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IXYS Corporation (NASDAQ:IXYS)

F4Q10 (Qtr End 31/03/10) Earnings Call Transcript

May 25, 2010 5:00 pm ET

Executives

Nathan Zommer – Chairman & CEO

Uzi Sasson – President & CFO

Analysts

Steve Ferranti – Stephens Inc.

Vernon Essi – Needham & Company

Christopher Longiaru – Sidoti & Company

Jeff Schreiner – CapStone Investments

Michael Amari – Americo Inc.

Operator

Good day and welcome to the IXYS Corporation's fiscal year ended March 31, 2010 earnings conference call. Today's conference is being recorded.

At this time I would like to turn the conference over to Dr. Nathan Zommer, Chief Executive Officer, please go ahead sir.

Nathan Zommer

Thank you. Good afternoon and welcome to the IXYS Corporation fourth quarter and fiscal year-end earnings 2010 earnings conference call. I am joined by Uzi Sasson, our President and CFO. Uzi will lead us through the financial discussion later in the call.

First, to review the formalities, our discussion today contains forward-looking statements including statements related to potential future revenues and earnings. Any statements in this conference call that are not statements of historical fact maybe deemed to be forward-looking statements.

There are a number of important factors that could cause the results of IXYS to differ materially from those indicated by these forward-looking statements, including among others, risks detailed from time to time in our SEC reports, including our quarterly report on Form 10-Q for the quarter-ended December 31, 2009. IXYS does not undertake any obligation to update forward-looking statements. As a reminder, IXYS fiscal year ends March 31st. Therefore this quarter marks the fourth quarter of fiscal year 2010.

We will now turn to the highlights for the quarter. With quarterly revenues up $76.7 million, an increase of 31.4% from the same quarter in the prior fiscal year. Gross margin was 42.4%, an increase of 24.2 percentage points from the comparable quarter of the prior year. We acquired Zilog in a $65.2 million all-cash transaction.

Ending cash balance was $61.3 million even after the Zilog acquisition. Bookings were up $21.4 million or 27.8% from the December 2009 quarter, indicating that customers have begun restocking inventory utilizing IXYS products. We have achieved three consecutive quarters of growing revenues, much of which can be attributed to our strong cross selling efforts, new design wins, and winning product orders over our competitors.

We are optimistic about our future prospects within all of our traditional and developing markets, further enhanced by the recent acquisition of Leadis Display business [ph], and Zilog Microcontrollers. The order levels in this quarter were very strong with $21.4 million more in bookings in the March quarter than the prior one. We had a book-to-bill ratio of 1.3 for the quarter, which is the highest it has been for the last six years.

Importantly, the fiscal year book-to-bill ratio of 1.2 has not been witnessed since fiscal year 2001. We are clearly encouraged about our growth prospects. (inaudible) revenues during the March 2010 quarter were $76.6 million, 31.4% higher than the same quarter a year ago of $58.2 million. The March quarter’s revenues were approximately 19.6% higher than the December 2009 quarter.

We recorded revenues that rivaled our three recession quarter successes. We can attribute this gain to the following issues. We executed on our long-term strategy for growth, which included investment in R&D and our own internal manufacturing technologies, staying focused even during the recession, and our plan to diversify allowed us to enhance our product portfolio and (inaudible) all of our competitors.

(inaudible) with offering new products and approaching new markets and customers with synergistic products from our power, IC, and system product groups. We experienced increased demand for our products across our classic markets, industrial, medical, IT and telecom, alternative and renewable energy, transportation and consumer applications.

For the 12 months ended March 31, 2010, IXYS reported net revenues of $243.2 million as compared with net revenues of $273.6 million from the same period in the prior fiscal year. It was a year that started in April 2009 with declining quarterly revenues and ended in March 2010 with three quarters of growth in revenues, leading to a cash balance at year-end of $61.2 million.

As a percentage of total revenues for the fourth quarter of fiscal year 2010, North America represented 30.1%, Europe and Middle East 33.5%, Asia 33.4% and the rest of the world 3%. It is important to note that IXYS’ sells higher margin products in North America and Europe.

Our revenue by market segment for the fourth fiscal year 2010 was as follows

industrial and commercial, which includes also renewable energy, 49.7%, communication infrastructure 14.9%, medical and electronics 10.5%, consumer 10.7%, transportation which includes auto and traction 4.1%, and others 10.1%.

Our revenues based on product groups for the fourth quarter of fiscal 2010 were 69% for power semiconductors, 23.8% for integrated circuits and 7.2% for systems and RF.

During the quarter we introduced five new products, including a high-voltage, high speed power MOSFET and IGBT driver, which is well suited multidriver switch [ph] power supply, lightning and industrial applications; a three phase rectifier module utilized in electrical systems where AC electrical power is converted to DC power mainly for applications such as motor drive, welding and high power conversion.

An AC solid state switch that enables energy savings by power supplies [ph] and other offline application and especially when systems are (inaudible) for inverters, power supplies, lighting and (inaudible) and miniature 16-volts solid state relay ideal for portable instruments, automation and industrial system and low voltage lighting.

I will now turn the call over to Uzi Sasson, President & CFO, who will discuss the financials.

Uzi Sasson

Thanks, Nathan. Strong sales growth coupled with disciplined cost and operations management allowed us to post solid financial returns. Gross profit was $24.8 million, or 32.4% of net revenues, for the quarter ended March 31, 2010, as compared to the gross profit of $4.7 million, or 8.1% of net revenues, for the same quarter in the prior fiscal year.

Importantly, gross margins increased 7.9 percentage points over the December 2009 quarter, marking four consecutive quarters of margin growth. Gross profit increased by $9.1 million quarter-over-quarter due to higher revenues, a better mix of higher margin products and lower unabsorbed manufacturing costs, and in particular better fab utilization.

Gross profit for the twelve months ended March 31, 2010, was $63.4 million, or 26.1% of net revenues, as compared to a gross profit of $66.0 million, or 24.1% of net revenues, for the same period in the prior fiscal year.

In the March 2010 quarter, our net income was $4.0 million or $0.13 per share on a diluted basis, as compared to the net loss of $10.9 million, or $0.36 loss per share in the same quarter of the preceding year. Net loss for the twelve months ended March 31, 2010 was $677,000, or $0.02 loss per share, as compared to the net loss of $3.3 million, or $0.11 loss per share, for the same period in the prior fiscal year.

The number for the fourth fiscal of 2010 and for the fiscal year 2010 included our acquisition related expenses of approximately $542,000 in the fourth quarter and $1.4 million during the fiscal year. But for this acquisition expenses, our profit for the fourth quarter and the year would have been approximately $4.4 million and $162,000 respectively. The required non-GAAP information can be found on our website by going to ixys.com, clicking on the link titled financial releases, and then clicking on the item titled IXYS corporate financial information fiscal quarter ended March 31, 2010.

Interestingly, bookings and backlog have increased in the last three quarters. Backlog was $125.5 million at March 31, 2010, as compared to $76.9 million in the comparable quarter of last year. More indicative of a recent upward trajectory, backlog increased $33.7 million in the March quarter over the December quarter. Bookings were equally impressive with $98.6 million for the March quarter, as compared to the $38.3 million for comparable quarter of last year, an impressive 158% increase.

On a quarter-over-quarter basis, bookings jumped from $77.1 million in December 2009 to $98.6 million in the March 2010 quarter, a 28% increase. CapEx was $2.6 million for the quarter with expenses mainly due to new equipment purchases for our internal fabs.

R&D spending for the quarter was $5.9 million or 7.7% of net sales as compared to the $4.4 million or 7.5% of net sales in the prior year quarter. IXYS R&D spending level allows us to design multiple new products each quarter, some of which have 10 to 20 year life cycles. SG&A expenses were $11.5 million or 15% of net sales.

Turning to the balance sheet, the ratio of current assets to current liabilities was 3.5. Even with the cash purchase of Zilog in February, the company exited the fourth fiscal quarter of 2010 with approximately $61.3 million of cash and cash equivalents. IXYS did not purchase shares during the quarter. We currently have about 1.4 million shares left authorized for buyback under our current program.

Net accounts receivable at March 31, 2010 were $47.2 million, an increase of $10.6 million from the December 31, 2009. DSO was about 55 days at March 31, 2010, as compared to the 51 days at December 31, 2009. As of March 31, 2010 net inventory was $65.6 million, a $200, 000 increase from the prior quarter. Zilog inventory on that date was $3.3 million. If we exclude the Zilog inventory, IXYS active sales growth and better fab utilization would have resulted in our net inventory being lower at March 31, 2010 than it was at the end of the December quarter.

IXYS exercising discipline in purchasing and spending related to inventory. Inventory turns were 3.2 times during the quarter. We continued to hold strong cash position and maintain a lean operating environment. We remain focused on operating cost reduction, while dedicating $4 million to $6 million to R&D each quarter. Tentative company projections look quite promising with a quarterly book-to-bill ratio 1.3.

Therefore we project revenues for the first fiscal quarter of 2011 to be between $79 million to $81 million.

We will now open the floor to questions.

Question-and-Answer Session

Operator

Thank you. (Operator instructions) We will take our first question from Steve Ferranti with Stephens Inc.

Steve Ferranti – Stephens Inc.

Hi, thank you. Congratulations guys on the nice results.

Nathan Zommer

Thank you, Steve.

Steve Ferranti – Stephens Inc.

You know, we have been hearing, I would say a fair number of anecdotes about tightness and component availability from other semiconductor suppliers in the power electronics space, but more on the low-power side, but I wonder if you might be able to talk a little bit about how you feel about your ability to deliver relative to the very robust demand that you are seeing out there today?

Nathan Zommer

Okay. One thing I want to mention and I mentioned that in our press release is we're blessed in the fact that over the years we balanced our manufacturing with internal wafer fab and external foundries and as you can imagine, if you have internal foundries or internal wafer fabs with ultimate flexibility in jumping up production.

However, what happened in the market, the demand is just going through the roof and as we said it is unprecedented the book to bill ratio we are in. So we are booking more, we are shipping more, and still receive tremendous bookings. So we're doing as best as we can and we’ve seen that a lot of our customers come to us for more product because they cannot get it from the competition. Uzi might add more as to what is going on in the operation in that regard.

Uzi Sasson

Steve, with respect to operations we try to control our own destiny, which means we have a division that grows [ph] for internal usage, and we're capitalizing on that. We are using our assemblies. We're certainly investing in our own fabs and we are blessed, as Nathan mentioned, the fact that we have our own manufacturing capabilities, and that really puts us ahead of some of the other companies in the same space. So we are able to deliver and address customers’ demand.

Steve Ferranti – Stephens Inc.

That is great, and can you give us a sense for where internal capacity utilization is today in your fab versus where it was a quarter or two ago?

Nathan Zommer

Well, let me just add (inaudible) so manufacturing costs went down significantly, but of course, I would say that 50% point, we have some fabs that are running very close to the max available capacity, and available capacity depends on how quick we can stop, and then shifts.

So, we still have capacity to aggressive growth, (inaudible).

Steve Ferranti – Stephens Inc.

That is great, very helpful. Just one more from me, you know, gross margins looked great in the March quarter, and you alluded to a couple of factors that helped in the prepared remarks, which were improving fab utilization, product mix, and improved absorption of overhead. Can you – was there one of the factors that sort of stood out as a driving factor, and I guess sort of related to that, we have now got a contribution from Zilog. Does that perhaps change what we should think about in terms of how high margins could go in your business?

Uzi Sasson

Steve, I will take that. You know, with margins we were struggling earlier in the year, then that is predominantly because of unabsorbed manufacturing costs. You know we have our own fabs that you know carry some inherent costs with them. Now that the utilization is going up the unabsorbed manufacturing cost is going down. We have direct contribution or positive contribution I should say to the bottom line of the gross margin.

In addition, Zilog inherently has a pretty good gross margin, which also contributed to that, but let us not forget that in the last few quarters we have been also reducing inventory and have been alluding to the fact that inventory, but the Zilog acquisition would have gone down on a gross and net basis, all of which are moving parts and helping us improve our gross margins.

Nathan Zommer

I will add to that. There is no question that the mix of our products have changed significantly as you can see from the percentage of revenues in the quarter that we see the power semiconductors now, although we are growing the business it is below 70% of our revenues, and the integrated circuits, which inherently have high gross margins take a bigger chunk.

So, indeed you should sharpen your pencil when you analyze the model that indeed we are seeing mix of products with higher margins, and all the good stuff that Uzi just mentioned just yesterday. So, we continue, I believe that we continue to see incremental improvement in margins.

Steve Ferranti – Stephens Inc.

That is great. Sounds like things are going very well. Just one housekeeping question to sort of finish it up for me, you know, when you break out your revenue by end market, which end markets would you have incorporated Zilog revenues into?

Nathan Zommer

Well, the Zilog revenues go into the industrial and consumer markets.

Steve Ferranti – Stephens Inc.

Okay. Fair enough. Thanks and congratulations again and good luck going forward guys.

Nathan Zommer

Thank you so much, Steve.

Operator

Next up, we will hear from Vernon Essi with Needham & Company.

Vernon Essi – Needham & Company

Hi, thank you very much and congratulations, especially I think on the inventory side that is pretty impressive. The fact that you also told us how much inventory came from Zilog opens the door for me to press my Q&A here. Are we going to be able to know how much Zilog contributed to the quarter by chance in terms of revenue?

Nathan Zommer

Yes, you know Vernon, it is good to hear your voice, and I know you always have very nice questions. As you know our tradition is we don't break out by divisions because we intermix and we have synergistic sales approach. So you can decipher it from the jump in the integrated circuit revenue.

Vernon Essi – Needham & Company

Sure, sure…

Nathan Zommer

…which is a combination of our own (inaudible) and our own ICs into Zilog. And that is okay if Zilog only had 40 days in the March quarter to sell devices.

Vernon Essi – Needham & Company

That is true. Okay. So, that is helpful and I appreciate the way you have always approached your acquisition. Can you give us a little more understanding over time of how we might see the operating expenses play out, obviously the SG&A is going up here, I'm trying to understand sort of what would be your normalized run rate for that on a go forward basis and also the amortization charges as well?

Nathan Zommer

Okay, Vernon, I will take that. So first of all with regard to depreciation and amortization in the fourth quarter, we had approximately $4.3 million, and as far as the G&A cost, traditionally and as I mentioned in the prepared remarks, the G&A cost includes the one-time acquisition cost. So we need to bifurcate those in order to come up with a really true operating line over SG&A cost, but you know overall our aim is to reduce operating expenses, and reduce the cost.

And as I mentioned, we are basically working continuously on making sure that those expenses are being controlled, and working on operating cost reductions overall.

Vernon Essi – Needham & Company

Okay, but just to get an understanding here, we should expect there to be still I guess an upward trend line near term in those line items, correct, as we move into the June quarter given that these aren’t even fully loaded for your acquisition for the March quarter?

Nathan Zommer

Actually, those are fully loaded Vernon. The expenses include approximately $2 million of acquisition cost related. So if you remove those you will get percentages that are much different and lower in absolute dollars SG&A costs. So at the end of the day we would like to be at the 11%, 12% of operating expenses of SG&A, and that would be a good number for us to be in.

Vernon Essi – Needham & Company

Okay. That is helpful. And just for clarification here, I'm sorry, but I was asking just in general your intangibles charge or amortization per quarter, we appreciate the depreciation number, but in the OpEx line should we be modeling that sort of in the 1.4 range going forward?

Nathan Zommer

Actually 1.841 that was the number.

Vernon Essi – Needham & Company

Okay. And then two others, and I think you had mentioned this in your prepared comments, but what was the update on the buyback. I apologize, I missed your comments.

Nathan Zommer

Sure. We didn’t acquire shares during the quarter, and we have about 1.4 million shares left under our program.

Vernon Essi – Needham & Company

All right, and one other housekeeping point here, cash from operations, what was it in the quarter?

Nathan Zommer

It was approximately $6 million.

Vernon Essi – Needham & Company

Okay. And then finally just, I know you have talked about synergy overall from Zilog and what you expect to garner out of that, are there any sort of anecdotal examples of where you have seen some cross selling that you can discuss on the call?

Nathan Zommer

It will be a pleasure Vernon. To give you a very good example that we had one case of a Zilog customer that Zilog (inaudible) and they had been using a power semiconductor from our competitor. And the first thing (inaudible) Zilog salesman that closed on the account is, can we get IXYS product ASAP, because they cannot get products from the competitor. So that did as a result, remember that question to us for June end quarter results, then we will take about it. So we started to see the benefit of that cross selling.

And we have seen the same thing with Clare for the last two quarters, and it became more pertinent in this quarter, where a Clare customer or a Clare product utilizes IXYS power semiconductor inside, namely the power solid state relay, and we mentioned that product in our new power AC switch, (inaudible). As a matter of fact, several companies now use the AC switch to cut off the energy from the AC line to the power supply using our power solid state relay.

Our power solid state relay is an embodiment of the synergistic and cross selling when you sell that Clare, and the switch is really a IXYS power semiconductor in one device. So, we love it, and we alluded to that in our statement that we start to see the benefit of our long-term strategy on how those divisions fit into the one picture, the one market, industrial, the power, the medical, the consumer and the traction. So we just hope that the market will still be there.

That is the issue. We have all the products. We have the right products and the right issues in the market. As you can see today the world is waking up, short of resources and the notion is energy today is a big story, and to solve energy problems, the bricks for that are the power semiconductors. And we have (inaudible).

Vernon Essi – Needham & Company

Okay. Well, congratulations and thanks for taking my questions.

Nathan Zommer

Thanks, Vernon.

Uzi Sasson

Thank you, Vernon.

Operator

Our next question will come from Christopher Longiaru with Sidoti & Company.

Christopher Longiaru – Sidoti & Company

Hello.

Nathan Zommer

Hi, Longiaru.

Christopher Longiaru – Sidoti & Company

Congratulations guys. Great quarter.

Nathan Zommer

Thank you so much.

Christopher Longiaru – Sidoti & Company

So, my biggest question here is, can we get a better idea, your utilization obviously jumped up a bunch, can you give us an idea where, was it the end of March and where you are currently?

Uzi Sasson

Yes, sure. Chris, I will take that. Utilization, as Nathan alluded earlier is above the 50%. In some fabs we are running close to full capacity. Let us not forget also that couple of years ago we migrated from 16-inch to 8-inch with our external fab. So that allows us better or additional capacity that we can capitalize on, and you know we are in a lot of ways blessed and fortunate enough to have our own fabs, whether it is Beverly, Mass or Germany or the UK or whatnot, so that we can with a little investment increase capacity and utilization.

Christopher Longiaru – Sidoti & Company

And I'm talking about in Germany, are you seeing yet any advantages to the Euro weakening against the dollar in terms of costs?

Uzi Sasson

Well, in a lot of ways if you think about it, it is neutral hedged that we have the fact that we have the fab in Germany, but the fact that the euro is getting weaker could really cost us on the revenue line at some point in time, but then we will get the benefit in other locations within the P&L as you know, but at the end of the day the dollar is getting stronger and our products are going to be much more attractive for selling in the marketplace, and more competitive, and I think at the end of the day it is going to help us.

Nathan Zommer

If you look at our revenues, 60% something plus of our revenue are euro, in North America. So, as Uzi said sometimes it is neutral because in some countries we denominate the sales in euros, but some countries in dollars. So, we love the fact that 66% of our revenue are in dollar currency, and about 50% of our production is in Europe.

Christopher Longiaru – Sidoti & Company

Okay, and the last thing it is just on that backlog number, can you give us any read through into that backlog, how long does that go out and…

Uzi Sasson

I will take that. Chris, usually the backlog is for 12 months. As you know, and as we indicated the backlog has been increasing, the booking has been increasing, and with a backlog at March 31 of $125.5 million, I think a lot of it is because we have technology that is A plus, and that is for 12 months. Many of the customers understand the issue of lead time, understand the issue of catastrophe, stocking material et cetera, and we are insisting on having orders, which are coming in.

Christopher Longiaru – Sidoti & Company

What's the lead time now?

Uzi Sasson

Lead time it depends. It could be 16 weeks, it could be 18 weeks. It depends on the product, but it could also be 14 weeks, it depends, but we have the backlog, we have the bookings and we are working on getting products out of the door.

Nathan Zommer

The fourth area, we hear from our competitors that their lead times is 24 to 28 weeks. So, thank god we still haven’t crossed that number…

Christopher Longiaru – Sidoti & Company

Okay, great. Thanks a lot guys. Congratulations again.

Nathan Zommer

Thank you very much, Chris.

Operator

Next up, we have Jeff Schreiner with CapStone Investments.

Jeff Schreiner – CapStone Investments

Thank you for taking my questions, gentlemen. Great March quarter.

Nathan Zommer

Thank you.

Jeff Schreiner – CapStone Investments

Dr. Zommer, could you talk a little bit about potential double ordering, if there is product shortages for your customers and people are flipping to you so quickly to get product, could there not be some double ordering going on out there in some of your numbers just backing into your power numbers it looked like you were you were up a very large amount of your gain might be coming from power, maybe I am wrong on just back of the envelope, but I am trying to understand here where this significant increase sequentially came from when we haven't seen something this significant in the last five years in the business if I am not mistaken, so are there any concerns about double ordering when you're hearing about product shortages from other customers?

Uzi Sasson

I think that – this is Uzi. With regard to double orderings, I am sure that there are in certain instances double orderings or double bookings if you will. But in order to basically protect our self, we are going line by line. We are monitoring who are the customers, which distribution or which distributor is ordering the parts, what parts are being ordered. We are comparing them to historical trends and whatnot.

We are talking to existing customers. We are visiting customers. So from time to time we find instances where there are double bookings. But overall I think that the current situation is pretty good in terms of looking at the booking and looking at the backlog.

Nathan Zommer

Jeff, let me just add, this is Nathan that is why we don’t go gaga over capital expansion in a crisis. We realize it. So even if you discounted, let us assume there is double booking. So, with book-to-bill ratios, (inaudible) it will be 1.16. So, we monitor, as Uzi said, yes, we think it is a great run internally. With the teams going through the distribution, this is OEMs and try to understand in some part numbers that we know belongs to a certain customer, don’t forgot that a lot of proprietary part numbers, sometimes we can break the code and understand we have double bookings.

But nonetheless, as I said, we don't go gaga of spending money just because we see an unprecedented increase in orders. This is really unprecedented and – but we – remember what Uzi said while reporting we are disciplined.

Uzi Sasson

The other thing that just to add to that it goes hand-in-hand of managing the capacity, the starting materials, inventory ordering, procurement and everything associated with it and therefore, and having had our inventory goal down in the last few quarters, I think it is very prudent. It is very essential for us to manage this process so that at the end of the day we don't get stuck with inventory that was purchased because of double booking.

Jeff Schreiner – CapStone Investments

Okay, thank you very much for that. Uzi or Dr. Zommer, can you tell us maybe what I know you don't to want talk about a breakout of revenues, but I think it would be very helpful if we could learn maybe what dollar contribution of backlog was added from Zilog?

Nathan Zommer

Well, I would say that if you look traditionally Zilog was only 40 days in our regular picture. But if you look at the integrated circuit jump in revenues, you can assess from that a few million dollars, and we expect further impact in the next quarter. Uzi can add maybe more statistics to that, but I think that given the fact that microcontrollers are very distinct (inaudible) business.

Uzi Sasson

Okay. Let me add a couple of things to that. First of all, let us not forget that as Nathan mentioned earlier on the call, Zilog was only with us for 40 days. We closed the transaction on February 18, and at the end of – this conference call is with respect to the end of March.

Now having said that, you can easily pull from prior year, and the last quarter numbers and extrapolate what would have been their backlog or their revenue and figure out what their contribution was to that. I can tell you that without Zilog, our backlog would have been about $114 million. Today we are sitting with 125.5, and therefore you can do the math and figure out that it was approximately $12 million contribution in terms of backlog.

Jeff Schreiner – CapStone Investments

Okay. Thank you very much, Uzi, for that. Uzi, maybe since this is closer to you in terms of being feet on the ground here, but what percentage of revenues were from distributors in the March quarter, and can you remind us of what the terms are with the majority of your distributors? Are they sell through or sell in?

Uzi Sasson

All of our distributors are sell in and the amount of revenue from distribution is approximately 44% to 47%.

Jeff Schreiner – CapStone Investments

Okay. Just the last question from me, and gentlemen, I really appreciate you taking the time today, how much of the June quarter is currently booked?

Nathan Zommer

Let us wait for the June quarter ending.

Jeff Schreiner – CapStone Investments

Okay. All right, gentlemen, thank you for your time today.

Nathan Zommer

Thank you so much.

Operator

All right. And our next question will come from Michael Amari with Americo Inc.

Michael Amari – Americo Inc.

Congratulations guys. Great quarter. Most of my questions were answered. Trying to find out what is the number of employees now that you have internationally?

Nathan Zommer

Total number of employees as of March 31 is 1157.

Michael Amari – Americo Inc.

Now, all this revelation in Europe, is this really affecting you very much? How much of your business is done in Europe?

Uzi Sasson

About – as Nathan mentioned earlier on the call, about two thirds of our business is done outside Europe or I would say in Asia and in North America. Therefore that would leave approximately give or take one third of our business in Europe.

Nathan Zommer

As Uzi said, 33.1% or 33.5% [ph].

Michael Amari – Americo Inc.

But you don't think this will be – whatever is happening in Europe will affect if you there is any slow down or anything like that? Would this affect you?

Uzi Sasson

No, I think that if anything it could help us at some point in time. Look, I mean only one third of our revenue is in Europe. We have about 50% of our manufacturings done in Europe, and that really helps us in a lot of ways to be able to make sure that our products are perhaps “less expensive” out there, and more attractive to various customers.

Nathan Zommer

Let me add that as you know when we see Europe, the major economy in Europe is Germany, and Germany is the number one exporter in the world. So most of the production that we have in Europe is companies like ABB, Siemens, the Schneider Group. They export a lot of their products and you can see from advertising in North American television both in North America and Asia.

So we believe the fact that the euro gets weaker, it will make European companies much more competitive, and as we said usually traditionally our margins are higher selling to Europe and North America. So the European pocket is coming out from a dormant manufacturing tradition to a stronger manufacturing tradition in this coming year.

Michael Amari – Americo Inc.

Well, congratulations, guys. You really have a great conference call too. That's the first time I see a lot of enthusiasm in several quarters and I am gratified and proud of you.

Uzi Sasson

Thank you very much.

Nathan Zommer

Thank you.

Operator

(Operator instructions) We have no further questions at this time.

Nathan Zommer

Thank you. As there are no more questions, and in closing the conference call, we need to remind you that our discussions contain forward-looking statements, and there are a number of important factors that could cause our results to differ materially from those indicated by these forward-looking statements, including among others risks detailed from time to time in our SEC reports, including our quarterly report on Form 10-Q for the quarter ended December 31, 2009. We do not undertake any obligation to update forward-looking statements.

Thank you all for your time. Also we like to take this opportunity to thank our suppliers, customers, employees and stockholders for their support of IXYS. Thank you.

Uzi Sasson

Thank you so much.

Operator

Once again, it does conclude our conference call for the day. We thank you for your participation.

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Source: IXYS Corporation F4Q10 (Qtr End 31/03/10) Earnings Call Transcript
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