sandler – Deutsche Bank

So why don’t we wrap up the storage side there and move over to the mobile and wireless side of things, and we’ve officially made it twenty minutes without talking about it so that’s probably a record for your day today.

Brad Feller

Congratulations.

Ross Sandler – Deutsche Bank

There you go. [laughs] I thought talking about the side of your business that actually makes more money and is the majority would be a decent place to start. [laughter] So talk a little bit about the last two quarters. The last couple years have been tough in your wireless business. You set some pretty high aspirational goals for this year and in the last two quarters, your quarter and your guide, about 30% growth sequentially in both of them. Talk a little bit about what’s driving that on the top line.

Brad Feller

Sure. So the biggest change we made over a year ago was coming out with our unified platform. So this took two separate architectures we had historically, combined them into one architecture, and having the entire platform being our content. So whether it’s the modem, the apps processor, connectivity, power management, GPS – all those things are now all ours in one platform. So what we’re seeing is customers investing in that platform and designing their roadmap based on our platform.

So these customers have brought to market dual-core devices, they’re bringing to market quad-core devices and they have LTE and LTE Advanced on their roadmap. So we’re really seeing that help our customers – it’s also helping us from an execution perspective. Obviously being able to focus on one platform allows us to execute much faster and meet the demands of our customers so that’s been a significant game changer for us on the mobile side.

On the wireless side of things a couple things have happened. So one, we’ve come out with our 11ac device. In addition we were historically in the wireless side of things printers and gaming systems. Now we’re 100% attach rate with all our mobile devices, we have products for tablets and ultrabooks and that type of stuff as well as at the high end with our 4x4 application for access points and whatnot. What we can do on the connectivity side of things has branched out significantly and that’s driven a fair amount of the growth there.

Ross Sandler – Deutsche Bank

When you talk about the cellular side, there’s a lot of companies – and this would be more of a top-down question, a wide number of companies have aspired to enter especially the cellular side of the equation, Base Fan etc. And it’s been requiring a lot of investment and very few have succeeded. Talk about what your aspirations are for how you expect to win longer-term and what the definition would be of winning – some market share goal or revenue level. How do you tend to set those targets?

Brad Feller

Yeah, so I think you mentioned our aspirational goal – 10% of WCDMA that we set out this year. We knew that was a stretch, very aggressive goal. We put that out for a reason, because we wanted both internally and our customers to know we’re in this game for real, this is a very important market for us. Will we get there this year? Time will tell but we think absolutely we’re on that growth trajectory, and then even more as LTE comes onboard because today there’s one person with an LTE solution in the market. We think our timeline will put us on a great track to grow in that space as well and it’s been a good thing for us.

Ross Sandler – Deutsche Bank

I think you’ve said in the past that on the LTE side you’re qualified in China already and you’re in the process of getting the US verification?

Brad Feller

So we’re qualified for data in the US and by the end of the year we’ll have voice as well.

Ross Sandler – Deutsche Bank

So what’s the time table from once you’re qualified for voice let’s say in the US to when you likely get into phones and when the phone actually ramps?

Brad Feller

So a lot of, and this is a good thing for us – a lot of the phones, the designs are already there, the phones are built. And once that certification happens we can start shipping very shortly thereafter.

Ross Sandler – Deutsche Bank

The same thing in China – it’s not really…

Brad Feller

Yeah, China’s an interesting dynamic right now because the licenses haven’t technically been issued yet. So people even more so there are running in parallel, and even more so when the government finally issues those licenses you’re going to see phones out on the market very quickly.

Ross Sandler – Deutsche Bank

By this time next year would you expect to have more traction in the WCDMA side or have the LTE side be a bigger part of the growth in 2014?

Sukhi Nagesh

Well LTE will be a bigger part of our mix exiting next year.

Ross Sandler – Deutsche Bank

Is that a bigger part of your mix today or overall?

Sukhi Nagesh

Overall. If we look at next year, our expectations are exiting next year we should have a significant portion of our volume in handsets will be LTE.

Brad Feller

And so it’s somewhere maybe Q3 next year, Ross, is the kind of crossover point. So for the full year it’s kind of a 50/50 situation. Obviously earlier in the year it’ll be more 3G and then switching more kind of the Q3-ish timeframe.

Ross Sandler – Deutsche Bank

So assuming all of the quals come through fine and you start the LTE ramp sometime in the first half of the year with the crossover in the back half of the year, what’s the features that you guys are trying to intersect with – the features of carrier integration…

Sukhi Nagesh

If you look at what’s out there in the market, the volume devices in LTE right now are Cat3. Cat3, that’s the biggest player in the market supplying. Our device is LTE Advanced which is a Cat4 Release 9 modem, 150 MHz per second throughput. Now, it doesn’t have carrier (inaudible) yet in this version but it will soon which is 300 Mbps. So we’re on track for that as well. So I think when you take a look at intercept we’re actually going to have a quad-core 5-mode LTE device in the market the early part of next year for some of our customers which will be on par with the market leader. And so we know what some of our competitors are shipping today. We know what the largest player in the market is shipping today – a Cat3 modem. And they’re going to be moving to Cat4 as well based on their roadmap that we know of. I think we’ll be very close to what they have.

Ross Sandler – Deutsche Bank

For investors, at least for me and I’m not sure I should talk for all investors, but for a lot of them that I speak with we hear the same thing from a number of companies – everybody not named Qualcomm more or less has a similar story as far as the timing they’re going to come into LTE. Some have different intercepts timing-wise. What can you point to to give investors confidence that Marvell could be that number two player to qualify – who knows, somewhere down the road be the number one player – that’s different from the promises that we’ve heard from any number of companies?

Brad Feller

I think the one thing to think about is our LTE modem has been out there for two years, so it’s not as though we’re just getting our modem done, we’re starting to test, we’re starting to get in front of customers, right? It’s been two years, this is like the third generation of our LTE modem. So customers are familiar with it; customers have had it in their lab. They’ve had time to do all the testing on it and once we get the certifications we’re ready to go.

Ross Sandler – Deutsche Bank

And is it different that they have the data side of the equation but they haven’t really used the voice side of it, or through that testing process even though it’s not qual’d for the voice they’re running all the tests anyway.

Brad Feller

Right, correct.

Ross Sandler – Deutsche Bank

And then I guess kind of a conceptual question that’ll be a bridge over to the always-popular margin side of the equation, if the biggest guy in the market that’s dominating right now still can’t get a multiple on their own stock – even if you win as far as the business in this market how do you consider the shareholder value side that it may or may not create?

Brad Feller

Well, I mean one of several advantages to Marvell is we have a diversified portfolio. So we have a very strong storage business that we talked about. We have a very strong networking business and we have what we believe will be a strong mobile and wireless business. So we believe we can be successful and that there is accretion to the operating margin even in that business but we have a broad portfolio.

Ross Sandler – Deutsche Bank

So talk about that, the difference between the gross and the operating margin side of things. I think last quarter when you reported the good news was on the revenue line clearly and it was even pretty much in line with expectations in the quarter and even better in the guide if I remember my numbers right. The challenge became that the gross margin commentary was, kind of had [two handle] on the incremental gross margin. Is that something that is permanent? First, is that math generally right? Second, is an idea that you’re willing to sacrifice gross margin as long as the operating margin goes up? And then I guess the third part of that is are there things, LTE, etc., that will help the gross margin itself?

Brad Feller

Yeah, so being a fabless semiconductor company, when people talk about incremental gross margin it’s not like a company that has manufacturing. So the math is not necessarily right around that. So we’ve talked about for several quarters now as we get success in mobile and wireless it’ll put some downward pressure on our margins but still keep us in the 50% to 55% range. We still feel strongly about that. There are some things that will improve that. So some of it is when you have a new device on the market, say a quad-core – the yields and some of the test times and some of the things there are not optimal yet. As that gets more mature and more volumes that’ll get better. But the other uptick we see is when LTE comes onboard we expect to see a nice ASP uplift there as well and we believe that’ll significantly help the margins.

Ross Sandler – Deutsche Bank

Does the complexity of LTE mean that the initial ramp time faces the same inefficient testing and early gross margin pressure issues? I know you’ll have some ASP offset for sure and quite potentially a lot, but in a market that seems to be turning over so fast can you ever get out of kind of the early launch mode where you have those pressures?

Brad Feller

Yeah, and part of it is because that modem has been out there for so long and obviously it’s a full platform, right? The rest of the platform has been there as well. It’s not a brand new device, that type of deal, versus our dual-core and our quad-core was more a new product for us. This is more the follow-on in the line. You shouldn’t have as much of that and we do expect to see significant uplift from an ASP perspective.

Ross Sandler – Deutsche Bank

So if I’m correct in what I’m hearing is on the WCDMA side if we just take that in its own in a vacuum, the gross margin within that over the next year should improve as the efficiencies gain, etc., etc. Even though I would assume also the ASP side might be under even more pressure with the LTE having the ASP going the other side?

Sukhi Nagesh

Well some of this is scale, right? There’s ways to take costs out of the business when you start to see scale, unit scale, volume scale – so packaging for example. So stuff like that is what we’re working on. And so obviously you have a chicken and an egg problem – once you start to see more units come through we’ll be able to improve the gross margin.

Ross Sandler – Deutsche Bank

I want to take a shot and see if there are any questions from the audience. If there are please just raise your hand and wait for the microphone because I think this is webcast.

Question-and-Answer Session

Analyst

Hi, thanks. I wanted to get a sense of your view in terms of your margin profile and the pricing pressure on the HDD side of the business. Yesterday Seagate talked about the way that they’re working with their partners and it’s a partnership, and you know it’s suggesting that maybe they’re not putting pressure on their suppliers.

Sukhi Nagesh

Oh believe us, there’s pressure.

Brad Feller

There’s always pressure but it’s something we manage, and obviously customers come to us often with price reduction requests. Now, obviously the margin profile of some of our customers has improved significantly over the last couple years so it is something that it’s a balancing act between the companies. And we tend to keep that very tight relationship and manage the things appropriately.

Analyst

But it hasn’t helped you increase margins that the customers have gotten?

Brad Feller

No, and that’s where we don’t go after and raise prices when things are good for them. It’s a balancing act but we tend to partner directly with them such that we manage the two things together.

Sukhi Nagesh

One other thing is that we are constantly working on increasing feature sets for them to improve their performance to help offset some of their required price declines. So that helps a little bit as well.

Ross Sandler – Deutsche Bank

Any other questions from the audience? There’s a microphone coming your way.

Analyst

You talked about the enterprise SSD growth for the industry and that you’ll outgrow it, and you mentioned Sandisk and Micron and they both sound very positive about that business going forward. But how about the hard drive guys? It seemed like Western Dig ticked off some assets with Verdant and those guys are clearly going to look at that market as also a great growth opportunity. How are you positioned with them? The second question is on the next-gen game consoles coming out, Xbox, PS4, what’s that dollar content and what’s the margin profile? Thank you.

Sukhi Nagesh

So we don’t provide dollar ASP or margin by product so we’ll skip that, but in terms of your question on enterprise for drive guys – we did see the acquisitions that WD made earlier this week and you know, clearly we’re working with all of our customers both on the SSD side as well as the hard disk drive side to enable them to be successful in the enterprise space. On the SSD front we’re a little bit more selective in where we engage.

Brad Feller

Yeah, so if you look at the volumes in the SSD market they are largely on the client side of things. And so that’s where we’ve focused our efforts, because us as a business we always focus on the biggest part of the market – we want to make sure we’re driving volumes. And today the volumes are on the client side of things; we expect that to continue. But as Sukhi pointed out we have good relationships with those customers and in select engagements we’ll engage with them on enterprise as well.

Analyst

…the ASP and margin profile of the console business, the parts that you have in there, whether it’s connectivity or…

Sukhi Nagesh

Yeah, on the console side our content is increased now. In the past we just had our connectivity solutions in the console businesses; now it’s connectivity plus hard drive.

Analyst

And both of those [are in the boxes] right?

Sukhi Nagesh

[Both in the box, yes sir.]

Analyst

Alright, thank you.

Ross Sandler – Deutsche Bank

Any other questions from the audience?

Analyst

What’s your thoughts on Broadcom buying [Nosis], the asset there to get into the LTE market?

Brad Feller

We don’t necessarily comment on that. We like our solution, we like our timetable, we like our chances in that space.

Ross Sandler – Deutsche Bank

How about this – do you need any IP blocks that you don’t currently have?

Sukhi Nagesh

We’re not going to make an acquisition if that’s what you’re asking.

Brad Feller

No. So as I mentioned before, Ross, to address the concern – in our previous generation we did have pieces to the platform which were supplied by third parties. We now have the entire platform which is our solution, right? So whether it’s GPS, whether it’s RF – anything in that is now our solution.

Ross Sandler – Deutsche Bank

When you find in the latest generation of the iPhone them going to the [A-7] which is multiple cores of course, and even 64-bit they talk about – what’s your belief on kind of the core wars and moving from 32-bit to 64-bit, etc., etc.?

Sukhi Nagesh

Yeah we noticed that. It’s probably a little bit hard to discern exactly what advantage the 64-bit ARM CPU is getting.

Ross Sandler – Deutsche Bank

It can say “64.” It’s more than 32.

Sukhi Nagesh

…quad-core or eight cores, right? I mean how much more advantage are you really getting from a user’s perspective? It’s a little too early for us to comment. I do think from a marketing perspective at least you will see other players start to talk about a 64-bit as well, it’s just the nature of the business.

Brad Feller

But I do think, Ross, it’s similar to the core wars. If you talk to someone that’s technical enough they’ll tell you in a quad-core phone one core is used and maybe 60% to 70% of the second core but it’s marketing – I have a quad-core phone. So it’s hard to say whether that’s a similar situation with the device.

Ross Sandler – Deutsche Bank

At least until you put out an octo-core that you can roast marshmallows over, that tends to blow up on you. [laughter] Any other questions? It looks like we have time for one more question here from the front. Just yell it out and I’ll repeat it.

[inaudible audience question]

Brad Feller

In the part of the market that we play in which is largely the enterprise side of things, switches in [fives], it’s been steady. The piece that a lot of people have seen growth in is more of the infrastructure and telco side of things. Today we have a very small presence there. We do have some design wins there but those take longer to get to market and so we’re not seeing that impact yet and the core business has been steady.

Ross Sandler – Deutsche Bank

Brad, your timing is impeccable. The zero is flashing in front of us so we are out of time. Thank you for the great questions from the audience and thank you to Brad and Sukhi for joining us.

Brad Feller

Thank you, Ross.

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