Cypress Semiconductor Corporation 4Q09 (Qtr End 12/31/09) Earnings Call Transcript

Cypress Semiconductor Corporation (CY) 4Q09 (Qtr End 12/31/09) Earnings Call Transcript January 28, 2009 11:30 AM ET

Executives

T.J. Rodgers - President and Chief Executive Officer
Brad W. Buss - Executive Vice President, Finance and Administration and Chief Financial Officer
Chris Seams - Executive Vice President of Sales and Marketing
Norm Taffe - Executive Vice President, Consumer and Computation Division
Dana Nazarian - Executive Vice President, Memory and Imaging Division
Dinesh Ramanathan - Executive Vice President, Data Communications Division

Analysts

Timothy Luke - Barclays Capital, Inc.
John Pitzer - Credit Suisse (United States)
Chris Danely - JPMorgan Securities, Inc.
Doug Freedman - Broadpoint. AmTech Equity Capital Markets
Srini Pajjuri - Calyon Securities USA, Inc.
Adam Benjamin - Jefferies & Co., Inc.
John Barton - Cowen & Co.
Vijay Rakesh - ThinkEquity LLC
Suji De Silva - Kaufman Brothers LP
Jeffrey Schreiner - Capstone Investments
William Harrison - Signal Hill Capital Group LLC

Operator

Good morning and welcome to Cypress Semiconductor Fourth Quarter Earnings Release Conference Call. Today’s conference is being recoded. (Operator Instructions). I would now like to turn the call over to Mr. T.J. Rodgers, President and CEO of Cypress Semiconductor. Sir, you may begin.

T.J. Rodgers

Good morning. We are going to report fourth quarter and year-end 2009 results, financial and other business results. We will start with Brad Buss, our CFO on the numbers.

Brad W. Buss

Thanks T.J. Good morning everyone. I just want to thank you for spending, and boy, what a difference a year makes. This call is going to be a lot more fun than the last Q4 was. Just the usual kind of preamble at the beginning. Everything we are talking about is based on our unaudited prelim results. You will see our 10-K come out the first week of March. As you know, in our press release, we have a lot of GAAP to non-GAAP recons. We’ve put it on our website and by the way we redesigned our website, a lot more information, a lot better flow so we would encourage you to check that out and get a lot of your basic information. And if you have any feedback on it, please let us know.

So as usual, I will go through Q4 in somewhat of a detail between the income statement and the P&L and then I will give you the guidance for Q1. So with respect to Q4, I am obviously very excited to report a very strong quarter. We closed with better revenue, gross margins, net income, EPS and cash flow than we originally expected and we obviously exceeded our prior guidance and beat the Street consensus. A lot of that is due to just the internal leverage that we been talking about, it was very strong and I see that continuing well into next year and we will elaborate a little more on that during the call.

So the revenue for Q4 is 194 million, it increased 9% sequentially and 18% on a year-over-year basis. We exceeded the top range of guidance due to strengthen in MID and CCD. So if you look at it by division, which we have a table in the press release, you can see it all. MID increased 18% from Q3 driven by strengthen in our SRAM, a lot of that is due to market share gains that we have been talking about for quite a while and we are also seeing like everybody else an increasing comm business driven by wireless and wireline end customer. DCD was up 2% and was slightly better than we expected as West Bridge was just marginally better than we predicted going into the beginning of the quarter. And more importantly in CCD, we increased 4% sequentially in Q4, and keep in mind, that was after growing 26% sequentially in Q3, and normally CCD has a seasonal decline in Q4 of about 9 to 11%. So that was a very strong showing and I think you can guess what drove that, you know the seasonal declines that we normally experience was offset quite significantly by TrueTouch solutions portfolio, which grew 50% sequentially, and we set a record for revenue dollars as well as unit shift, and that business is growing quite strongly. We expect it to continue to grow into Q1 and it has been meeting and exceeding our own internal expectations and I am sure you will have questions for that for Norm later.

On a GAAP basis, we actually returned to profitability, so an early present for you, Mr. Danely and we posted a net income of 2.9 million or $0.02 per diluted share and that was obviously a big improvement from a loss of $0.13 per basic share in Q3 and $2.88 on a year-over-year basis. The non-GAAP net income was 31.7 million and again that was our highest since the second half of 2004 and we resulted in earnings per diluted share of $0.16. And again that was an increase of 60% from Q3 and exceeded my initial guidance of $0.10 to $0.11 that I gave at the beginning of the quarter.

This resulted in a profit before tax of 16.3%, again the highest level we have had since 2001, and like I mentioned at the beginning, the EPS strength was really primarily driven by really operating leverage. We had great revenue, we had stronger gross margins and we continue to be very tight on the OpEx control. Our non-GAAP gross margin was 53.9% and that was up a whole two percentage points from the prior quarter and was above our guidance as our factories and foundry partners continue to execute very well and we also had a favorable product mix. This is the highest non-GAAP gross margin since Q4 of 2000. We have exceeded our near-term prior peak gross margins, yet we still have plenty of room to go. We can still take our utilization up quite a bit further and we expect to have higher revenue base, more business through foundries and a more favorable product mix over time.

Our core semiconductor gross margins which excludes the impacts from Emerging Tech Division were 55.2%. Average utilization for Q4 was 73%, that was down slightly from the 78 in Q3, again due mostly to product mix. I expect the Q1 utilization to be flat to slightly up, probably no more than the high 70s. And again like we talked about, about 38% of our wafers that came from our foundry partners are pretty consistent with the record that we hit in Q3, and our partners are working very well and it’s having a positive impact on our gross margin. Our product margins increased slightly due to cost improvement and stable pricing as we had a record 84% of our revenue being proprietary in nature. And I was very pleased with the ASP results. In Q4 ASPs increased year-over-year by 8% and they increased by 5% sequentially to $1.39.

Our non-GAAP operating expenses actually decreased by 1.1 million sequentially and totaled 74.7 million and again that included $0.5 million for the non-cash accounting charges related to the deferred comp plan and we provided additional disclosure of that in the press release. So just to put it apples to apples with my guidance which does not assume any movement in the deferred comp plan because it’s totally unpredictable, it would have been 74.2 million versus my guidance of 74 to 75. So again very tight cost controls.

Restructuring wise, our headcount continued to decrease. We total about 3,550 people, which is a decrease of 20% since our peak in Q3 ’08, and it’s the lowest level in over a decade. We took a small restructuring charge and that’s about it for Q4 related restructuring. For the fiscal year of 2009, we posted total revenue of $668 million, that was a decrease of approximately 13% from fiscal year 2008. And again, we still got a lot of room to grow back not only into those peak revenues, but I think we will more than exceed the peak revenues that we have prior due to the host of new products and new multi billion dollar markets that we are moving into that we’ll talk about further.

On a GAAP basis, we had a loss for the year of $1.03 and that was down from the loss of a $1.89 in 2008. OIE, we had a gain of 1.7 million due to a $1 million related to the deferred comp which again is non-cash related and then we had a $0.5 million in interest income and remember we have no debt and thus we have no interest expense.

The non-GAAP tax charge in Q4 was only 200,000. It was better than the 900,000 expected due to some equipment tax credits and miscellaneous year-end adjustments that we made and I am sure Obama will be taking most of that away next year but we will deal with that later.

Basic shares came in at 155 million. That was down from my guidance of 157 to 159. Fully diluted shares were 194 million, again down quarter-on-quarter, and we repurchased 3.7 million shares during the quarter at a price of around 9.50.

On the balance sheet, very strong. Our cash investments looked very good. Our cash, cash equivalents and short-term investment totaled 300 million and it increased 53 million from Q3. If you add in our total investments which include 33 million of auction rates that we classify as long term, that's 333 million with a very strong operating cash flow in Q4 of 75.3 million. That increased over 200% from Q3. And again, it has been the highest level in many, many years, obviously due to the strong net income but we also had very tight working capital management. Our friends at SunPower paid a tax receivable of $60 million, and guess what, we got $5.5 million refund from Uncle Sam as well and we obviously had various option exercises and ESPP purchases and then like I mentioned we had paid out the 35 million to buy back the shares.

Inventories have been another shining spot for us. I have been very pleased with what’s going on there. Our net inventory was 91.2 million. It increased slightly from Q3 as we proactively started increasing build at MID due to the strength that we just reported in Q4 and that we see continuing into Q1. The good thing is that we have shipped all that inventory and our actual inventory as we sit right now is below Q3 levels and I expect the inventory only to increase slightly in the quarter as we support the Q1 demand and get our profiles where we want it to be. Our Q4 inventory dollar levels is really again similar theme at the lowest levels in years and more importantly we have increased our on time delivery metrics to all of our major customers. And just so you put inventory in perspective, as I know that’s on everyone’s mind, our 91.2 million in net inventory includes 5.7 million related to capitalized non-cash stock based comp charge which is kind of nutty but it’s there. And also $11.7 million net for the last five builds due to the closure of our Texas fab that we completed in Q4 of ’08.

So if you exclude those things and look at what we do call a normalized operating inventory, that’s only about 73.8 million, and again these are very, very low levels for us, and that’s only to (inaudible) around 80 days. Disti inventory again continued to remain flat quarter-on-quarter. We are not seeing the distis wanting to load up inventory. In general, we see inventory levels still remaining very low at us, our distributors and in the channel, and we are not concerned on any issues related to double ordering or lead times right now.

If you look at AR, our accounts receivable totaled 87 million, it was down 16 million or 16%, and while that was just because of the linearity in the quarter, it was a very, very good quarter right from the beginning, and it wasn’t back-end loaded by any stretch, albeit December was our biggest month due to it being, having an extra week. The DSO decreased by eight days to 44 days and our aging continues to be excellent.

CapEx was 7.5 million, depreciation was 12.4. Our total CapEx for the year was 25.8 million and again that was our lowest CapEx spend since 1987, and hopefully that’s not a cycle. As a reminder, we have no debt; share count 155 million up slightly. I told you we repurchased 3.7 and the diluted share count was 194. When you look at the GAAP numbers now, we have a diluted GAAP number because when you make profits, you got to diluted from basic and it’s 184 million. It differs from the non-GAAP number because you get to treat the unamortized stock-based comp as a further reduction of share count since you are taking for it. If any of you need a prime around that, I will be glad to take you through it.

More importantly, we are managing our dilution very tightly. We actually had a negative 1% burn rate in 2009 as we had more cancellations than grants during the year. Now, to the main event, guidance, which again is on a non-GAAP basis. With a very strong book to bill of 1.13 and again it’s very important since we hardly ever have a positive book to bill to begin with, never mind one of that magnitude. All the divisions are near 1 or greater with MID and DCD being the strongest and CCD is basically on parity which again is a very significant accomplishment since they are normally down significant due to consumer seasonality and obviously it’s the benefit of the strong TrueTouch bookings helping there.

So we had a very strong sequential growth since Q2. We had very good growth in Q4 and I am happy to say that we are actually expecting to remain Q1 flat to up 2% so that’s a 194 to 198 million. Remember Q4 was a 14 week quarter and Q1 returns to a normal 13 week quarter, so if you normalize that, you can kind of get through Q1 growth rate more like 8 to 10% assuming a linear 14 week quarter in Q4. And again to put that in perspective, our historical Q1 sequential growth has normally been down an average of 8 -- of 6%.

We expect growth in MID due to the comp strength and market share gains, a slight decline in CCD which normal Q1 seasonality can be anywhere from 9 to 11% and it’s being offset by continued growth in TrueTouch, and DCD should decrease just slightly. I am expecting gross margins to hold and be around 53.5 to 54% and that’s assuming utilization kind of in the mid to high 70s. OpEx will move up slightly to 78 to 79. All of the one time cuts have now been restored. There is no shutdowns going on. All the pay cuts and bonuses have been back and we get the normal seasonal reset for FICA without the audit fees in Q1 like everyone else, et cetera, et cetera. Net OIE of about $400,000, again I am assuming no major flux in the deferred comp plan, the minority interest benefit of about 300,000 due to our subsidiaries, and our tax rate should go back to 10% as we are solidly back in profits for the balance of the year, and I expect that to hold through the rest of the year.

CapEx of about 16 million as we had some stuff in Q4 that didn’t get received and we are buying a few new testers to support the ramp up of our new products. And depreciation will be around 12.8 million. Share count, basis share count of around 150, or 158 to 162, and fully diluted around 198 plus or minus a million as I expect our average stock price to be higher than it was in Q4. So you boil that together you end up getting non-GAAP EPS of 12, 13% -- $0.12 to $0.13, which is 50 to 63% above the current Q1 Street consensus of $0.08, and it actually exceeded our own internal plan that we just put to bed six weeks to go.

So I will just stop there. I will turn everything over to Chris and once again just I want to thank the company for posting an excellent quarter.

Chris Seams

Thanks Brad. Let me go through a few of the industries and some color on the end markets. In the fourth quarter, splits of revenue by geography where we shift to Asia-Pacific was 55%, North America 22 and Europe was 13%, Japan was 10%, relatively unchanged from the prior quarter. Units were up slightly to 140 million units. Brad talked about pricing, ESP went up from $1.32 in prior quarter to $1.39 are really reflecting an increase in higher shipments of higher value products in a relatively stable pricing environment right now.

The end markets driving our growth in Q4 were the wireless and wireline infrastructure end market as well as the handset and the recovery and industrial market for us. Brad gave you the book-to-bill numbers, I won’t go through them again. Our backlog grew to $230 million, that’s a six month backlog number for us, and we entered the quarter very strongly booked 75% through the guidance number that Brad gave and the booking patterns that we have seen three weeks into this quarter support that guidance as well.

If you look at the industry right now, more in the midst of our market where we get regular reports from our customers of spot shortages, not from us but from competitors and other component suppliers and we hear of lead times in excess of 20 weeks, I would like to say that we are actually very proud of the work that our operations and manufacturing groups have done. Our lead times I think remain above -- remain at the best in the industry with most of our proprietary products being in the four to six week range. So in a market where people are quoting 20 plus weeks, four to six is very competitive and we expect to get continued business and share growth with those competitive lead times.

As Brad talked about, we remain very vigilant, checking both consumption and inventory levels at our top accounts as well as our distribution partners, and right now our checks continue to say we don’t see any signs of double bookings at this point. So the market is very strong right now and we are very well positioned despite that market.

Let me turn the call back to T.J. for more details on the quarter.

T.J. Rodgers

Okay, I highlighted nine points about our financials, I will now talk about products. First of all to repeat what Brad said, we had a revenue increase in the fourth quarter which is pretty rare for us, 8.5% quarter-on-quarter. If you wanted to take one reason for that is TrueTouch. If you look at the absolute numbers, there appears to be a surge in RAMs, but the RAMs in effect ploughed ahead while the new growth is TrueTouch and PSoC really made the difference relative to our internal plan.

We are starting to get some booking out in the Q1 and Q2, first time in a long time where people are not just assuming they go to the stock market, our book-to-bill ended at 1.13 for the quarter. Internally, due to the surge of PSoC revenue at the end of the quarter, we beat our internal plan for growth margin, operating spend, net income and earnings per share, so we were pretty happy with this quarter. Investor were too, and for the year of 2009, Cypress shares went up a 136% as compared to the stocks which went up 70% and the Nasdaq index which went up 45%. Now that was true to period of December 31 ’08 through ’09 January 1, 2010. The same statement about our share price beating the indices that I quoted is also true from 2007 through 2009, 2006 through 2009 all the way back to 2003 through 2009. In other words if somebody bought our stock on December 31, 2002 and held it until January 1, 2010, they would have had more appreciation than the indices the way I stated it earlier. We are proud of that.

We released and started getting revenue from PSoC 3 and we released for sampling PSoC 5 during the quarter. As you remember, PSoC 3 is a high performance 8-bit 8051 machine and PSoC 5 32-bit ARM Cortex. Relative to PSoC 1, which has $1.5 billion TAM, PSoC 1 plus 3 plus 5 raises the addressed TAM to $15 billion, 10X from $1.5 billion. Revenue by division, CCD was 0.7 million or 42% of revenue. MID, Memory and Imaging, 84 million, 43.5%, Datacom $25 million. So the smallest division Datacom reported the highest gross margin at 65.3% followed by CCD with PSoC division at 57.8% and the MID division with 49.7% gross margin which has been very, very good for that business.

The weighted average core semiconductor gross margin was 55.2% non-GAAP and that was diluted down to 53.9% recorded by the lower gross margin of the emerging technology companies in our portfolio.

Now some product division highlights. Back on PSoC 3, I just want to remind you that if I compare PSoC 3 and PSoC 5 to our original product, the PSoC 3 has 7.5 times more computing power than the PSoC 1 family and PSoC 5 is 25.5 times higher in performance. So these products put us in some higher performance market that we simply couldn’t even address with PSoC 1. The story of PSoC 1 is about flexibility and system on chip and not about high performance. It also improved the analog which we are finding is the most important thing we’ve done on PSoC 3 and 5. The analog is 256 times more accurate with 0.04 times smaller resolution and 10 to 30 times faster than PSoC 1. We also put 10 times more programmable logic on PSoC 3 and 5 both..

We was finding out software is more important to us than we had or I had estimated in the past. We brought out a new a software package, called PSoC Creator. This is for the PSoC 3 and 5, and it is being very well received, and we have had 2,000 PSoC 3 and 5 development kits purchased and 3,000 downloads of the PSoC Creator software from our website.

On design wins, our TrueTouch division, which the recent& Q4 was higher than expectation, specifically TrueTouch in cell phones, there were three more phones at Sharp that we won and we’ve also introduced not the revenue, but introduced the touch screen device drivers supporting the Google Android operating system.

Now switching over to tablet computers, we introduced a tablet sized capacitive touch screen technology, so basically it’s something that will handle screens of 7 to 17 inches rather than the smaller screen-type cell phone. If you want to take a look at that functioning, if you go to our press release, there is a website address and you can get a video on there showing its functioning. We are currently working with alpha product with one major OEM with the aim of creating a Windows 7 compatibility and we expect that we will be rolling the thing out to our beta side customers within 60 days.

Next point, we are getting a lot of action on 1.8 volt CapSense, the internal name of the chip is krypton. It’s selling in the millions of units. Our prior PSoCs have been 3.3V, cell phones, 7.8 volts [ph] and we are in the process of introducing an entire new family in this case, the PSoC 1 products, so it doesn’t bring new functionality like PSoC 3 and 5, but it takes PSoC 1 more comfortably into the cell phone battery part as the environment. We have introduced a product called smart SmartSense. It’s an automatic tuning solution for CapSense. CapSense are the touch buttons, capacitive reactivated touch button. Problem with them today is you need to buy a module made by somebody where they take their chip and tune it to a printed circuit board buttons. Or you need that tuning by yourself manually. Since our CapSense followed by PSoC which has a computer in it, it actually can do its own tuning and we now have a product that allows you hook up to the circuit board, dynamically detect all the capacitance of the button you are trying to activate, and setting its own operating parameters such that the PSoC tunes itself. And what we feel this will do is it will allow people to put CapSense more simply into their products and this aggregates the supply chain going to chips or to the (inaudible) by module.

We’ve introduced a Precision Analog Voltmeter Demo Kit. It features a 20-bit Delta Sigma Analog-to-Digital Converter and just for you non tech, 10 bits is 1024, 20 bit is a million, and it means it looks at microvolt or one millionth volt level sigma.

We’ve also introduced another evaluation kit to run LCDs. Our PSoCs couldn’t easily run LCDs, the new PSoCs are big enough and powerful enough to need a central chip, or small systems, and therefore they must run the display and we’ve introduced a chip for that comprised of 768 segments today in a very large way. We also put 30 new example projects for PSoC 3 on the web. There is a website address you can visit, if you want they are downloadable for free, so we are making our way now creating a lot of content for PSoC 3 which is really required before you turn on big revenue.

And finally PowerPSoC which we introduced a couple of years ago, a PSoC that can run at 36V and handle end user current. PowerPSoC won the European Electronic Industry's Elektra Award as the Power Systems Product of the Year. We are proud of that, it (inaudible) puts PSoC in another environment.

Now, let’s cut it off there, so we can have more time for questions. Thank you.

Question-and-Answer Session

Operator

Thank you sir. (Operator Instructions). One moment please. Tim Luke, you may ask your question and please state your company name.

Timothy Luke - Barclays Capital, Inc.

Thanks so much, Barclays Capital. Congratulations on your quarter and indeed the guidance. With respect to the outlook, Brad, I was wondering as you guide for flat to up revenue, could you give us your feel for how – maybe then T.J. can touch on this, how you perceive the year potentially progressing in terms of broad seasonality, if you have stronger than seasonal first quarter, should we then possibly see some moderation? And your guiding for a pretty robust gross margin level, do you feel that level can be potentially sustained as you move through the year? And lastly if I may, in the quarter the angstrom stuff looked particularly strong, how should we think about that going forward in terms of a piece of the mix. Thank you.

Operator

Would you like to go to the next question?

T.J. Rodgers

Hello?

Operator

Would you like to go to the next question, sir? John Pitzer, you may go ahead. Please state your company name.

John Pitzer - Credit Suisse (United States)

Yeah, guys can you hear me? Hello?

T.J. Rodgers

Michelle, you are making a mistake.

Operator

Sir?

T.J. Rodgers

We have a question from Tim Luke and we are in the process of answering it, we do not want to go to the next question.

Operator

Okay, I didn’t hear it. I apologize, sir.

T.J. Rodgers

Thank you. So, Tim, you know, I think our thoughts we sit right now, you know, we don’t look at Q1 being somewhat of an anomaly that's going to impact the future. I think it’s very tough to look too far ahead but with the bookings we have, the book-to-bill, the new product, I would still expect to see somewhat of a seasonality in our business going forward, which normally we grow again in Q3, so I’m pretty positive in where we’re going and a lot of these new products are still going to continue to drive. I think the gross margin is definitely sustainable and potentially could move up slightly as we move out throughout the year, and the revenue base builds and we get a little better utilization, we amortize some of the quasi-fixed costs that are in COGS.

And again, we continue to get a favorable product mix in the stuff that’s growing. We don’t have a lot of low margin stuff really anymore as a company, and our growth drivers are all at or even greater than the gross margins that we’re posting. So I’m pretty comfortable on where margins can go. So yes, you’re most likely going to be tweaking up your model.

I don’t want you guys getting too nutty in the back half of the year, because it’s still – it’s hard to say – we don’t see any signs that would cause us to pause, and I’ll turn the SRAM specific question over to Dana, who runs MID.

Dana Nazarian

On the SRAM side, again, we can’t really see much farther out than the first half of the year. But the first half of the year looks fairly strong. In terms of our -- we’ve been steadily improving our market share for the last five years at a nice, steady rate and we expect that to continue with our broad product portfolio.

T.J. Rodgers

Go ahead, Tim.

Timothy Luke - Barclays Capital, Inc.

If I may, you talked about the strength in touch. Could you just remind us of the number of core handset supplies that you have now been able to penetrate, and what sort of ramp you may be expecting there? And separately, just in terms of the year, we should be expecting USB and West Bridge to be a little lower with the growth being driven by PSoC touch and obviously the MID area as well. Is that correct?

Norm Taffe

Hey, Tim, this is Norm. I can address the PSoC and the touch aspect of that question. From a touch perspective, as we’ve said before, we really are actively being designed into at least eight of the top ten handset suppliers. I think four of them are already driving significant revenue, and I think that number will go up in the coming year. So we do see a very strong component of growth. And as you kind of surmised, PSoC will be one of the largest growth drivers for the company in 2010 and is expected to grow dramatically more than the rest of the company overall while we will grow as a company.

Chris Seams

And I think, Tim, just on the USB – we don’t expect USB to go down year on year. We expect probably more kiddish [ph] kind of growth there. It did very nicely in ’09. And West Bridge, like we said, there’s really no big major update on the West Bridge stuff. I mean we’re at a level that – it’s pretty nice, it’s been pretty big growth, and we’re looking at adding a potential couple of new guys there. But we don’t expect that revenue to go up year on year at this point.

But it’s really more of a stay tuned on that mid year.

Timothy Luke - Barclays Capital, Inc.

Thanks so much. Congratulations on your execution.

Chris Seams

Thank you. We can now go to the next question, please.

Operator

Thank you. John Pitzer, you may go ahead, and please state your company name.

John Pitzer - Credit Suisse (United States)

Yeah, it’s Credit Suisse. Thanks for taking my questions, guys. Brad, you went through the book to bill by division, I appreciate the granularity. I guess – I’m just a little bit curious, when you look at the CCD division, book to bill near one, I would have thought that with the TrueTouch ramp, that that would have been higher. So can you help me understand how we think about TrueTouch book to bill as you start to ramp all these new projects?

Brad W. Buss

So again – let me give a quick comment on that, and then Chris can give you some of the specifics. But normally, the book to bill on CCD is like 0.8 to 0.9, right, and a lot of times it’s been lower.

So the fact that we’re at parity is a big feat, and again, it’s mostly due to TrueTouch. I mean we’re not giving out specific numbers on TrueTouch, but we do expect it to grow decent into Q1, which normally is a down handset market, and we’re adding new customers, so you can take that where it’s at.

And Chris, if you want to give the numbers?

Chris Seams

Well, you gave by division, CCD was right at one, MID was 1.26, DCD was 1.12. At TrueTouch, we don’t calculate down to the end family level. But if you look at – TrueTouch was well above one for book to bill, if you have to calculate one for the first quarter.

John Pitzer - Credit Suisse (United States)

And Brad, should I think about the rest of the CCD division in that normal 0.8 to 0.9 range?

Brad W. Buss

Yeah, definitely, within factor, yes.

John Pitzer - Credit Suisse (United States)

And then just secondly on the MID business, on non peak revenues, you guys are approaching very high gross margins. I know you’ve done a good job with some cost down programs around 65 nanometer. In addition, you’ve seen a lot of supply rationalization just from an industry wide perspective in that market. Any guidance on where gross margins could go? And I guess I’d be interested to see what unit versus ASP did in that division in this quarter.

Brad W. Buss

Yeah, I mean I think on the gross margin, I mean we talked about hitting 55% in kind of the first part of 2011, I think it’s probably safe to say that it has a good chance of happening in the back half of 2010. So I’d probably kind of leave it there.

And – but just again to emphasize, because I know there’s a lot of buzz out there on peak margins and things can’t get better. We’re undergoing structural changes in the company, right. We used to have two fabs when we had wire peak margins [ph], now we have one. And we’re doing a lot more through foundry partners, which are beneficial; and the mix like I emphasized, is going in the right direction.

So I think over time, we could potentially see the 55. But I think it’s too early to give any specific timeframe or guidance on that.

John Pitzer - Credit Suisse (United States)

My last question, just on DCD. You talked about West Bridge driving strength on the book to bill side. But then you mentioned that you expect only market growth there. Just help me reconcile that. It would look like relative to the book to bill in that division, that you’re seeing a ramp of perhaps new phones with more West Bridge.

Brad W. Buss

Well again, DCD has more than West Bridge, don’t forget, right?

John Pitzer - Credit Suisse (United States)

Yup.

Brad W. Buss

So I mean there’s – we got specialty memories and a bunch of comm stuff and that’s driving more the book to bill growth than the West Bridge part of it.

Chris Seams

And then, hey, John, you had a question on MID that Dana…?

Brad W. Buss

Dana can answer for you as well.

Dana Nazarian

Yeah, just, John, quickly on the – you asked about the units and the ASP, so. Basically, the units was proportionately up with our revenue and the ASPs were relatively flat. And in the broader market, stable supply is becoming increasingly more important right now.

John Pitzer - Credit Suisse (United States)

So Dana, on that front, given that this is more of a commodity business relative to other things you do, could you actually start to see positive pricing leverage as we go throughout the year if capacity stays where it is? As far as the tightness [ph]?

Dana Nazarian

Yeah, it is possible. We definitely – as I said, the broader trend right now is stable supply. And it does look like that the demand is exceeding supply right now.

You did mention the word commodity. And a significant portion of our portfolio could be classified as commodity, but the fact of the matter is, our high performance synchronous RAM which is our biggest part of our business, there is only a handful of design teams in the world that can make these sophisticated chips. (TRANSCRIPT ENDS ABRUPTLY)