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Executives

Steve Buhaly – CFO

Ralph Quinsey – President and CEO

Analysts

Tim Luke – Barclays Capital

Edward Snyder – Charter Equity Research

Steve Ferranti – Stephens Incorporated

Aalok Shah – D.A. Davidson

Sanjay Devgan – Morgan Stanley

Anthony Stoss – Craig-Hallum

Nathan Johnson – Pacific Crest Securities

David Duley – Steelhead Securities

Richard Shannon – Northland Securities

Bill Dezellem – Tieton Capital Management

Richard Davenport – Connexiti

TriQuint Semiconductor, Inc. (TQNT) Q4 2009 Earnings Call February 24, 2010 5:00 PM ET

Operator

Good afternoon. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the TriQuint fourth quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to Mr. Steve Buhaly. Sir, you may begin your conference.

Steve Buhaly

Thank you. Good afternoon and welcome to our fourth quarter 2009 conference call. This call will include forward-looking statements about TriQuint's projected results. Results could differ materially based on various factors, including those described in our reports on Forms 10-K and 10-Q and other filings with the Securities and Exchange Commission.

This presentation also includes non-GAAP financial measures, which exclude equity compensation charges, a charge for the settlement of the lawsuit, the charge for the impairment of goodwill, and charges associated with acquisitions. These non-GAAP measures are provided to enhance understanding of our core operating performance. A full reconciliation of these non-GAAP measures is in our press release.

Ralph will now provide an overview of the quarter.

Ralph Quinsey

Thanks Steve. This was another record revenue year for TriQuint at $654 million. In a troubled economy that held back our Networks business, we achieved 14% annual revenue growth for the company, led by Mobile Devices at 38%, and Defense & Aerospace at 29%. TriQuint generated non-GAAP operating income in the last six months of 2009 comparable to the total year of 2008. We increased cash, cash equivalents and investments by $52 million ending the year with approximately $154 million and no debt. Steve will provide more details of our financial performance during his comments.

The company made solid progress during 2009 in each of our three major markets, Mobile Devices, Networks, and Defense & Aerospace. With our broad technology portfolio, we provide our customers higher integration, better performance and smaller sized solutions. As the mobile devices were all transitions from voice to data, TriQuint helps customers reduce time to market and miniaturize RF work space – minimize RF work space.

In the Networks market, TriQuint is recognized as a performance leader, sought out by customers around the world as they increase consumer bandwidth and provide more efficient and greener optical cable and radio access networks. Lastly, revenue for our products and support, surveillance and communications in the Defense & Aerospace arena achieved another record year. In Q4, our GaAs factory utilization was 74% and new product revenue defined as revenue from products introduced within the previous two years climbed to 64% of total revenues.

Looking more closely of Mobile Devices, the largest of our three major markets, revenue in Q4 increased 55% over Q4 2008 and 15% sequentially. Mobile Devices revenue for the full year was 38% greater than 2008. Wide band CDMA or 3G revenue was up 80% full-year 2009 over 2008. CDMA was up 13% and GSM Edge was down approximately 10%. WiLAN with a high attach rate to Smartphones grew a 135% full year over full year. Sequentially wide band CDMA was up 22%, CDMA up 18% and GSM Edge was flat-to-slightly down.

I expect 2010 to be another growth year in Mobile Devices with continued content expansion in overall unit growth of mobile devices. Smartphones should continue as a growth engine in 2010 and expand into low-end phones over the next three years. Our roadmap of leadership TRITIUM PA duplexers followed by multi-mode solutions and then by Triumph, our fully converged solution, addresses the needs for small size and maximum performance in multi-banded Smartphones that offer a worldwide access.

We are expanding on this successful integration roadmap to include a new family of five component HADRON III power amplifier modules for wide band CDMA. These devices specifically target Qualcomm architectures creating a new growth opportunity for TriQuint. Our customers now have a choice of solutions to match their needs.

Our HADRON III modules have been designed into multiple phone models and sales will begin ramping in Q2 of this year. Our PA duplexers are currently selling in high volume. Multi-mode and converged are future opportunities. I expect to ramp material revenue of our multi-mode solution in 2011 and converged in 2012, and forecasting in all of our major mobile customers this year driven by unit increases and continued penetration of our leadership products.

Now switching to our Networks market, where there are clear signs of a market recovery following a severe economic slowdown of 2009. Our Networks revenue was up 4% to 5% sequentially in Q4, finishing stronger as compared to the full year being down 23% to 24%, largely attributed to the economy. Base station revenue was up 11% for 2009 with all other major sub markets including transport, wireless client, and emerging being down. Base station revenue benefited from 3G spending in China and full year revenue from the WJ acquisition compared to the partial year of 2008.

Wireless client revenue was down 48% in 2009. Much of our wireless client success was focused on one customer and turned out to be an inventory build in 2008 that drove 2009 results down. We continue to address high-performance RF in laptops, but I don’t see sales materializing for the level that we once expected. On the other hand, wireless LAN in Smartphones is a much greater part of our growth story due to volume than we previously forecasted and it’s reported under Mobile Devices.

Within emerging markets, for the full year, our automotive revenue grew to approximately $2 million with the launch of automotive radar products. Sequentially in emerging markets, we saw a solid growth in AMR, AMI, and stocking orders to support our many small customers served through distribution. Our network strategy of simplifying RF is focused on bringing leading technology, ease of design and superior value to our customers. Independent of the economic effects of 2009, we have pursued the strategy and maintained investment for growth in this market.

A strong Networks book-to-bill ratio in Q4 of 1.24 to 1 is a positive sign recovery is underway and our investments are paying off. The transport recovery is well underway with the largest individual markets within transport, point-to-point radio, cable, optical, and ground station, each having very strong book-to-bill ratios in Q4. I expect 2010 to be a solid growth year for our Networks business with market recovery, continued development of our TriPower products, the positive impact of the Huawei optical agreement and growth in cable revenue accelerated by our acquisition of TriAxis.

Lastly, our Defense & Aerospace revenues were up 3% to 4% sequentially in Q4 ’09 compared to Q3 ’09 and an impressive 29% full-year 2009 as compared to 2008. Direct R&D investments from government and industry partners was up a 192% in 2009, radar was up 16% to 17%, and all other sub markets combined were up 13% to 14%.

TriQuint has focused on the defense market and has recognized for leadership technology in compound semiconductors and filters. Our team of trusted engineers are successfully partnering with industry leaders creating mission-critical next-generation solutions. In the short-term, we are benefitting from positive cycles in airborne radar programs such as Joint Strike Fighter and ASA.

And in the longer-term, we are shifting our strategy to emulate our success – our successful modular efforts in the commercial market. This involves transitioning from a technology provider to a solution supplier by creating RF solutions in high performance cost-effective packages and modules. For example, module integration can increase the functionality and reduce the space requirement in a high-density phased array antenna. I expect Defense & Aerospace revenue to grow about 10% this year over 2009.

Now, Steve will provide our results for the fourth quarter of 2009, and our guidance for Q1 and full-year 2010. Steve?

Steve Buhaly

Thank you, Ralph. For the fourth quarter of 2009, we reported revenue of $193.3 million. Revenue increased 12% sequentially and 30% from the fourth quarter of 2008. All markets enjoyed sequential growth. For the full year, revenue grew 14% from 2008. For the quarter, our revenue split-to-end markets was Mobile Devices 65%, Networks 23%, and Defense & Aerospace 12%. Please refer to the supplemental data posted on the Investor section of our website for a detailed breakdown of our revenue by market.

During the fourth quarter, Foxconn was our only customer comprising 10% or more of our revenue. Our book-to-bill ratio for the quarter was 0.90. Our gross margin for the fourth quarter was 37.4%. Fourth non-GAAP gross margin was 38.4%, up from 35.0% in the third quarter. Improved product mix and efficiency improvements particularly in our BAW line were primarily responsible for the increase.

Operating expenses were $53.9 million for the fourth quarter and $51.0 million or 26.4% of revenue on a non-GAAP basis. Increases in product development costs, selling and expenses associated with revenue and design wins; and within G&A, medical and legal costs contributed to the sequential quarterly increase in our operating expenses. Our late third quarter acquisition of TriAxis also increased expenses sequentially.

Net income was $17.5 million or $0.11 per diluted share for the fourth quarter. Non-GAAP net income grew 44% sequentially to $22.6 million or $0.14 per diluted share. Cash flow from operations was $26.5 million in the fourth quarter of 2009. Total cash and investments increased to $153.9 million or nearly $1 per share. Capital spending was $12.4 million compared with depreciation of $10.9 million.

At December 31st, 2009 accounts receivables improved to $88.1 million with DSO at 42 days, while inventory decreased slightly with turns of 5.4 for the fourth quarter of 2009. Networking capital was virtually unchanged from the third quarter as the decline in accounts payable balance roughly offset improvements in accounts receivable and inventory.

Non-GAAP financial measures exclude stock-based compensation charges, a third quarter charge for the settlement of the lawsuit, and certain charges associated with acquisitions. Complete reconciliations of GAAP to non-GAAP results are available in our press release and in the Investor section of our website.

Moving to our outlook, we believe first quarter revenue will be between $170 million and $175 million. Non-GAAP gross margin is expected to be between 36% and 38%, and non-GAAP operating expenses are expected to be about $50 million. First quarter net income is expected to be between $0.05 and $0.07 per share with non-GAAP net income between $0.08 and $0.10 per share. Cash is expected to increase by about $15 million in the first quarter. As of today, we are nearly fully booked to the midpoint of revenue guidance for the first quarter. We believe revenue will grow in 2010 by about 20% over 2009’s results.

This quarter, we will be presenting at the Raymond James Conference in Orlando on March 10th. And on the morning of Thursday, March 18th, we will hold our Annual Investor and Analyst Day in New York City. Both venues will be webcast and available to listen to on our website. We will also continue our bi-monthly update webinars for investors who are new to TriQuint or those investors who have not had contact with us in the recent past and would like a quick update with our management team. Please contact Heidi Flannery, Investor Relations, if you are interested in participating in any of these events.

Our Q1 2010 conference call is scheduled for April 28th, 2010.

I will now turn to Ralph for closing comments prior to welcoming your questions. Ralph?

Ralph Quinsey

TriQuint is unique in the industry as the only high volume supplier of both active and passive devices across a broad technology portfolio. This allows us to deliver very high performance, highly integrated and cost effective RF solutions to a wide variety of markets and applications. We are investing in R&D to fuel our new product development engine, enabling us to retain our products and technology leadership and continue to grow the company. Demand for our products is expanding as consumer insist on broadband everywhere. TriQuint is well positioned to benefit from this wireless explosion.

Investors should consider the following highlights for 2010. Within Mobile Devices, we are forecasting revenue growth with all major customers led by increased Smartphone unit volume and expanded RF content. We are also seeing opportunity with new types of mobile devices such as e-book readers and data cards. I see stronger, I see a stronger Networks market in 2010 in addition to our expected growth in optical, cable, point-to-point radio, and base station revenue. Defense & Aerospace revenue is forecasted to grow approximately 10%. Total company revenue should grow about 20% in 2010.

I will now open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question will come from the line of Tim Luke with Barclays Capital.

Tim Luke – Barclays Capital

Thanks very much, and congratulations on your quarter and your guidance. As you guys look at the year, you are – obviously you are guiding for a 20% revenue growth number again. Ralph, maybe you could just touch on whether you think that that infers that you are going to be growing faster than the industry and can exceeding the industry growth as you have in recent periods? And as you think about your OpEx through the year, could you give us some framework for how we should think about the growth through the year with respect to R&D and SG&A and also with respect to how you see the tax rates developing? Thank you.

Ralph Quinsey

Sure. I will address the share for 2010, and I will let Steve talk about the OpEx and tax rates. I do believe that as a corporation we will gain share and I do believe we will gain share in each of our markets. And fundamentally you know it’s inherently difficult to predict the future and so we are guiding for what I think is a healthy growth year and there is still variability, right? There is variability as to the market. But fundamentally, I believe we will have a good growth year and I believe that we will grow share.

Steve Buhaly

So taking the other half of the question, Tim, I think overall operating expenses will be in the low $50 million range per quarter. So we were guiding to $50 million in Q1, it could creep up a little bit. And beyond that, it will depend on how the revenue plays out. With respect to taxes, I expect taxes to be comparable with 2009. And at the non-op level, I think it will be pretty much a push between a modest amount of interest income and a modest amount of taxes primarily in foreign jurisdictions.

Tim Luke – Barclays Capital

If I may lastly, just, could you give us some framework? You obviously saw a substantial jump in the gross margin in the quarter; you guided it now to 37. How should you – we think about that developing? What is your sort of target level for that as you obviously see another year of fairly significant sales growth? And I guess a part of that maybe mix related, part of it may be utilization. Do you have any color on what the utilization levels are now? Thank you.

Ralph Quinsey

Sure. The utilization in the fourth quarter for our GaAs line was 74%. And our target remains at 40% for non-GAAP gross margin. We think we will be in a ballgame for that in the second half of the year and continue to strive in that direction. I think clearly the performance in Q4 is a good indicator of progress. And Q1 is not too bad given it’s slightly down seasonally for us.

Tim Luke – Barclays Capital

Thank you so much.

Operator

Our next question will come from the line of Edward Snyder with Charter Equity Research.

Edward Snyder – Charter Equity Research

Thanks. Good quarter guys. Congratulations. Several questions here. Gross margin was up as Tim alluded to here. 40% remains your goal, what are you going to have to see happen to get there? Your utilization is moving up or you – or we have to see further gains there or are you counting on the continued improvement in mix? Or can you give us maybe two or three factors you expect to be the big drivers between here and 40% in gross margins?

Steve Buhaly

Sure. The primary box of check is the one that says all of the above.

Edward Snyder – Charter Equity Research

That’s cheating, Steve.

Steve Buhaly

Utilization was actually level Q3 to Q4 at about 74% and so clearly improved utilization in the GaAs line will help margins. Secondly, we are making continuous progress on the manufacturing efficiency, yield improvement, and designing more value into the products. Finally, the return of the Networks business to a growth business in 2010 is going to help, growth in optical, cable, point-to-point type segments, definitely pull up the average for us. And those are all the factors we believe will get us in the ballgame probably in the second half of the year.

Edward Snyder – Charter Equity Research

So we have a few kind of a rally in the network segment to really get into your target range in gross margin. That would be a fair assumption, right?

Ralph Quinsey

It certainly would help us.

Edward Snyder – Charter Equity Research

Okay.

Ralph Quinsey

We have to do more elsewhere if that doesn’t happen.

Edward Snyder – Charter Equity Research

And then, I mean Ralph, clearly handsets is your big driver, it’s on a tear for you here, and I know that has a lot to do with Smartphone growth. But how much of your gains there do you think is coming at the expense of competitors versus a everyone benefiting from OEMs doing more Smartphones? Is everyone winning here? And if so, how long is that going to last?

Ralph Quinsey

I would say the theme of the leaders winning at the expense of smaller players is still a valid theme, and I think that the consolidation around the top few is going to continue. We see other competitors that are doing quite well, and we expect to do quite well. And we see other competitors that are going to do that we don’t think are going to do so well in 2010. But the consolidation around the leaders is really I think the theme.

Edward Snyder – Charter Equity Research

And what’s the factors? Is it technology, is it delivery, is it price, is it performance?

Ralph Quinsey

I like Steve’s answer. All of the above. I would say that to be a successful supplier in the mobile devices market, first of all, you need to have the technology to solve the problems which is basically high efficiency, linearity, small size, then you need to have the size and scale in manufacturing and the wherewithal to go up and down with a fairly dynamic market.

And then lastly, the ability to continue to integrate and offer next-generation roadmap solutions that the customers trust you can deliver like multi-mode, like converged. Those are the three major items. Again, the technology today just to solve the fundamental problems in the handset, the size and scale, and the wherewithal to play in this market. And then the future, right? The investment in the future technologies, specifically technologies around multi-mode and converged that’s believable and the customers understand that. It’s going to be a good solution.

Edward Snyder – Charter Equity Research

And then back to Steve, real quick, 42 days DSO, that’s a record going all the way back 1999. In fact, I don’t think you have done 42 days before that I can see. First of all, is this just a reaction to the downturn in ’08 that everybody has leaned out inventories – do you see it permanently staying at a lower rate? And if not, can it improve much beyond this and should we expect to snap back? So what’s your feeling here?

Steve Buhaly

For accounts receivable, the great story there was this is driven by shorter cycle times in our manufacturing operation which created a more linear revenue performance for us that we have typically have. And when you don’t ship everything at the last minute, it’s amazing how much better AR it turns out to be. I am not sure we will stay at 42 days. I am still thinking in the high 40s. So it’s pretty good performance.

On the other hand, our accounts payable also really dropped in the quarter and I don’t think that’s going to stick as far down there as it is also. So I think what I am trying to say is the adjustment I expect back to normal, if you will, will be about the same in AR and AP and the net will be zero.

Edward Snyder – Charter Equity Research

So you think we are going back to normal if there was a permanent change in the industry, everybody trying to conserve cash and cut inventories after the downturn?

Steve Buhaly

Are you talking about inventories or receivable?

Edward Snyder – Charter Equity Research

Well, both actually. I mean if we are looking at how quickly payment terms are being executed and if you talk to Nokia and these guys, they were squeezing everybody for cash during the downturn. It seems like if you look at the OEMs all the way back to the semiconductor players, the chain’s tightened up quite a bit since ’08. And we are just wondering is it going to snapback and how much?

Steve Buhaly

No, I think what we are seeing right now is what it is from an industry standpoint.

Edward Snyder – Charter Equity Research

So – and then on OpEx, I mean you basically think you are going to be hanging around $50 million, $51 million for the rest of the year irrespective – I mean we don’t expect to see SG&A grow with sales if your 20% sales growth number comes through.

Steve Buhaly

Low 50s remember. And it could grow a little bit, but we are coming of a quarter where we had $193 million in revenue, which if you annualize that gets you pretty close to a full 20% growth on last year, and I think we will be in that ballpark of the low 50s.

Edward Snyder – Charter Equity Research

And then final question. I mean you mentioned some new products. You gave the percentage, I think so it was 64% of revenue is from new products, and then you also mentioned net books and e-readers and such. Are you seeing an increased activity from there? Do you think you will hold your own or gain share in that space? I mean, obviously you can't speak about Apple, nobody can. But we saw the iPad announcement and you guys got a presence with Apple already. Should we not be surprised to see TriQuint win its share or more than its share with some of these new products?

Ralph Quinsey

Yes, in general, we have had pretty good share in some parts of that market, data cards for example. But it’s been very narrow application as you know, Ed, for the Polar device. We think that we now are in position where we can expand comfortably into the linear devices as well. So I would say we have been gaining share in that type of market. And then for other applications like e-readers, yes, I think that’s upside for us. I think we are going to gain share broadly across the market, because we have got good solutions.

Edward Snyder – Charter Equity Research

Okay, thanks guys.

Operator

Our next question will come from the line of Steve Ferranti with Stephens Incorporated.

Steve Ferranti – Stephens Incorporated

Hi guys, congratulations on the quarter. Really nice job there. I wanted to see if you might be able to provide us with some additional color in terms of your growth guidance for calendar year ’10. I know you said you expected 10% growth on the military side. That would imply that networks and handsets would grow probably north of your corporate goal. Any additional color you can give us in terms of what growth rates per segment might look like in calendar year ’10?

Steve Buhaly

No other specific numbers. I can tell you that, yes, I think that we should have fairly strong year in both handsets and networks. Certainly the handset market is seeing expanding contents, Smartphones are out of chair, we are well positioned, we have got good new product alignment. So I feel comfortable and bullish about handsets. And on the network side, as we – as I have discussed in the past, we have got some pretty good activities in optical, in cable, in base stations that should give us good incremental growth and I anticipate a market recovery. And if so those four, all four those hit, we should see good solid growth in the network side of business as well.

Steve Ferranti – Stephens Incorporated

And Ralph, just talking about those incremental growth opportunities in Networks, can you give us some sense for, I guess where we are in terms of those ramping up to what you would consider full volume? And any color you can give us in terms of sizing of the, I guess total incremental opportunity from those three particular growth drivers?

Ralph Quinsey

Yes, if you will lump the three together, I think that we are in the range of $15 million to $30 million of incremental growth, new business if you will. I think you will see the impact of optical first, followed by cable, followed by some of the TriPower base station impact.

Steve Ferranti – Stephens Incorporated

Okay, very helpful. And last one from me. I think in your prepared remarks, you talked a little bit about the migration from PA duplexer architectures to multi-mode to ultimately your Triumph product and it sounded like you had some expectations about multi-mode beginning to ramp in ‘011. Does that imply that you are at least in discussions with the customers about multi-mode solutions and maybe pass there in terms of actual design activity?

Ralph Quinsey

It does and the nice thing about our position now as the technology leader is that we are fortunate enough now to be working with partners and customers, not only on the next platform, but the platform after that, all right? And that gives us good insight and confidence that we continue to grow our business if we can offer compelling solutions from a roadmap perspective that are more than just a PowerPoint presentation, but good engineering, demonstration vehicles that show solid gains and what we are trying to do for our customers.

And you heard me say it before, it’s simple what we are trying to do for our customers, we are just trying to help them improve the performance of their applications. In this case, it’s battery life, it’s form factor, preserving the board space in the phone or we want to help is lower the cost of other phones, other appliances. And again as we move to the multi-banded phones, the RF section can get pretty crazy. And so multi-mode and then on to converge really helps our customers deal with that both from a cost perspective and the floor space perspective.

Steve Ferranti – Stephens Incorporated

That’s helpful. And then just to clarify, when you talk about multi-mode, does that include LTE bands or 4G bands of any kind?

Ralph Quinsey

The architecture could include that. I think the best way for investors to look at 4G or LTE band is it looks a lot like another 3G band to us. Certainly there is differences, but that’s probably a good way to look at it. It can be included or excluded in that fashion across all the platforms.

Steve Ferranti – Stephens Incorporated

Okay, that’s it from me. Nice job again and good luck going forward guys.

Ralph Quinsey

Thank you, Steve.

Operator

Our next question will come from Aalok Shah with D.A. Davidson.

Aalok Shah – D.A. Davidson

Hi guys, congrats. Just a couple quick questions for you; Ralph you mentioned GSM Edge, I guess in the numbers it looks like it was down slightly. Can you tell us about GSM and then what do you guys think about GSM in 2010? Is that something that we should expect for you guys to kind of grow as you guys kind of start to develop some products on there?

Ralph Quinsey

Sure. As I said, GSM Edge was down about 10%. You should read that, most of that down was in GSM. Edge was actually up year-over-year quite nicely. And so, we are seeing that impact as we redirected resources away from GSM to 3G opportunities successfully I might add. We are seeing that impact, but we have long planned on reentering that market and I do expect to see positive GSM impact in revenue in the second half of the year.

Aalok Shah – D.A. Davidson

And that’s with existing customers as we think about it as maybe penetrating some newer customers as well?

Ralph Quinsey

So we clearly – virtually all customers except Nokia are our customers and then we are not going to break into GSM, Nokia in the second half. So I would say it’s existing customers.

Aalok Shah – D.A. Davidson

Okay. And then in terms of utilization rights, I am assuming Hillsboro was considerably higher than your Texas facility. And if you are looking for a strong growth out of the wireless side in 2010, does that imply you could get up to almost a – somewhere between 90% and a 100% in Hillsboro?

Ralph Quinsey

Just to give you the data, Hillsboro, Oregon, was pretty flat actually to last quarter at that 76%, 77% range. Texas was actually up from about 39% to 42%. I might add that that’s the first time Texas has passed through the 40% level. So the – we saw a growth in the Texas, pretty flat in Oregon. That leaves us pretty good upside capability in Oregon.

We continue to squeak out a little more. We actually added a little capacity in the quarter, so the 76% to 77% comparison sequentially in Oregon doesn’t tell the whole story, because we added a little bit of capacity. And as you know we have got capacity – we have got space available in Texas. So if we ever do have to make a move for more equipment, it’s relatively a cost effective move.

Aalok Shah – D.A. Davidson

But you don't expect any major CapEx increase in Hillsboro based on wireless products or for mobile handsets I guess?

Ralph Quinsey

No, I think we will – we have a plan to increase capital expense pretty much consistent with the growth of the business, but nothing outside of that.

Aalok Shah – D.A. Davidson

Okay. And then DOI was down – days of inventory were down in the quarter and pretty much a new low level for you guys in the last couple of years. What level of inventory do you guys feel comfortable with at this point?

Ralph Quinsey

Our turns in the quarter were 5.4. I think that’s a pretty good number. We maybe able to boost that up a little bit, but it’s consistent with the competition and I would say if we are able to get it up to 6 without jeopardizing deliveries and flexibility to customers, we would be doing well.

Aalok Shah – D.A. Davidson

Okay. And then last question from me. Going into Q4, you sounded off some alarms about a major Korean customer having some inventory issues. Can you walk us through what happened in the quarter now that it’s over?

Ralph Quinsey

It’s pretty much the way I expected, right? There was an adjustment. It was down, it wasn’t that material. I think that obviously we did not communicate it effectively, because I got lot lots of questions around it, I suspected the questions were driven by other reasons, but really no surprise. And looking forward, I feel pretty good about our Q1 guidance. Actually we should be up in Korea sequentially.

Steve Buhaly

And just to scale that for you, the sequential decline with that customer was less than 2% of our Q4 revenue.

Aalok Shah – D.A. Davidson

Okay.

Steve Buhaly

So it turned out to be – the asset went down, but it’s almost in the rounding error category.

Aalok Shah – D.A. Davidson

Great. Thank you very much guys.

Ralph Quinsey

Thanks Aalok.

Operator

Our next question will come from the line of Sanjay Devgan with Morgan Stanley.

Sanjay Devgan – Morgan Stanley

Thank you for taking my question. Just as you look at kind of Q1 for your mobile products group, can you kind of give us your view on kind of the growth rates for each of the different interfaces on a sequential basis, meaning kind of WCDMA, CDMA and then GSM, GPRS, Edge?

Ralph Quinsey

I am not going to give specifics on that detail for Q1, but I will talk in general that I think our – a lot of our growth is coming from wide band CDMA, 3G and Smartphones. GSM as I mentioned is down for us, expect that to come back in the second half. Our Edge-only products have been fairly strongly consistent. And then CDMA, I was really looking at CDMA as spiky, more tied to – for our revenue, I mean more tied to specific industry events, phone launches, et cetera, similar to what we saw in 2009. I don’t see that market growing significantly, but I don’t see it going away fast either. Is that helpful enough?

Sanjay Devgan – Morgan Stanley

Yes, yes, that’s very helpful.

Ralph Quinsey

Okay.

Sanjay Devgan – Morgan Stanley

Thank you so much.

Operator

Our next question will come from the line of Anthony Stoss with Craig-Hallum.

Anthony Stoss – Craig-Hallum

Hi guys, good job. A couple of quickie questions for you Ralph. Any component shortages or any limitations that would prevent you guys from producing to demand in the near-term?

Ralph Quinsey

Not that I am aware of. Nothing on the horizon. Supply chain looks pretty solid right now.

Anthony Stoss – Craig-Hallum

Okay. Also there is a lot of design activity going on and a lot of talk about 5.8-gig coming on line kind of mid-2010 in the Wi-Fi side for handsets. Let me hear your thoughts on where you guys sit for design activity there, your thoughts on content as well.

Ralph Quinsey

Yes, so we look at both single band and dual band opportunities. I think that there is a play for the high band in Wi-Fi; we will see how the market rolls out.

Anthony Stoss – Craig-Hallum

Okay. Last two quick questions; ASPs are they stable Ralph? How would you kind of characterize pricing right now?

Ralph Quinsey

Nothing out of ordinary. I think pricing is behaving as we would expect and as you know, Tony, we try to play in for our dynamic markets about 10% to 15% per year and that’s my expectation.

Anthony Stoss – Craig-Hallum

Okay. Last question, if memory serves me, your BAW filter expansion or capacity upgrade was supposed to be done in December. Can you confirm it was? And also kind of review on the alleviation on gross margins or the impact it might have for March.

Steve Buhaly

Yes I will take that one. We did achieve actually more than we expected. The team down there in Texas did a fabulous job. And it was a significant contributor to the sequential improvement in margins that we saw in the fourth quarter.

Anthony Stoss – Craig-Hallum

All right. That’s it, thanks guys.

Steve Buhaly

You bet.

Operator

Your next question will come from the line of Nathan Johnson with Pacific Crest Securities.

Nathan Johnson – Pacific Crest Securities

Hi, guys. Thanks for taking my question. I just wanted to ask a quick question on the emerging markets other category. You talked a little bit about the strength in quarter, but was wondering if that particular segment is expected to continue at a strong trajectory throughout 2010 or was there something maybe one time in nature in the December quarter that is unlikely or repeat itself throughout 2010. And then secondly just you talked about the taxes in 2010, but there was an update on when NOLs will potentially come to it and for you guys I know it’s a bit of a moving target, but just was wondering if you guys have gone to that process recently?

Ralph Quinsey

Sure, I will comment on the emerging markets and I will ask Steve to comment on the taxes. By the nature of the markets, i.e. emerging markets, it’s somewhat hard to predict, because you are at the beginning of the cycle and there is some volatility. Over and above that, I feel pretty good about some of our products in emerging markets. AMR, AMI looks fairly positive, automotive radar looks fairly positive. The only even that may not be repeated is we did see some stocking orders in the quarter, in our distribution channel, because we made some changes in how we did distribution. The impact was about 500k of the total, so it wasn’t a huge impact. But I don’t expect to see that repeated. I will let Steve comment on taxes.

Steve Buhaly

You are sure you don’t want to take it Ralph?

Ralph Quinsey

Okay.

Steve Buhaly

Just kidding. Nathan, I continue to believe we will be in a federal NOL environment through mid 2011. Obviously there is lots of moving pieces, but that’s a ballpark estimate and until then we will report tax expense roughly consistent with 2009. I will also add that we are actively going through some tax planning now that we can kind of see the end of the NOLs on the horizon. And so I will probably update those estimates as we go through, but that’s the most conservative estimate you will hear.

Nathan Johnson – Pacific Crest Securities

Great. And one last question, just coming back to the multi-mode PAs and the Triumph platform. I was wondering the timing of that. How much of that is dependent upon R&D within TriQuint itself and how much is dependent on the ecosystem? Are you guys looking to transceiver suppliers as an example to supply their products to be able to work with multi-mode PAs and how are you seeing that process development?

Ralph Quinsey

Yes, very good question. There certainly is quite a bit of interplay between customers, platform partners, and RF partners working on these next-generation platforms and lots of discussion. And so the chances of those programs moving in a quarter or pushing out a quarter is a reasonable assumption. I think – and that’s why I said I think material revenues are going to be in 2011.

The launches may move in around a little bit. But I think we will see material revenue in 2011 for multi-mode. And I think we will see material revenue for converged in 2012. There will be lots of talk about that before hand. And depending upon who you talk to and their individual dispositions of the communication of the event, you get a different one. But I think that’s really when the market is going to see material revenue. 2011 for multi-mode, 2012 for converged.

Nathan Johnson – Pacific Crest Securities

It’s great. I appreciate it.

Operator

Our next question will come from the line of David Duley with Steelhead Securities.

David Duley – Steelhead Securities

Congratulations on a nice quarter. Couple of questions from me. When you look at your handset business, clearly you are going to grow faster than the market. And I am wondering what the major driver of growth in your handset business is? Is it increased content with current customer or is it winning new customers?

Ralph Quinsey

I would say, Dave we are going to see two growth drivers with primarily existing customers. One is just overall unit growth, right? There is going to be unit growth this year in handsets in total. And then Smartphones are going to grow faster than market, we are quite strong in Smartphones. Then the other component is what you suggested, it’s just the RF expansion associated with Smartphone growth. We have more contents and more opportunity in Smartphone than we do in a GSM voice-only phone.

Steve Buhaly

But I will kind of reiterate Ralph’s earlier point. Within the about 20% growth guidance, we do not anticipate picking up any material business from Nokia. And we do business with pretty much all the rest of the players in the industry.

David Duley – Steelhead Securities

So that suggesting that you already have all these guys as Smartphone customers, so the faster growth rate that you are going to see is mainly coming from increased content.

Ralph Quinsey

Yes, and that’s an accurate statement. I mean certainly going through the list in my head, but all of the major Smartphone players except for Nokia, we are – we do well with and I expect to grow with.

David Duley – Steelhead Securities

Okay. You guys were talking about wireless LAN products in phones and I am sorry I don’t recall if you mentioned how big that business is, I thought you mentioned it might ramp this year. Could you give us a little bit more detail on that product and what we should expect there?

Ralph Quinsey

Sure, that business in Q4 of 2009 was in the range of $7 million to $8 million in the quarter. And it was up – I had it in my notes I think a 130% in that range year-over-year. So it’s a growing business for us and we expect it to continue to grow. And we expect it – that business to grow across again all of the Smartphone customer base, because we have a strong relationship with a partner there that’s doing quite well.

David Duley – Steelhead Securities

Okay, great. I guess just one housekeeping question. I think you mentioned Foxconn was the only 10% customer in the quarter. Could you give us a percentage for Q4 and/or for the year? I think you have to file your statements and disclose that.

Steve Buhaly

Yes, they were about 20% for the year. And I don’t have a Q4 number right off the top of my head.

David Duley – Steelhead Securities

Thank you very much and congratulations on a nice quarter.

Ralph Quinsey

Thank you.

Operator

Our next question will come from the line of Richard Shannon with Northland Securities.

Richard Shannon – Northland Securities

Hi guys. I guess my first question is on CapEx. How much you are expecting to spend in 2010?

Steve Buhaly

I think you should model in about $60 million in 2010.

Richard Shannon – Northland Securities

Okay, great. And is that pretending any sort of capacity expansions, whatever additions you can do in Oregon and maybe even more in Texas or what is that –?

Steve Buhaly

That’s pretty much it. We – it’s consistent with our plan to grow 20%. We would like our utilization to be a little bit higher than the 76% we had in Q4. So with that growth, we expect a little bit of improved utilization, a little bit of equipped capacity expansion, and then some investment in capability as well. So it’s not all just capacity.

Richard Shannon – Northland Securities

Any thoughts about potentially doing some outsourcing like some of your other competitors do?

Ralph Quinsey

We have not actively looked at fab outsourcing, but contrary to at least some of our competitors, most of our backend is outsourced. We have an operation in Costa Rica for filter backend, but all of the rest is outsourced.

Richard Shannon – Northland Securities

Okay, great. My second question is regarding Ralph’s comments about to expecting growth from all of your major handset customers in this year. I am kind of curious how many of those customers you consider to be major and whether you will see any customers become major this year?

Ralph Quinsey

Well, I think it’s the expected list of majors that you would see. We probably – when you look at our Mobile Devices products have up to probably north of 20 customers for all the different products and applications. So the classic top five and then the Smartphone leaders, I think you will see growth from all of those with the exception of Nokia.

Richard Shannon – Northland Securities

Okay. My last question is just on M&A. You obviously made a small acquisition late last year. Kind of curious about your overall outlook and what valuations you're seeing out there or anything impending of that nature?

Ralph Quinsey

So if I understand your question, yes, TriAxis we acquired, they are focused on the cable and fiber-to-the-home market. I am sure investors understand that just as with 1G, 2G, 3G in the phone area where new standards create new opportunities for RF suppliers, same thing happens in cable and fiber-to-the-home. So DOCSIS 3 and Edge QAM, those type of things where systems are being upgraded and the electronics are being changed, we have great opportunity there. And TriAxis brought to the company some terrific engineering talents, some great products, some great design wins. They are on track, they are fully integrated and they are – they will part of a story of growth for us in 2010.

Richard Shannon – Northland Securities

Great. Thank you very much guys. Congratulations.

Ralph Quinsey

Thanks.

Operator

Our next question will come from the line of Bill Dezellem with Tieton Capital Management.

Bill Dezellem – Tieton Capital Management

Thank you. So you are going to have to make sure that Nokia doesn’t listen to this call or they will start to think that they are the ugly step child.

Ralph Quinsey

Well, let me just make a comment about that, Bill. We have I think a good relationship with Nokia. We have a lot of respect for them. We talk to them often. We would love to have them as customers. In fact, we will sell them products. We have sold them products in the past we continue to sell them products. I just want to be clear with investors we don’t have a strategic relationship with Nokia. The people shouldn’t expect that. Now we have a relationship where we will sell products, we will have fairly decent revenue likely with Nokia for some products this year. But we just don’t have that strategic relationship.

Bill Dezellem – Tieton Capital Management

Well, that’s actually a helpful response to what was just intended to quip. So moving on to my question, the wireless LAN market with devices other than laptops, you had refreshed in your opening remarks I believe that you were thinking now that that will be a larger market than you had originally anticipated. And so is that because those devices are proliferating more than you had originally anticipated or is that because you were – are picking up business or share there that you had not expected?

Ralph Quinsey

I would say two things. For a while, the market was trying to decide what’s it going to be? Is it going to be wireless LAN, is it going to be Bluetooth, is it going to be 3G, is it going to be WiMAX, what’s it going to be? And I think the market has decided it’s all of the above. So wireless LAN associated with Smartphones is now just part of the package. So that’s been a little bit of a change versus my thoughts a year ago.

And then we have – we are partnering with a good partner that has some good success and a great solution and that’s how we go to market, right? We partner with silicon providers and do the guts of the solution and we help connect them to the network. And we are seeing good design win activity, better than maybe we anticipated six months to nine months, and those two things have created a market I think in wireless LAN in handsets, primarily Smartphones or those appliances that are non-traditional phones, that looks pretty attractive.

Bill Dezellem – Tieton Capital Management

Thank you. And then the second question is relative to the first quarter in a normal seasonal decline, are we interpreting your comments and guidance correctly that yes, there is a seasonal decline, but it is not as steep in the first quarter of 2010 as maybe what would be typical.

Steve Buhaly

So I would say Q1 was pretty good, yes. A little bit better than seasonality. And I feel good about where we will be certainly compared to Q1 last year. So I think that’s a fair statement.

Bill Dezellem – Tieton Capital Management

And what do you believe is the reason or reasons that that the Q1 is turning out to be a little bit better than the seasonal norms?

Ralph Quinsey

I think the Smartphone phenomena is part of it. And I think the – our customers and their customers are playing inventories fairly tight through this selling season after going through a difficult year. And so I think we stay fairly lean through the selling season, so we are not seeing a significant of a reset post selling season.

Bill Dezellem – Tieton Capital Management

And to what degree does the Networks – was it a 1.24 book-to-bill – to what degree does that enter into the equation, because that sounds like a higher book-to-bill coming into Q1 and that would be normal also.

Steve Buhaly

Yes that is a much higher book-to-bill. But keep in mind the Networks business is 25% of our revenue, Mobile Devices is –

Ralph Quinsey

65%.

Steve Buhaly

65%. And so the relative impact is going to be put in that context. But certainly a rebound in the networks market is helpful of course.

Ralph Quinsey

We do expect sequential growth in the networks market. It’s going to help, but it’s not big enough to really push the needle very far.

Bill Dezellem – Tieton Capital Management

Got one final question here just following up on that Steve is do you normally anticipate Networks to be sequentially up in the first quarter? And understanding it’s a small piece of your business to start with, but –

Steve Buhaly

No. Networks and the military typically do not have much seasonality. So we think what we are seeing there is more of a market coming back, something we expected earlier and didn’t happen. And now we are seeing increasingly positive indicators of rebound in the networks market and that’s great news.

Bill Dezellem – Tieton Capital Management

Thank you both.

Operator

(Operator Instructions). Our next question will come from the line of Richard Davenport with Connexiti.

Richard Davenport – Connexiti

Thank you for taking my question. Actually first I have a clarification. Going back to the question about the Korean customer’s inventory situation in the quarter, did you say that that customer was 2% of revenues or that customer’s revenue has declined 2% sequentially?

Ralph Quinsey

The latter. Less than 2%.

Richard Davenport – Connexiti

It declined less than 2% sequentially.

Ralph Quinsey

Correct.

Richard Davenport – Connexiti

Thank you. And secondly regarding your largest customer, do you recall if that amount was above or below what was disclosed in your most recent Q and you plan to disclose that amount in the upcoming Q?

Steve Buhaly

You are referring to the percentage of revenue?

Richard Davenport – Connexiti

Yes I am.

Steve Buhaly

Yes, that will be disclosed in the K that we expect to file this Friday.

Richard Davenport – Connexiti

Great. Thank you very much.

Operator

Our next question will be a follow-up from Aalok Shah with D.A. Davidson.

Aalok Shah – D.A. Davidson

Hi guys. Just one quick question. Steve, I think you mentioned the book-to-bill on the Networks to be somewhere in the 1.2 range. Is that correct?

Steve Buhaly

Yes.

Aalok Shah – D.A. Davidson

And is that book-to-bill that’s shippable in the next three months or how should we think about that?

Steve Buhaly

It’s not by rule, but by practice, it generally is.

Aalok Shah – D.A. Davidson

Okay, so we should expect to see fairly significant growth out of the network space and then I am assuming the margins attached that business should be also pretty good or is that offset because of the lower volumes from the handset space?

Steve Buhaly

No you are right on both counts. The margins are definitely better in the Networks business. And in fact the best part of the story is some of the better margin areas in Networks are showing the real rebound, i.e. the transport segment of that. And we feel increasingly confident that market is turning around for us and it will be a net contributor to company gross margins.

Aalok Shah – D.A. Davidson

And Ralph, is that from a macro standpoint, are you seeing that more North America or is that more Asia, you are seeing that strength?

Ralph Quinsey

Different submarkets different, so the accurate answer is more global. Certainly optical is Asia driven, point-to-point driven; point-to-point radio is probably a combination of all of the above; cable is North America and South Asia, so all of the above.

Aalok Shah – D.A. Davidson

Okay, great. Thank you very much.

Ralph Quinsey

Okay.

Operator

At this time, there are no further questions. Do you have any closing remarks?

Ralph Quinsey

Yes, I want to thank the participants and the listeners for their interest in TriQuint. I am proud of the TriQuint’s team’s performance in 2009 and look forward to even better results this year. 2010 marks our 25th Anniversary. We are very proud of our solid heritage of technology innovation and have robust plans that will take us to new levels of success. We will talk to you again in April.

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