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Inphi Corporation (NYSE:IPHI)

Q4 2013 Earnings Call

February 3, 2014 5:00 PM ET

Executives

John Edmunds - VP and CFO

Ford Tamer - President and CEO

Analyst

Jorge Rivas with Craig-Hallum Capital Group

Sundeep Bajikar - Jefferies

Joseph Turano - Needham & Company

Doug Freedman - RBC Capital Markets

Tore Svanberg - Stifel Nicolaus

Bob Gujavarty - Deutsche Bank

Operator

Good day, ladies and gentlemen and welcome to the Inphi Corporation Fourth Quarter 2013 Earnings Call. My name is Esteban and I will be your operator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to Mr. John Edmunds, Chief Financial Officer, please proceed sir.

John Edmunds

Good afternoon everyone. Thank you for joining us today for our quarterly earnings call to discuss our Q4 and 2013 year-end financial results and business outlook. I’m John Edmunds, Chief Financial Officer and with me today is Ford Tamer, our Chief Executive Officer.

I will begin with the Safe Harbor then Ford will give you an overview of our business. After that I will provide a financial summary and the outlook for the first quarter of 2014. Then we’ll be happy to take your questions.

Please note that during the course of this conference call, we may make projections or other forward-looking statements. These forward-looking statements and all other statements made on this call which are not historical facts are subject to a number of risks and uncertainties that may cause actual results to differ materially. These forward-looking statements speak only as of today’s call. We do not undertake any obligation to provide further updates after this conference call.

For further information regarding risk factors for our business , please refer to our registration statements on Form S(1), as well as our more recent Annual and Quarterly Reports on Forms 10(NYSE:K) and 10(NYSE:Q), all filed with the Securities and Exchange Commission, accessible at www.sec.gov. Please refer in particular to the sections entitled, Risk Factors. We encourage you to read these documents.

Also during the course of this conference call, we may make reference to non-GAAP financial information. A reconciliation of this information is included in the press release and on the website which is available at www.inphi.com. This information is not a substitute for GAAP and should only be used to evaluate the Company’s results in conjunction with corresponding GAAP measures.

Now, to begin our review of the quarter let me turn the microphone over to our Chief Executive Officer, Ford Tamer, Ford?

Ford Tamer

Thank you, John. Good afternoon everyone. I’m happy to report Inphi record revenues of $29.1 million and above consensus EPS of $0.08 for Q4 2013. This represents strong 27% year-over-year revenue growth and 9% sequential growth, our third consecutive quarter of 8% plus sequential growth. Our operating margins have steadily grown through the year from a slight loss in Q1 to nearly 11% in Q4. Furthermore, our guide for Q1 2014 also reflects continued strengths in the business with new record revenue of $31 million at the midpoint.

Let me review the Inphi’s accomplishments over the past two years. First, we’ve consistently done what we said we would do on previous earnings call. Second, we delivered industry leading products and supported the production rollout of our Tier 1 customer systems. This resulted in top-line growth above industry average. And third, we’re executing on our product, customer and Company’s changing strategy that I’m confident will support and potentially accelerate continued long-term revenue growth.

On doing what we said we would do, this December quarter marks the 8th consecutive quarter of consistent on target or above performance. This performance led to fiscal 2013 revenue of $103 million and earnings per share of $0.12, ahead of consensus expectations. In February 2012, we announced our Q4 2011 revenue of $17 million. Our Q4 2013 record revenue of $29 million represents a nearly 70% increase in revenue from two years ago. This 2013 revenue has been fueled by growth in our three emerging businesses, our 100 gig amplifier and driver grew over 40% in 2013, our 100 gigabit SerDes grew 165%, our LRDIMM buffer grew 270%.

We’re forecasting growth in each of these three segments moving forward in 2014. We project our 100 gigabit amplifier and driver and our LRDIMM buffer businesses to each grow around 70% in 2014 and our 100 gigabit SerDes business to nearly double. Clearly our investments in new products for Inphi over the past two years are paying off and positioning us as a revenue growth leader in the semiconductor industry.

Let’s now turn to our product delivery and customer support. We are excited about our current world-wide Tier 1 customer success. Their success across multiple product cycles is fueling our goal.

On the server front, we are pleased with our high-speed memory business which delivered approximately $50 million in revenue in 2013 and averaged more than $15 million per quarter in the second half of the year. We continued our industry-leading market share for our LRDIMM buffer in Q4. The reintroduction of the Intel Ivy bridge platform, our quarterly revenue run rate doubled in the fourth quarter to approximately $5 million and we delivered just under $11 million in LRDIMM revenue for the year. We currently have more than 50% market share in LRDIMM buffer and expect our market share to increase in Q1 2014. Although we’d like to have more data points, we’re consciously optimistic that this growth trend will continue for LRDIMM buffer products throughout 2014.

On DDR4, we are pleased to report that we’ve received significant orders for our register and buffer products. The DDR4 back-ends will continue for the next 12 months for 2015 production revenue. We are mindful that we need to continue to compete for the ongoing orders. But we are confident in our product lineup.

In our industry-leading DDR4 registered product we are the lowest power and best performance for several OEMs. Our DDR4 buffer is already in the industry leading 40 nanometer node, which places Inphi ahead of our competition. Because of our extensive validation test we’ve given up over 8 years of demanding field experience, we expect our DDR4 register and buffer to be of the highest quality. We are committed to continue to deliver the best DDR4 roadmap in the industry with our next generation products.

We are especially excited about new application of memory product for big data and cloud, for our U.S. and Korea memory and OEM customers. On the communications front, we’ve made tremendous progress in our worldwide design wins. In North America multiple Tier 1 OEMs have released the 100 gigabit systems to the market, including the Cisco Nexus 7000, and Nexus 7700, the Juniper MX, and the Arista 7500E.

Cisco has also released their CPAK silicon photonics module to production with their new 100 gigabit NCS 6000 router. In North America, we expect our 100 gigabit SerDes to start scripting online card applications in the second half of 2014. All of this represents continued momentum.

In Europe, we are excited about Alcatel-Lucent and British Telecom having achieved 1.4 terabit per second speed in test trials. This is the fastest throughput ever achieved by commercial-grade hardware. The new system features new technology that enables the equivalent of transmitting 44 uncompressed high definition movie in a single second. Linear drivers would be critical for the consuming deployment of coherent optical networks and Inphi is leading in that category. We are very successful with our communication design wins in Europe and Israel.

Tier 1 system vendors released their 100 gigabit systems to market such as the Alcatel-Lucent 1830. In Asia, a modern double layer revenue in Japan turning that country into a key strategic contributor to Inphi’s overall results. In China, we had several important design wins with Tier 1 customers. To continue our product momentum, we strengthened our team in Singapore.

One measure of our progress in 2014 is that we have doubled the number of customers, each of whom contributed over $5 million in annual revenue from 4 in 2013 to a projected 8 in 2014. Looking out further, we intent to double the number of customer each of whom would contribute over $10 million in annual revenue from 4 in 2014 to a projected 8 in 2015.

We will fuel this growth by the continued rollout and design wins of our DDR3 LRDIMM buffer, DDR4 register and buffer, 100 gigabit amplifier, driver and SerDes and new products. In turn, I am confident that this will enable us to deliver our goal of $50 million in revenue around Q4 of 2015.

As Inphi grows, we’ll also benefit from investments in our infrastructure. For example our new co-location datacenter in Nevada would provide us with flexible scalability, more reliable power availability and a more efficient storage configuration. These upgrades reflect our continued conviction in the strengths of our business in 2014 and the years ahead. We thank you for your support during the past year and look forward to what is a very promising future.

Now let me turn the call over to John to go into details about the financials. John?

John Edmunds

Thanks Ford. Now let me recap the key financial results for Q4. As Ford told you, for the fourth quarter of 2013 Inphi reported record revenues of 29.1 million, this represented 27% year-over-year growth and 9.4% sequential growth. Overall, both our communications and server revenues have grown sequentially by double-digits in the second half of 2013 versus the first half. As we expected, we experienced more of a surge in communications related growth in Q4 in contrast to the surge in server related growth Q3.

Overall, as we predicted in the Q3 earnings call, the mix of product sales for the second half of 2013 approximated something on the order of a 60-40 server-communications mix.

In communications Q4 growth was driven primarily by growth in coherent 100 gig products. Based on new products ramping into production, we do expect communications to be growing more rapidly in the first half of 2014 and to be at about a 50-50 mix in the second half.

In the server area, the run rate for LRDIMM sales in Q4 was approximately double the Q3 run rate. We recorded nearly 11 million LRDIMM sales in total for the year. Based on the bookings and forecast to-date, we expect continued growth in LRDIMM in Q1 of 2014.

RDIMM revenues did decline somewhat in Q4, this was due to memory module makers electing to burn off channel fill accumulated in Q3, which was just prior to the lost of Intel’s new Ivy Bridge platforms. RDIMM revenues currently appear to be steady in Q1 with slight growth anticipated by the end of the quarter.

On a GAAP basis, net income in the fourth quarter was a loss of 1.3 million or a loss of $0.04 per diluted share. This included stock compensation expense of $4 million and the associated offsetting tax benefit of approximately 1.1 million. This compares to a net loss of 16.6 million or $0.58 per diluted share in Q4 2012.

To give you more detail and comparing numbers, let’s take a look at some non-GAAP additional measures. Within the press release we have provided specific written reconciliation, but in general the differences between GAAP and non-GAAP are due to excluding 2.9 million net stock compensation expense, we also exclude some other GAAP to non-GAAP income tax differences of approximately 0.8 million.

On a non-GAAP basis then, net income for the fourth quarter was approximately 2.4 million or approximately $0.08 per diluted share. This was above the $0.06 at the high-end of our Q4 earnings guidance. This also compares with non-GAAP net income of 1 million or $0.03 per diluted share for the same quarter one year ago. Non-GAAP gross margin for the fourth quarter of 2013 was 66.3%, which was up 210 basis points from the 64.2% in the third quarter.

In Q4, the gross margins went up based largely on a growth in mix of communications related products, as well as the increased volume at LRDIMM. Due to slightly lower than expected mix in communications products in Q1, we currently expect Inphi’s gross margins to come down at approximately 30 to 50 basis points in Q1.

Non-GAAP operating expense for the quarter totaled 16.3 million. This was up approximately 0.8 million as expected based on hiring, year-end bonus accruals and other development-based activities. We plan to continue to hire critical engineering resources as we continue to make measured investments to support projects with large OEM customers. We again expect our Q1 operating spending to rise approximately 0.2 million, plus or minus, 0.1 million, principally due to additional hedge, R&D activities and payroll taxes.

With regard to the non-GAAP tax provision in the fourth quarter, the effective tax rate came down to 26.9%, and the annual effective tax rate on a non-GAAP basis also came down to 31.5%. Based on the exploration of the Federal R&D tax credit as of the end of 2013, we currently expect the 2014 non-GAAP effective tax rate to be approximately 30%. If 2014 rate can then be further reduced, if and when, the Federal R&D tax credit is reinstated for the 2014 tax year. Other income in Q4 was approximately 0.2 million, coming mainly from interest income consistent with Q3.

Now turning to the balance sheet, cash and investments, and marketable securities increased by 3.3 million for the quarter to 123 million from 119 million, this represented a slight increase per share to $3.83 per diluted share at December 31st. This net increase of 3.3 million in cash and investments is essentially the result of approximately 7 million in cash from operations, plus 0.3 million in net receipts from auction exercises and ESPP, offset by 4 million being used for property, plant and equipment including mask sets.

The 7 million in non-GAAP cash flow from operations came from 2.4 million in non-GAAP net income and we add back 2 million in depreciation, 0.5 million from a non-cash asset reserve and 0.5 million in other miscellaneous non-cash charges. Finally one additional source was 1.6 million in cash from better working capital management through the deferral of cash payments associated with certain expenses.

Our cash flow and working capital in general have continued to stay efficient in Q4. Accounts receivable increased 0.3 million from 12.8 million to 13.1 million due to sales growth in the quarter. However, this represented a decrease in days sales outstanding to 41 days at December beyond from the 44 days reported at the end of September.

Inventory increased from 5.5 to a still lean 6.7 million at the end of December. Inventory days were up to 62 days number from the 52 days on hand at the end of September which then implies inventory turns declining to 5.7 times at the end of Q4 from 6.9 times at the end of Q3. Total inventory has generally been lean, but increased by approximately 1.2 million in Q4 to accommodate larger swings and surges in individual products being demanding.

Payables increased from 6 million to 7.3 million and days payable outstanding went up to 67 days at the end of December and 57 days at the end of September.

Now let me recap the business outlook for Q1. I remind everyone again that the following statements are based on current expectations as of today and include forward-looking statements, actual results may differ materially. We do not plan to update nor do we take on any obligation to update this outlook in the future.

As a range of guidance for Q4, we forecast revenues to be up sequentially 3% to 10% or 31 million at the midpoint plus or minus 1 million. We expect non-GAAP gross margin to decline 30 to 50 basis points based on the mix of business and should be in the range of 65.5% to 66.5%. We expect non-GAAP operating expenses to increase approximately 0.2 million in the first quarter plus or minus 0.1 million. This is primarily expected in R&D due to ongoing hiring and new product design.

We are currently estimating the non-GAAP effective tax rate to be 30% for the year. We are confident these components should then align in non-GAAP net income of between 2.5 million and 3.4 million which on approximately 32.6 million estimated diluted shares would result in estimated non-GAAP earnings per diluted share of between $0.08 and $0.10.

We also estimate non-cash stock compensation expense to be between 4.4 million and 4.6 million. This would imply a GAAP net loss at the low of 0.8 million to net income at the high of 0.1 million. GAAP earnings per share will then be in the range of a loss from $0.02 to breakeven per common share. We will not update this outlook during the quarter and up until the time of the next quarterly earnings release unless Inphi publishes a notice stating otherwise.

So please ask your questions today during the general Q&A period and now we’d be happy to answer any questions that you might have.

Question-and-Answer Session

Operator

Ladies and gentlemen, we are ready to open up the lines for your questions. (Operator Instructions) Our first question comes from Jorge Rivas.

Jorge Rivas - Craig-Hallum Capital Group

Thanks for taking my question, very nice work on the quarter. It seems like your comm business will be accelerated and faster than your memory interface segment. So I was wondering if we should expect the material shift that would trickle down the gross margins and may be what are you guys are thinking to change your long-term operating model that calls for gross margin of between 60% to 64%?

Ford Tamer

Yes, thanks Jorge for the question. We do expect communications revenue to be growing faster here in first six months of 2014 and in general that will bode well for gross margins. But I think we would like to remain conservative for the time being, because it’s all a function of new products coming into the market versus legacy products and the pricing arrangements we have with customers. So for right now we are still guiding to 65.5% to 66.5% gross margins for the first quarter.

Jorge Rivas - Craig-Hallum Capital Group

Okay, fair enough. And then just wondering your OpEx plans for 2014 and whether if you can provide some kind of color on what to expect and what type of R&D investments we’d see Inphi to be more to be focused on during 2014?

Ford Tamer

Well, I think we are focused on continuing to invest in R&D and we are trying to kind of walk our fine line here of taking advantage to investment opportunities, as well as providing earnings leverage for our investors overall. So for the -- I think as we move through each quarter, you will see us continuing to invest and also trying to improve operating margin at the same time. So we may stretch things out a little bit from quarter-to-quarter, but in general we’ll be continuing on that same tact.

Jorge Rivas - Craig-Hallum Capital Group

Okay, alright. One last question if I may. So just wondering on the CFP and CFP2 initiative, wondering if you guys have seen any contribution this quarter, what are those design wins last year you’ve already burning through for you guys?

Ford Tamer

Yes on CFP and CFP2 the ramp has started, so the SerDes revenue that we have today is being driven mostly by the CFP module. And we expect a good increase in 2014 that’s the line that we guided that we still will expect another 165% increase. We had 165% increase in ’13 expecting about a doubling in ’14 in that business.

Jorge Rivas - Craig-Hallum Capital Group

Okay, alright. That should be all for me guys. Thank you very much.

Operator

Our next question comes from Sundeep Bajikar with Jefferies.

Sundeep Bajikar - Jefferies

Hi, guys. Thanks for taking the question and nice job on the quarter. First, can you tell us what portion of your 100 gig revenues are generated from modules for the datacenter today versus modules for ONCALL or any other type of device that’s not datacenter? And what do you think that mix would look like potentially exiting this year. Also what portion of the datacenter revenues are generated from amplifiers versus other components?

Ford Tamer

So if you look at the two businesses that we do discuss. Sundeep as we discuss the 100 gig driver and amplifier together, we don’t breakup the two and then we discuss the 100 gigabit SerDes as a second business, 100 gigabit SerDes today is mostly datacenter, the 100 gigabit amplifier driver is mostly carrier and service provider. And we existed the year at call it 75-25, so the amplifier, driver business being above 70% of our communication business and the SerDes being about 25%. And as we go through 2014, the SerDes grows faster. We said the SerDes will double and the driver amplifier will grow 70%. So we’d probably exit 2014 about two-third, one-third and amplifier, driver in third in SerDes.

Sundeep Bajikar - Jefferies

Great. And then on the driver side, can you give us some color on Inphi’s market share today and where you think it might go exiting the year?

Ford Tamer

So, we’re very excited about the rollout of linear driver which are a very critical component in being able to drive coherent into longer distances and higher speeds as evidenced by the Alcatel-Lucent, the British Telecom trials. And we do believe we’ve got a leading share and linear drivers today as opposed to limiting driver that are supplied by our competitors, so as the market develops through 2014 and beyond Inphi’s share will grow in that driver business as a result of our linear driver share.

Sundeep Bajikar - Jefferies

Okay, great. And then finally from me, 10 gig and 40 gig revenues it seems like a smaller portion of your overall communications revenues, how should we think of them just in terms of revenue profile going through 2014 and beyond? Should we just hold them stable or maybe model even a slight decline in that bucket?

Ford Tamer

A slide decline in a bucket is the right thing, Sundeep, so there was still a I will call it a 20% to 25% of that driver, amplifier business as we exit 2014 that there will not be as relevant, and so you see a slight decline through the next four quarters.

Sundeep Bajikar - Jefferies

Great, thank you very much.

Operator

Our next question comes from Quinn Bolton with Needham & Company.

Joseph Turano - Needham & Company

Hey, guys, this is Joseph Turano for Quinn. And I want to add my congratulations on the quarter and guide. I was hoping you could touch on a little bit about the RDIMM business, I know you had said it was down quarter-to-quarter some inventory correction I was hoping you could potentially deal a little bit deeper and a little more color there? Thanks.

Ford Tamer

Yes Joseph, I think, is that correct.

Joseph Turano - Needham & Company

Yes how are you?

Ford Tamer

Yes thanks for joining us today. The RDIMM is down slightly we had some channel filling on the third quarter with the Ivy Bridge launch, so it seems to be stable as we move into the first quarter here and we’re anticipating a slight growth in RDIMMs by the end of the quarter.

Joseph Turano - Needham & Company

Okay, thanks. And just I want to check on the DDR4 qualifications, everything on-track there any additional color would be helpful.

Ford Tamer

We’re on-track, we do have revenue that in orders, we are being qualified and we do believe the batches will keep going for the next few months and we’re definitely in the running, so on-track.

Joseph Turano - Needham & Company

Alright, thanks so much, I appreciate it guys.

Operator

Our next question comes from Doug Freedman with RBC Capital.

Doug Freedman - RBC Capital Markets

Great thanks guys for taking my question and again congratulations on your strong results. Can you help us understand what you’re seeing as sort of the driver of the LRDIMM uptick that you’re seeing, is it that the price of the modules, the delta has collapsed a little bit, is it the markets moving to performance, anything you can offer as far as what’s driving the market towards this solution now?

Ford Tamer

Yes Doug this is consistent with what we said in the past, meaning we had, our remarks in the past and look there is two factors, one is the Ivy Bridge launch which will get the performance of LRDIMM to be the same as in RDIMM, where in the past it was slightly disadvantaged. And the second one as we discussed is the fact that the pricing delta now is under 2x, so today we’re probably looking at a 60% premium on LRDIMM pricing compared to RDIMM.

And so the two factors, the Ivy Bridge launch along with a continued decline in the LRDIMM module price has contributed to LRDIMM growth. And as we said in our prepared remark we are cautiously optimistic that their growth will continue through the remainder of 2014.

Doug Freedman - RBC Capital Markets

Do you believe there has been any impact on your business from what we’re seeing in the DRAM market the tightness there and the price increases, well if the pricing in DRAM was to inflect and soften do you think it would have a positive or negative impact on our revenue recognition?

Ford Tamer

So far the, we meet on the same cadence and we have to have the same price negotiation with our memory module customers, so obviously our customers are in a better mood coming to these negotiations but I think the negotiations have been business as usual, so we don’t believe they’ll be an impact, we haven’t seen an impact so far and we don’t believe any softness would have an impact on our business.

Doug Freedman - RBC Capital Markets

Great and my last question for you really is just to understand the R&D spending, in the past you’ve been able to introduce some new products such as your SerDes. Is there anything in the pipeline without divulging products before they’re released that we might classify as a new product category that could create material revenue?

Ford Tamer

We have introduced our linear driver product we probably haven’t made as big a deal about it as we should have, but the linear driver and online is a new category, is a category we’ve been investing in for a while and it’s going to be driving substantial revenue in 2014 and beyond. We’re obviously working on some new products that we haven’t announced yet and would drill out later on.

Doug Freedman - RBC Capital Markets

Great thanks so much and congrats on the strong results.

Operator

Our next question comes from Tore Svanberg with Stifel Nicolaus.

Tore Svanberg - Stifel Nicolaus

Yes, thank you, very good quarter, my first question is on your visibility I know you typically don’t give out any sort of backlog information, but could you just qualitatively talk about linearity and how bookings have progressed so far in the quarter?

Ford Tamer

Yes, we’re in general in good shape, I think we were, our backlog’s probably a little bit higher than it would be at this time of the quarter for instance in, we do see positive growth trends both in the communications side of the business and in the server side with respect to LRDIMM in the quarter I think from that point of view that’s reflected in the guidance that we’ve given for Q1 here.

Tore Svanberg - Stifel Nicolaus

Very good and if we look at RDIMM and LRDIMM for 2014, just trying to think, just trying to ask how we should think about the growth in each one, so now that the inventory correction is over so should RDIMMs sort of grow in line with the market and then LRDIMM maybe having the potential of doubling, is that how we how we should look at it?

John Edmunds

Yes, I think that’s the right way to look at it Tore, LRDIMM it’s really hard for anybody to say what the upside potential is in LRDIMM, so we quoted a figure in the press release we talked about I think in Ford’s speech here he talked about 70% potential growth there, and RDIMM will definitely track with the market, people need DIMM cards every year just like they need PCs and autos so it’s, that market will definitely trend along with the rest of the market.

Tore Svanberg - Stifel Nicolaus

Very good and Ford you, and I know this is not a guidance per se, it’s sort of 50 million run rate by Q4 ’15, but it’s 20 million higher than where we are today, if you look at the eight quarters I mean is it going to be fairly sort of linear trajectory towards that 50 million or do you have any significant ramps throughout that period that we should potentially model?

Ford Tamer

So internally, we have a goal to get to around the $30 million mark by end of this year and you could see between Q4 and Q1 our Q1 guidance where we’re right, the average obviously is right around that mark. And so the next target for us is to get to the 40 and then to the 50, and we have an internal plan that we believe that's a reasonable achievable target. So we're marching towards it, Tore and we don’t want to start giving forward guidance for ’14.

Tore Svanberg - Stifel Nicolaus

Understood. Last question you mentioned the linear driver product could maybe already start to generate some revenues this year. Is that the case and if so are we talking meaningful here or would the linear driver still be primarily 15 of that?

Ford Tamer

Actually I'm pleased with the introduction of our customers systems and they will be driving some good growth in 2014.

Tore Svanberg - Stifel Nicolaus

Very helpful. Thank you very much.

Operator

(Operator Instructions) Our next question comes from Ross Seymore with Deutsche Bank.

Bob Gujavarty - Deutsche Bank

This is Bob Gujavarty for Ross. I was just curious about the kind of the interplay between LRDIMM and RDIMM. I mean is there some -- I think it's still a good tradeoff for you guys, even if there is some substitution effect of LRDIMM for RDIMM given the ASP premium and the differentiation. But is there -- as LRDIMM becomes a bigger part of the market, by nature is that RDIMM market smaller? Just curious.

Ford Tamer

Bob, the way to think about it is, even with the recent LRDIMM success, it still represents we headquarter a number of 2.5% to 3% of the market. So it's still a very small percent of the market. Obviously we would prefer to have more of the market shift to LRDIMM, so actually we -- a shift towards LRDIMM is beneficial for Inphi given ASP and the market share that we have. So we -- as the price premium between LRDIMM and RDIMM continues to come down we think -- as I said consciously optimistic that the LRDIMM share will go up compared to RDIMM.

Bob Gujavarty - Deutsche Bank

Great and then just kind of you suggested a kind of more of a 50-50 mix between comms and computing in the first half. Does that go back to 60-40 in the back half or is it kind of more balanced still like 55-45, how should we kind of think of that, kind of first to second half?

Ford Tamer

So just to clarify we were at a 60-40 split in 2013, and expect to exit 2014 at that 50-50. So we ended 2013 on a 60-40, communications grows faster so expect to exit 2014 at a 50-50.

Bob Gujavarty - Deutsche Bank

Okay so that’s kind of a full year, or end of year target for like Q4 run rate kind of 50-50.

Ford Tamer

The second half.

Bob Gujavarty - Deutsche Bank

Second half, okay, thank you.

Operator

Our next question comes from Jorge Rivas with Craig-Hallum Capital Group.

Jorge Rivas - Craig-Hallum Capital Group

Yes I had a follow-up on your SerDes. I was wondering if you have been able to determine what kind of share you’re going to have in the market?

Ford Tamer

You’re asking about market share?

Jorge Rivas - Craig-Hallum Capital Group

Yes.

Ford Tamer

So we have not changed -- we have said in the past that we expect to have a leading share in that market and we still expect that to be the case.

Jorge Rivas - Craig-Hallum Capital Group

Okay and one more, if I may, so you said it is 60% premium compared to RDIMM on LRDIMM. So I am just wondering if there is a potential scenario where ASPs can decline to the point where we can see a more rapid adoption of OEMs, you think…?

Ford Tamer

So just to be clear, there is a 60% module premium for LRDIMM compared to RDIMM. So at a high level a RDIMM to 216 gigabit RDIMM so a 32 gigabit equivalent of RDIMM is roughly around a 450 and a LRDIMM you could think about it around 850. It’s actually the two RDIMM is around 480s, so 48, to be exact I have got the numbers here, 480 and 840. So that’s the premium today. So 216 gigabyte RDIMM are 480 and 132 gigabyte LRDIMM is 840, sort of after discount our estimate of where street price is right.

Jorge Rivas - Craig-Hallum Capital Group

Okay.

Ford Tamer

So in the past that premium was much higher right. We started with a 5x premium and we always said when we go under the 2x we could see some interesting things happen and as we get closer to on the one half or closer to the 1x mark, obviously that could be very interesting, so that’s the premium we are discussing.

Jorge Rivas - Craig-Hallum Capital Group

Okay, that’s very helpful. Thank you. I’ll jump out of line now.

Ford Tamer

No problem.

Operator

I will now turn it over to John Edmunds for closing remarks.

John Edmunds

Thank you, Esteban. Ford and I would like to thank you all for joining us today. We look forward to attending the Stifel Conference in San Francisco on Tuesday, February 11th, the Morgan Stanley Conference in San Francisco in the March 3rd to March 6th timeframe, the Piper Jaffray Conference in New York also on the March 11th to 12th timeframe, and ROTH Conference in Los Angeles on March 9th through 12th.

Again we’d like to thank you for joining us today and we look forward to speaking with you again in the future.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.

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Source: Inphi's CEO Discusses Q4 2013 Results - Earnings Call Transcript
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