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Linear Technology (NASDAQ:LLTC)

F1Q11 (Qtr End 9/26/10) Earnings Call

October 13, 2010 11:30 a.m. ET

Executives

Paul Coghlan - VP, Finance & CFO

Bob Swanson - Executive Chairman

Lothar Maier – LLTC Management

Analysts

Tore Svanberg - Stifel Nicholas

Christopher Danely - JPMorgan

David Wong - Wells Fargo

Ross Seymore - Deutsche Bank

Tim Luke - Barclays Capital

John Pitzer - Credit Suisse

Uche Orji - UBS

Jim Covello - Goldman Sachs

Doug Freedman - Gleacher & Company

Craig Berger - FBR Capital Markets

Adam Benjamin - Jefferies & Co.

Craig Ellis - Caris & Company

Shawn Webster - Macquarie Capital

Terence Whalen - Citi

Steve Smigie - Raymond James and Associates

David Wu - GC Research

Chris Caso - Susquehanna Financial Group

Operator

Good day everyone and welcome to the Linear Technology Corporation Fiscal 2011 First Quarter Earnings Conference Call. Today’s conference is being recorded. At this time for opening remarks and introductions I would like to turn the call over to Mr. Paul Coghlan, Chief Financial Officer. Please go ahead sir.

Paul Coghlan

Hello. Good morning and welcome to the Linear Technology conference call. I will give you a brief overview of our recently completed first quarter of our fiscal year 2011 and then address the current business climate. We will then open up the conference call to questions to be directed either at myself; I’m Paul Coghlan, Chief Financial Officer and Lothar Maier who is our CEO or Bob Swanson, who is our Executive Chairman.

I trust you have all seen copies of our press release which was published last night. First though however I would like you remind you that except for the historical information, the matters we will be describing this morning will be forward looking statements that are dependant on certain risks and uncertainties including such factors among others as new orders received and shipped during the quarter at the time of the introduction of new processes and products and general conditions in the world economy and financial markets.

In addition to these risks which we described in our press release issued yesterday, we refer you to the risk factors listed in the Company’s Form 10-K for the fiscal year ended June 27th 2010, particularly management discussion and analysis of financial condition and results of operations.

Secondly SEC Regulation FD regarding selective disclosure influences our interaction with investors. We've opened up this conference call to enable all interested investors to listen in. This press release and this conference call will be our forum to respond to questions regarding our estimated financial performance going forward.

Consequently, should you have any questions regarding our estimates of sales and profits or other financial matters for the upcoming quarter as well as how they might impact our income statement model and our balance sheet, this is the time we are free to respond to these questions.

As you can tell from our press release, this was another record quarter for us. This is the sixth consecutive quarter that the company has grown revenues and the third consecutive quarter that the company has achieved record quarterly revenues. We grew revenue 6% sequentially at the higher end of our guidance and more in line with our historical quarterly growth patterns after a year in which quarterly revenues grew sequentially, 14%, 9%, 21% and 18%. Our strategy of focusing on traditional analogue end markets, industrial automotive and communications has been instrumental in achieving these results.

Once again we had a positive book-to-bill ratio. Although bookings in total were less than the previous quarter, decreasing proportionately across all major end markets. During this quarter we added more capacity and our average lead times have decreased to eight weeks from 10 weeks as we continue plans to bring our lead times into our historic levels of four to six weeks. These improvements in lead times enabled customers to lower their backlog on us and adjust their bookings accordingly.

This quarter's operating income was impacted by a one time legal charge of $5.3 million. This reduced operating margins as a percent of sales from 54% to 52.6% compared with 53.1% last quarter.

Pre-tax income as a percent of sales was 48.7% versus 45.9% last quarter. As last quarter was adversely impacted by a non-cash charge on the early redemption of a portion of the company’s senior convertible notes. Net income for the quarter was 53.3% of sales compared with 34% last quarter.

With this quarters tax rate of 27.5% being modestly higher than last quarters 26%. This sequential sales growth was even more pronounced on a quarterly year-over-year basis as sales grew 65% operating income 106% and net income of 126%.

Head count increased in the quarter again largely in the factory areas. In summary the effect of the items I just listed on the published quarterly results was that revenue was a record 388.6 million for the first quarter of fiscal 2011 compared to the previous quarters record revenue of 366.2 million and 236.1 million reported in the first quarter of fiscal year 2010.

GAAP diluted earnings per share of $0.59 was net of the $0.02 legal charge and improved $0.05 over the previous quarters EPS and more than doubled from $0.27 per share reported in the first quarter of fiscal 2010.

GAAP net income of a 137.3 million increased to 12.7 million from the previous quarter and also more than doubled from 60 million reported in the first quarter of last fiscal year. EPS would be $0.67 on a pro-forma basis which excludes the impact of stock option accounting and the amortization of debt discount which is the theoretical difference between the company’s convertible debt actual interest and the interested would have potentially had to pay if it had used straight bank debt.

During the September quarter the company’s cash and short term investments balance increased by 93.6 million to 151.7 million. The company announced that it would again pay a quarterly dividend of $0.23 per share. This cash dividend will be paid on November 24 to stockholders of record on November 12. As we enter the December quarter there is more uncertainty than in recent quarters which makes forecasting difficult. Although we had another positive book to bill ratio, bookings decreased as the quarter progressed.

Customers are more confident and their ability to get parts and therefore may continue to adjust inventory levels and safety stock downward. Given the above we currently forecast that revenue will be flat to down 4% sequentially for the second quarter of 2011.

This upcoming December quarter has 14 weeks rather than the customary 13 weeks for us. The extra week will have little impact on revenues, however operating expenses primarily labor related cost will increase modestly.

In addition, the company expects to redeem roughly 400 million of its convertible senior notes on November 1 which will reduce net interest expense next quarter.

Now I would like to address the quarter’s results on a line by line basis. Starting with bookings, for the first quarter in several bookings were less than the previous quarter although we still booked more than we shift.

Cancellations although up from last quarter were still relatively minor. Geographically bookings decreased in each major area, U.S. both in OEM and disti and in Europe, Japan and Asia. Bookings decreased relatively proportionally in all end markets, except cell phone, which was minor to begin with.

At this time every quarter we give you a breakdown of our books percentages by end markets to give you insight into those markets that drive our business. Industrial and communications continue to be our largest areas.

Industrial was 38% of our bookings, up from 37% last quarter while down modestly in absolute dollars. Our industrial business is very broad based, both geographically and by end products and although down modestly in absolute dollars, it is still very strong by historical standards.

The communications area increased from 23% to 24% of our business while also down modestly in absolute dollars. Within the infrastructure area our customers involved in the global Base Station build out did well. Cell phone remained at 1% of our business while up marginally in absolute dollars.

Computer was 15% of our business, down from 16% in prior quarter and obviously also down in absolute dollars. Within computer our largest opportunities are in tablet type products, followed by notebooks, desktops, storage devices and printing and imaging end products.

Automotive increased from 11% to 12% of our business while decreasing modestly in absolute dollars. Business remained relatively proportional in all geographic areas with Japan and Europe continuing to be our strongest and the USA and Asia showing opportunity. The expansion of existing Linear parts into new car models and new parts for new programs, especially in the hybrid and electric vehicle area continue to help us.

Automotive is an area that we've been focusing on given the increasing electronic content in automobiles. Our battery monitoring products for hybrid and electric vehicles are achieving expanding acceptance. In addition, we continue to distinguish Linear as a high quality supplier in important international automotive manufacturers.

The consumer area at 5% of bookings decreased from 7% last quarter with the decrease coming largely from customers in the international area. Finally military space and harsh environment products at 6% was unchanged as a percent of our business while like other areas decreasing modestly in absolute dollars.

In summary, we have largely completed our transition over the last several years into more traditional analogue businesses and less into purely consumer related end markets. Whereas 20% of our business was in cell phone and high end consumer related markets in 2005, 16% in fiscal 2008, this percentage was 14% in 2009, 9% in the most recently completed fiscal 2010 and 6% in the first quarter of fiscal 2011. Note we have a good balance of where our bookings are actually created with 45% of them created in the USA and 55% internationally.

Moving from bookings to sales, net sales increased 6% from the prior quarter and 65% from the similar quarter in the prior year. Sales grew in the USA, both OEM and distribution in Europe and the rest of Asia while Japan was down modestly in absolute dollars from a very robust prior quarter.

In summary, the USA was 26% of sales, similar to last quarter, but up in absolute dollars. Europe was 19%, also similar to last quarter as the automotive and industrial sectors remain strong. Japan at 14% was down from 15% last quarter but continues to show industrial and automotive strength. Asia Pacific at 41% of sales was up from 39% last quarter as some consumer related products begin their bill for the holiday season.

Growth margin, at 78.5% of sales increased marginally from last quarters 78.4% sales. Factory efficiencies has improved marginally on the higher sales base and this was partially offset by a minor change in mix and by currency loses as the U.S. dollar weakened visa-vi the Singapore and Malaysian currencies where we have our foreign factories.

Our average selling price remained constant at a $1.65. R&D, at $56.2 million increased $1.2 million over $55.1 million reported last quarter but decreased as a percent of sales to 14.5% from 15% due to the higher sales volume.

The largest increase is here when profit sharing and labor cost. We had some modest additional hiring. Selling, general and administrative expense increased by $6.4 million but also increased as a percent of sales. So, 11.3% from 10.3%, $5.3 million of the $6.4 million increase was due to a one time legal charge of $5.3 million with out which SG&A as a percent of sales would have been 10% even.

The minor increases other than legal cost were primarily labor and profit sharing. We also had some modest additional hiring in the sales area. Operating income, as a result of the above operating income increased by $10.3 million or 5%. Operating income as a percent of sales decreased to 52.6% from 53.1% last quarter.

Backing out the one time legal charge operating income would have actually increased to 54%. This is strong profitability and clear puts us ahead of our peers in this financial performance measurement.

Interest expense at $10.4 million was down 726,000 from last quarter and the amortization of debt discount of $6.8 million was down 313,000 from last quarter both due to the early retirement of a portion of our debt which occurred in the middle of last quarter.

The amortization of debt discount is a non-cash accounting charge resulting from the adoption of new accounting standards in the beginning of last fiscal year relating to convertible debt with a below market interest rate.

Interest income of $1.9 million decreased 688,000 due to a lower effective interest rate of 0.76% this quarter compared to 1.02% last quarter. This reduction was largely due to the impact of positioning cash and short term investments to redeem the debt of our senior convertible note on November 1st.

Last quarter the company had a non-cash the company had a non-cash charge of 10.5 million relating to the early retirement of a $154.9 million of its 3% convertible debt. There was no further retirement of this 3% debt this quarter. As a result of all the above the company’s pre-tax profits improved by $21.1 million and are now 48.7% of sales versus 45.9% last quarter.

Our tax rate was 27.5% this quarter versus 26% last quarter. Last quarter we had 1.5 points of discreet tax items and this quarter we had no discreet tax items. We currently do not expect any discreet tax items next quarter and therefore our effective tax rate remain at approximately 27.5%.

The major tax saving these items that will support our 27.5%. The major tax saving is items that will support our 27.5% effective tax rate, prior to discrete items are the benefits from our tax holidays overseas, our tax exempt interest and our domestic manufacturing tax benefits. The resulting net income of $137.3 million is an increase of $12.7 million from the previous quarter as the positives of increased sales and no loss on the early retirement of debt were only partially offset by a one time legal charge and a marginally higher tax rate.

The resulting return on sales was 35.3% versus 34% last quarter. The average shares outstanding used in the calculation of earnings per share increased by $1.135 million, primarily resulting from restricted stock grants and stock option exercises. The resulting GAAP earnings per share was $0.59, net of a $0.02 per share legal charge.

The $0.59 was an increase of $0.05 or 9% over GAAP EPS of $0.54 reported in the prior quarter and up $0.32 or 119% from the $0.27 reported in the first quarter last year. On a pro forma basis, without the impact of stock based compensation of $17.2 million and non cash interest expense of $6.8 million, diluted earnings per share would have been $0.67 per share.

Moving to the balance sheet, cash and short term investments increased by $93.6 million. $179.5 million was provided by operations, $52.8 million was paid in cash dividends and $38.8 million was used to purchase fixed assets.

For the 98th consecutive quarter the company has positive cash flow from operations. Our cash and short term balance is now $1 billion 51.7 million and represents 60% of total assets. However next quarter we will deploy roughly $396 million to redeem our 3 and 80% convertible senior notes.

Accounts receivable of $205.9 million increased like $29 million from last quarter. Our day sales and accounts receivable were 48 days, up from 44 days last quarter. It is not atypical for the accounts receivable balance to increase in the September quarter. As the month of September is a heavy shipment month, coming off in August vacation month and some build up of consumer related shipments in anticipation of holiday season sales.

Inventory at $56.4 million increased $4.3 million from last quarter. We have been working at increasing our capacity as evidenced by our increase in capital spending and at reducing our lead times. We have reduced lead times from 10 weeks to eight weeks and are well on the path to reducing them to our historical range of four to six weeks.

In order to accomplish this we need to increase our inventory levels. Nevertheless, our quarterly average inventory turns is 6 times, roughly similar to last quarter's 5.9 times, both of which are historically high by Linear standards.

Having adequate inventory and moderate lead times has always been a critical element of our strategy which is to be viewed as an excellent supplier by our customer base and to generally outperform our competition in customer request response time.

Deferred taxes and other current assets decreased by $2.8 million, largely due to a reduction in interest income receivable. Property plant and equipment increased by $28.7 million. We had additions of $38.795 million and depreciation of $10.88 million.

Most of the additions were for equipment across all our factories for wafer fabrication test and assembly which are needed to increase capacity and improve lead times. With regard to fiscal 2011 in total, we continue to expect additions in the range of a 115 million and depreciation of roughly 44 million.

Other non-current assets totaling $67.1 million decreased modestly by $2.3 million partially due to a reduction in debt issuance cost. Finally on the asset side of the balance sheet, our return on assets was 35.3%, an improvement from 34% last quarter.

Moving to the liability side of the balance sheet, accounts payable increased by $6.5 million largely due to increased purchasing for capital assets and raw material.

Accrued income taxes, payroll and other accrued liabilities increased by 30.5 million. The largest items here are profit sharing accrual, income taxes payable and accrued interest payable on our convertible debt.

Our interest payable accrual increased as we did not have a semi-annual interest payout this quarter. The profit sharing accrual decreased as this quarters charge to the accrual was offset by the actual payment of profit sharing for the last six months of fiscal 2010.

We pay profit sharing to our employees semi-annually in the fiscal first and third quarters. Our income tax accrual increased to reflect the tax liability on our increased profitability and the fact that we are only required to make minimal income tax actual payments in the first quarter of the fiscal year. Next quarter we will have two quarterly tax payments as required.

Deferred income on shipments to distribution $1.9 million this quarter as our shipments to U.S. distributors were lower than what they shipped out to their end customers although distribution ship more to their customers than they did in the previous quarter. Our accounting on shipments to U.S. distribution is conservative. We do not record a sale, nor income in our results of operations until the distributor ships the product out to its end customer.

We continue to closely control our inventory distribution to properly position the inventory without any unneeded buildup. Convertible senior notes, both the current portion and the long term portion together were increased by the accretion of the amortization of debt discount quarterly charged to the income statement. As I stated earlier, $396 million of convertible debt will be redeemed on November 1st.

Deferred tax and other long term liabilities were unchanged quarter-to-quarter. Changes in the stockholder equity accounts were primarily a result of the usual quarterly transactions, for net income, for dividends paid and for employee stock activity. The company announced it will again pay a quarterly dividend of $0.23 per share. The company believes that paying its dividend is an important way to return value to its shareholders. The company began paying a dividend in 1992 and has increased its every year cents and currently pays approximately a 3% yield.

Looking forward, I would like to close our introductory comments by revisiting our guidance. This has been a strong quarter for us from a sales and profitability standpoint. However bookings have been trending downward. It's difficult to forecast in a slightly bipolar environment. Although bookings were down modestly we still had a positive book-to-bill ratio. Cancellations were up but not by much.

However, contrary to this, there was still strong poling and expedite activity off and that the customers who were shortening their lead time bookings. It seems like customers are adjusting to our improving lead times and reducing the timing of their bookings and their inventory levels accordingly.

This trend will probably continue this quarter, although how long it will be is hard to forecast. Generally the major market opportunities that drive our business continue to demonstrate continuing growth, namely the build out of the broadband infrastructure, higher electronics content in gas driven and hybrid vehicles and energy efficiency and other technological trends in industrial applications.

Our computer and high end consumer applications will be influenced by overall consumer confidence levels which are hard to currently predict. Inventory at our distributors is still lean. Our inventory turns levels are similar to last quarter and continue to be well above historical norms. Combining all of these inputs leads us to our guidance for the December quarter of revenues being in a range of flat to down 4%.

We believe we will continue to have strong profitability and operating margins as a percentage of sales. However this quarter will have a 14th week, which occurs once every five or six years to bring our constant 13 week quarter in line with the calendar year.

This should have a minor affect on revenue as the extra week transcends the New Year's holiday. Also, roughly half of our worldwide sales go through distribution which continues to be a calendar quarter basis. However the 14th week will have a modest affect on operating costs, particularly labor, which will be impacted by an extra week compensation and stock compensation charges within the quarter. These costs will be in the $4 million to $5 million range and will be partially offset by reduced net interest expense as we redeem $396 million of convertible debt on November 1st.

In summary, we are well product and end market positioned to execute our strategy. We are strong in the areas we want to be, industrial, communications, infrastructure and networking and automotive and believe we are in an innovation driven environment. Our strategy is differentiated from other analogue competitors. We dominate in different end markets. We are a more reliable supplier with consistently lower lead times and our technology and support is valued as evidenced by our higher operating margins.

I would now like to open up the conference call to questions to be addressed to either Bob, Lothar or myself.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). We'll take our first question from Tore Svanberg with Stifel Nicholas.

Tore Svanberg - Stifel Nicholas

Paul, I know this is difficult to measure but what's your best guess as far as when lead times would get to your four to six week target?

Bob Swanson

Maybe I can answer that. Right now the factories are doing a pretty good job of catching up with demand. We think that in the current quarter, as we exit the quarter we should be back to, pretty close to our normal four to six week lead times.

Tore Svanberg - Stifel Nicholas

And I know pricing is usually not a topic for Linear per say but could you just give us a sense of what pricing is doing in the overall industry, especially now that lead times have come down from most companies?

Bob Swanson

I think most of our customers are still more focused on getting the product that they need. Presently there isn’t what I would say a lot of pressure on pricing.

Tore Svanberg - Stifel Nicholas

Good, and finally for Paul, could you just remind us where we stand on your converts at this point. Just give us an update on what you still have left.

Paul Coghlan

Well we have two converts. One convert is a -- 3 and a 80% convertible and we have roughly 400 million of that -- that $400 million or $396 million to be more accurate. $396 million we will redeem on November 1st. So as of November 2nd we will no longer have a 3 and a 80% convertible outstanding. We will continue to have the 3% convert, which started at $1 billion and last quarter was reduced to roughly -- not last quarter but the quarter before to roughly $850 million. So at the December quarter when I speak with you in January, we'll have roughly $850 million in convertible debt outstanding.

Operator

(Operator Instructions). Next we'll hear from Christopher Danely with JPMorgan.

Christopher Danely - JPMorgan

Paul, actually just a quick clarification on the outbacks? You said it goes up a little bit. Is that netting out the no more one time $5.3 million charge? Could you just go though that real quick.

Paul Coghlan

Yes, the 5.3 charge won't recur. We'll have 14 weeks of operating expense which is primarily additional expense on the labor area, only for this December quarter and the impact of that we think will be roughly $4 million to $5 million and that will be offset by maybe $3 million of lower interest expense because of the redemption of the debt.

Christopher Danely - JPMorgan

Okay. And then in terms of the demand question. So you talked about the different drivers you have going forward. In the past you've talked about tablets as being a driver for you folks. Is that still going to be a driver going forward or could there be some share shifts going on there?

Paul Coghlan

Well for us, I don’t think we've ever said that tablets are a big driver for us. The markets that we're focused on are the industrial communications and the automotive markets and from time to time we get opportunities that fall outside of those markets that we're focused on and sometimes we have that business, sometimes we don’t. We don’t have a lot of control over what gets designed in and how long those programs are. So I think that type of business is really not a big impact on Linear on the long term.

Christopher Danely - JPMorgan

And then last question, so the reason for the slowdown, do you think there is any demand or excess inventory issue out there or is this simply just -- the lead times are coming in and we're going to see a temporary fall in order rates and we'll be back to normal shortly.

Paul Coghlan

Well I think that’s why we said it’s a difficult quarter to forecast. Because what we see now is the impact. We can attribute it to the change in our lead times. However we don’t know whether companies are going to lower their safety stock levels if they built them up in this time period when product was hard to get or if companies are going to -- now when lead times are stretching out companies kind of order even more than to your lead times sometimes just to be on the safe side, then when you are confident your lead times are consistently coming down. We are not quite sure how they are going to adjust that.

So, for us we know those adjustments are taking place and they have had some impact and you can do the math as your lead times change. Whether there is any further demand being reduced is very, very hard for us to tell at the moment. We told you the major areas where we continue to see reasons why would they continue to be strong.

However, we don’t know so that’s why we said it's a little more difficult forecasting this quarter than it has been in previous quarters.

Operator

David Wong with Wells Fargo has our next question.

David Wong - Wells Fargo

Thanks very much. If my number is correct about 40% of your revenues are into foreign distribution and that’s a recognized the cell into distribution is that correct?

Paul Coghlan

That’s correct.

David Wong - Wells Fargo

Now have you got any evidence that your foreign distribution is reducing its inventory, so it's some of the sequential growth? There is a question of sequential growth associated with foreign distribution reducing inventory.

Paul Coghlan

No we don’t think they are reducing inventory, as I said in my opening comments our inventory returns both domestic and international have are at all time historic highs. So, we don’t think they are going to reduce their inventories further.

David Wong - Wells Fargo

Okay, so the sequential growth you see in the 60% that is either direct or through U.S. distribution that has a similar flat down 4% characteristic in the December quarter. Will that be correct?

Paul Coghlan

I don’t think the 0 to 4% down really has anything to do with what we anticipate will happen in inventories at distribution. What it is we said our bookings last quarter were down proportionally pretty much in all areas and in all end markets and I think when we look out and we gave the guidance since zero to down 4 we didn’t think it was anyone particular channel driving that nor anyone particular end market activity driving that.

David Wong - Wells Fargo

Great. Thanks very much.

Operator

Next we’ll hear from Ross Seymore with Deutsche Bank.

Ross Seymore - Deutsche Bank

Hi Paul. Just another question kind of along those lines, in the past you have talked about extended lead times needing to contract and the bookings is kind of at the long end of the tail adjusting accordingly but you also said that really shouldn’t impact the near term revenue side of the thing. How do I reconcile the revenue been guided down in fact it shifts the long tail bookings that are being adjusted downward.

Paul Coghlan

Well I think first of all in the very quarter we just completed what I said turned out to be true which is that our bookings were down in the quarter we are in and yet our sales went up in the quarter we are in. So this particular quarter when I said happened to come out to be true relative to the next quarter our guidance is zero to 4 down and right now we think that revenues could have an opportunity of coming down but zero to 4 we don’t think is particularly a huge range.

Ross Seymore - Deutsche Bank

And I guess also backing off the last question about the disti side versus the OEM side. If the disti aren’t going to burn inventory especially on your (inaudible) thing it is the primary incremental weakness coming from the OEM side or do you think that sell through from those disti is just going to be a little weaker.

Paul Coghlan

Well as I said we look through the disti so I mean I thought I said in the previous question that I didn’t think any particular channel was we had more concerns over one channel than another. What we are looking as all the overall end markets once our lead times come down the end customer that orders on us or orders through a distribution channel. We think has been making some adjustments and could continue to make those adjustments.

Ross Seymore - Deutsche Bank

I guess the final quick question, what do you expect your inventory to do in the December quarter, the inventory on your books?

Paul Coghlan

Right now we are seeing to be quarter-over-quarter pretty flattish but the current level of inventory that we have relative to our sales and relative to our historically inventories still remain pretty modest.

Ross Seymore - Deutsche Bank

Great. Thank you.

Paul Coghlan

I mean it could increase a little bit next quarter. So, but I don’t think it's going to be significant.

Ross Seymore - Deutsche Bank

Great. Thank you.

Operator

For our next question we will go to Tim Luke with Barclays Capital.

Tim Luke - Barclays Capital

Thanks so much. I was wondering if you had any color on factors that may concern your gross margin given a somewhat lower revenue of this perspective after strong quarters about performance and respective gross margin. Thank you.

Paul Coghlan

Gross margin, I don’t think gross margin will change very dramatically next quarter. So I don’t look for any significantly change in that.

Tim Luke - Barclays Capital

Thank you. That’s all.

Operator

Next we’ll go to John Pitzer with Credit Suisse.

John Pitzer - Credit Suisse

I guess Paul can you let me understand what was the returns in the September quarter and I guess with book to bill being above one, is the expectation and guidance that turns actually be go down as a percent of overall business in the December quarter?

Paul Coghlan

I think returns I told you going into September quarter, I think I told you was in the high-30s. Returns we need for the decent for quarters a little less than that actually in the mid-30s.

John Pitzer - Credit Suisse

And Lothar back to your question, just want to make sure I heard you right. Do you think by the end of the December quarter you will be down to the four to six week sort of lead times and that any of the revenue through fall it in December that’s kind of a function of customers adjusting to shorter lead times should be done in the December quarter, is that the right way to think about it?

LLTC Management

At least one part of the question I can answer is that by the end of this current quarter, by the end of the December quarter we should have caught up both in the front end and back end manufacturing of our factories with demand. There is a lot of capital equipment that has arrived and it has been installed. Lot of people have been hired, some expansions has been done. There is some more of this going to come into the factories this quarter and so by the time the quarter is over I think for the most part we will back to the normal four to six week lead times.

John Pitzer - Credit Suisse

And then Paul if you care to have a guess is to whether or not the book to bill will be positive in the December quarter?

Paul Coghlan

We don’t forecast that far, I don’t want to casually guess at the moment.

John Pitzer - Credit Suisse

And then guys my last question is just given the December quarter seems to be a pause in the cyclical growth. I am kind of curious as we think about next year as you guys think about next calendar year. So should we start to think about the industrial and the car markets kind of trending around sort of normal seasonal lines since we go into 2011? Is that the right way to think about it?

Paul Coghlan

As we shared with you, we think that there is good growth drivers in the common industrial area presently and that it's a relatively innovation rich environment. So if you just take out inventory changes, take out general consumer psyche and not consumer but customer psyche if you will. The opportunities are very prevalent that the internet infrastructure needs to be expanded and that those markets will continue strong.

The same holds true for the automotive industry becoming more electronic in the electronics content of cars and then in the industrial environment what you have is you have to move to more energy efficiency and also industrial companies have had pretty good cash positions in their balance sheets and I have noted for the second quarter in a row that Intel when they announced yesterday the results pointed to strength in the overall cooperate environment for their computer business.

So, our guess is now that everything is kind of settling in when it finally settles in things will be seasonal to answer your question relative to historical trends but these three areas that I talked to you could be stronger by how much it's hard to tell it could be stronger than other areas they are compared with.

John Pitzer - Credit Suisse

No that’s great. I guess my last question Lothar, if I go back to earlier question about tablets. If you look at your business model it's structurally setup to kind of gain sockets when they are producing very high profitability and then lose those sockets as profitability goes down. I am just kind of curious when you think about compute end market. What is the time to go from a sort of high profit socket to one that’s not at the margin levels that seem acceptable for you guys to take?

LLTC Management

It's really all over the map sometimes we are info cycles for few years sometimes we are in it for one product transition. I think there is really no standard that falls, it's like we have said in the past this is truly opportunity stick business. We really don’t build the company around it and when we have its okay and when it goes away we really don’t agonize over it. So, I think it will be hard to characterize that in to any particular time window.

John Pitzer - Credit Suisse

Great. Thanks guys very helpful.

Operator

Next we have Uche Orji with UBS.

Uche Orji - UBS

Well thank you very much. So, let me start off by asking is there any way to quantify or the weeks of these fee inventories now?

Paul Coghlan

We normally you what our terms are by individual areas, we have just told you that by historical norms it's very high.

Uche Orji - UBS

Sure all right. Lothar let me just ask you have called out wireless base as an area that has been strong. What is your sense as to geographical areas of strength? I know we have talked about China being in a new phase of deployment and a potential for India. Can you just talk about what is the key drivers are now and how you see that market evolving say into early part of next year.

LLTC Management

That’s a great question. For us we have always said communications particularly the infrastructure side of communications is a focused area for us and as Paul earlier said is really nobody is satisfied with their wireless connectivity and that’s certainly true in North American but it's true pretty much every place that I travel to and visit and so the wireless market for us is -- its really global. It's geographically maybe concentrated by the customers that buy from us but in terms of where their products go, they nearly go all over the world. A few quarters ago China was very strong. It continues to be a good market for wireless infrastructure. But our customers are very much focused on getting the wireless infrastructure in North America in expanded in India, in emerging nations and so I think the -- and the other thing is that we've got very good design ins and deign wins in virtually all of the major manufactures of Base Station. So this is going to be a good market for LTC, not just right now but for a number of years going forward really as the world builds out its infrastructure.

Uche Orji - UBS

Great. Just one more question. As your lead times are coming down, do you have any sense as to what your competitor lead times are also doing? One would presume they're coming down as well but any relative sense as to how your -- relative to your competition is?

LLTC Management

I think the sense is that most of our competitors lead times are coming down but typically when everybody's lead times are normalized, our lead times are typically four to six weeks and sometimes even less. Normally most of our competitors at their best lead times, its still typically still two XRs

Uche Orji - UBS

Okay and then just one last question. Industrial market, I mean this market has been very strong throughout most of this year. At what point do you think we are reaching the point of saturation? Looking at the comments you have made about the inventory one may almost be tempted to conclude that we are now at a point of -- I probably say equilibrium and the tailwind of restocking seems to have been done. But as you look into your end customers and industrial, how confident are you that growth can continue. Are we starting to see that also starting to saturate?

Paul Coghlan

Yeah, there is forces that would suggest that the industrial market could continue to grow. There has been a lot of underinvestment in industrial. There is a lot of industrial construction going on in emerging areas. There is a lot of automation and energy efficiency going into the industrial market right now. So there is a lot of upgrading that is place as well. So I don’t think the industrial market has run out of steam.

Operator

Next we'll hear from Jim Covello with Goldman Sachs.

Jim Covello - Goldman Sachs

I guess first is a follow-up to the question that Uche asked about the competitor lead times and you guys talking about how your lead times are kind of normally lower than the competitor lead times. Is there any reason then to kind of extrapolate -- when we think about lead times versus order rates for your competitors would you expect to see when other companies report the same kind of declines in orders or because their lead times are longer to begin with, maybe they haven’t seen the impact of the order declines yet and that’s still ahead of them.

Paul Coghlan

I don’t know if we really want to comment on our speculation as to what their lead times will be or what their announcements will be. We're telling you what trend we've seen and certainly the lowering of the lead times is Linear specific in that we made our lead times get less. We historically run less lead times, lower lead times and that’s something that we drive strategically to do. To be answering your question now as to what our competitors will tell you in the next two weeks. I would rather let their press release to that.

Jim Covello - Goldman Sachs

The second question recognizing that it's a normal tight range for you guys in terms of your guidance. What would the difference between the high end and the low end be? What kind of things would drive you to either side of that?

Paul Coghlan

Without stating the obvious I mean the amount bookings we get and the timing and the bookings we get within the quarter, it's going to be the - we will the most impacts on whether it's the high end or the low end to the guidance.

Jim Covello - Goldman Sachs

Is it a particular segment do you think or it's just broadly?

Paul Coghlan

Broadly.

Jim Covello - Goldman Sachs

Okay and anything you could tell us about the trend so far in October. They have kind of the booking rate has stabilize so far?

Paul Coghlan

I think we told the end of the last quarter, bookings we said bookings got little weaker towards the end. I think that’s I think October is in about that position.

Jim Covello - Goldman Sachs

Okay and then final question for me if I could -- Industrial segment U.S. versus non-U.S?

Paul Coghlan

What’s your question?

Jim Covello - Goldman Sachs

Well I mean I guess what people are concerned about is the ISM going back below 50 and what the implications there could be on the industrial exposed analog names. Could there be any offset of that continues, if that were to happen is it meaningful to expect industrial strength outside of the U.S. could offset that?

Paul Coghlan

Well I think for us you know we are a 3 billion, 4 billion, 5 billion, 6 billion whatever the run rate would be for the company in a very, very large market about 38% of our business is in industrial. So, we have a lot of specific opportunities in industrial it's not just we respond to the overall industrial trends. So, like in the USA there is the build out of the infrastructure going on that help us. Energy efficiency helps us, in Europe and Europe actually had a pretty strong quarter and they are very strong industrial. Our Japan business is mostly industrial and automotive. China our industrial business has been picking up since we are relative starting from a small base and we are focusing in on that into the market. So that’s doing well, so it's really hard to give you an answer as to the overall worldwide industrial market and linear, our reactions to those overall trends. We tend to look at it more at specific geographic areas and specific opportunities we have and as Lothar said earlier he thinks we are in a relatively good position.

Operator

For our next question we will go to Doug Freedman with Gleacher & Company.

Doug Freedman - Gleacher & Company

Great, thanks guys for taking my question. Paul as we head into the holiday period is there any possibility and are there any present plans for you guys to implement any factory shut downs to try to minimize the impact of the extra week.

Paul Coghlan

We’ve historically had some shutdown’s in the holiday season between Christmas and New Year’s and we are presently looking at that now and it wouldn’t surprise me if we choose to do that, what decisions we have to make is whether we do that in the factory certain factory we may need continuing production. So we are kind of looking at it now as the where we will implement it and where we won't. But we probably implement it in some places.

Doug Freedman - Gleacher & Company

Great and if I look at the moving on to this debt reduction plans taking place in November 1st and in the past we have seen you guys buyback some convertible some one time gains on those actions. Are you forecasting or do you expect anyone time gains in the retirement in this debt?

Paul Coghlan

No I don’t, the reason I don’t and that’s a good question. The accounting is pretty complex around this area and actually what you have is when you set up the debt or when you first engage the debt onto the present accounting rules. This charge on our income statement called the amortization and debt discount, you pick a number which is a differential between interest rates between you without making this too complex between bank debt and your convert and your accrete that over the period in which you believe you'll redeem the bonds so that if you've done that accurately and the math is relatively simple on that, when we redeem this bond we're redeeming it at the date that we could call it and put it from the origination of the bond. So therefore I don’t think there is going to be any gain or loss on what's called the early retirement of debt because this isn’t an early retirement. It’s a redemption at the maturity date. That’s probably more than you wanted to hear but…

Doug Freedman - Gleacher & Company

I got it. It makes complete sense. Thanks for the detail. If I move on and look at -- try and dig in on some of the product lines, you've given us a lot of color on -- that you're seeing across the board sort of changes in the order rates and take rates from your customers. But if we look into the products segments, power management and mixed signal conditioning, are you seeing any differences there from the company make up or any groups doing better than others and any outlook you can give there. In the past you've talked about the modules and the module business growing rather rapidly. If we can get an update there, that would be terrific as well.

LLTC Management

Yeah, so the kind of the relative growth of the company divided by the individual product lines, it's pretty proportional. I think as the business grows, all the business groups grow proportionately. But if you look inside of them you've mentioned the micro modules. They're clearly growing significantly faster than your raw rate of the company and micro modules are really no longer power products. They've crossed almost all of our business groups. So certainly the micro modules are growing quickly. Somebody asked earlier about kind of our enthusiasm about the wireless infrastructure market. We've focused on that market for a number of years now and we've made some pretty good progress in terms of putting some competitive or the most competitive high speed ADCs in the market. We made some module products in the wireless business and so I think specific products have maybe grown faster than the overall company, particularly areas like high speed ADCs and the micro modules but as kind of the proportion relative to all the business groups. So I think we've enjoyed pretty much even growth across all of them.

Paul Coghlan

And just to embellish that a bit, in the areas in the past, we've told we thought would be good growth areas and we gave you rough estimates, micro modules being one that load the just address and automotive being another. At this stage we think actually the numbers we originally gave you, we're pretty confident we can beat those.

Operator

Next we'll hear from Craig Berger with FBR Capital Markets.

Craig Berger - FBR Capital Markets

Could you talk about how the unit recovery for you has progressed and is that, as opposed to just revenues because you guys have had some ASP goodness. How does compare versus history and are you guys over or below the trend line?

Paul Coghlan

Well I'll try to answer it quarter specifically. First of all, our average selling price didn’t change, so, within the quarter. Therefore the units would have grown the same rate as the dollars. Overall we've been telling you that we've been embarked on a strategy five years ago to typically have less of our business in consumer related businesses and the consumer related businesses generally have lower average selling price for us than the industrial communications, automotive businesses and we have told you we have actually been achieving that goal and we have gone from consumer related businesses been 20% of our business. This quarter they were six, if we were just talking about high end consumer and cell phone. So, in that area our revenue growth has been faster than our unit growth but then drive them higher ASP units was very strategic and specific.

So, that I think relative to our overall trend the units are, we have had that unit growth and it is complied with the end markets we have tried to most focus on.

Craig Berger - FBR Capital Markets

Should we expect further ASP expansion overtime?

Paul Coghlan

Yes I think you could see further ASP expansion overtime. We just concluded responding some questions about our module products and those products would have a higher ASP than the average ASP I gave you. We talked about our opportunities in the infrastructure area; those products would typically will have higher ASPs than the products, than our average ASP.

Craig Berger - FBR Capital Markets

Great and then next question when I go marketing to investors I get a lot of questions about the Texas instruments, 300 millimeter fab or I guess known as the [TI] Death Star. Anyways wondering -- obviously your margins are very, very high but wondering do you feel you need to reassess your manufacturing strategy. Do you think you are going to be impacted by the Death Star and also what do you think those competitors going to 300 millimeter foundry for analog? Thank you.

Paul Coghlan

We think that the larger your wafer, the more you are likely to be employing those factory advantages into end markets with very, very high volumes and low prices and we have told you that those aren’t the areas we're focusing on. So, that when you look at our business, the industrial business, the infrastructure business, the automotive business to some extent we don’t personally have a need for 300 millimeter fab and so that from our standpoint we don’t look at what you call the Death Star and wish we had something similar. We don’t need that kind of diameter wafer to satisfy our customer base.

So I think in some ways that whole strategy might help investors to kind of understand when they look at analog companies and you're out marketing the companies, you could use that as an example to demonstrate kind of the differences within these companies, that you have some companies focused a lot on big consumer opportunities which could be good but a company with certain cost advantages might have a plus there and then there are other companies within the analogue stratosphere to continue a genealogy that that wouldn’t impact and actually have different end market focus and have their own opportunities for growth and good returns.

LLTC Management

And fundamentally our costs don’t drive our pricing strategies.

Paul Coghlan

And just remember what happened to the Death Star.

Craig Berger - FBR Capital Markets

Just a quick follow-up. Can you just remind us what you're fab layout is, what geometries and how much capacity that gets you since you have grown revenues so quickly and what you're future expansion plans might look like if any?

Paul Coghlan

Yeah. We have two wafer fabs, one located here in California; Milpitas, California and another one located in Camas, Washington. The wafer diameters are six inch in both of them. The smallest feature sizes were capable of doing a mostly 0.6 with some just below that.

We do the majority of all of our wafer fabrication ourselves. In our two wafer fabs we don’t use foundries for a whole lot. As we said in the past we've got our own manufacturing capacity to accommodate about $2 billion per year or $500 million a quarter. We're currently with the capital we've committed to and the capital that’s arrived. We probably are tooled up to support about $420 million in sales presently.

Craig Berger - FBR Capital Markets

Fantastic and congratulations on being one of the few still manufacturing in California.

Operator

Next we'll hear from Blayne Curtis with Jefferies & Co.

Adam Benjamin - Jefferies & Co.

Hey guys. It's Adam Benjamin for Blayne. A couple of questions. On the guidance, I was wondering if you can talk a little bit Paul about the area specifically that you're seeing some weakness in. You did talk about some orders slowing here in September and into October. So I was curious if you can highlight maybe some areas we should be focused on that are seeing the weakness.

Paul Coghlan

Well one of the reasons we said it was difficult to forecast going forward is the weakness we saw was proportional across all end markets. So that and also our lead times have come down. So that we really didn’t see any one specific industry or any one specific geographic area. Now again maybe we should have noted this. The bookings for the quarter, although they were down from the previous quarter, the previous quarter had surpassed all the quarters before that. So that really what we've seen is very proportional across all end markets, all geographies, a down turn which could co-inside with our reduction in lead times. We're one entity that sticks out.

Adam Benjamin - Jefferies & Co.

So it's just generally across the board. And then as a follow-up to that, you guys did a pretty good job back in '08 being early to things slowing. I think if I remember correctly you were the first company to bring numbers down and actually didn’t have to bring them down again as others did. So a lot of people thought it was extreme but it ended up being right. As you look at that period versus where we are today, I was wondering if you can compare and contrast it for us.

Paul Coghlan

Well the first thing is, you had a global financial meltdown going on then. So you had people freezing with regard to -- considering whether they'd have opportunities to get cash to grow their business. So they had a really dramatic and swift response which must be cash flow neutral or positive and therefore they severely cut inventory and their orders and laid people off, et cetera. So we don’t see any of those general economic market dynamics now. We don’t think it’s a health or robust economy out there and unemployment is still high. Foreclosures are still going on or they're not going on. They're being sort of artificially prevented from going on at the moment. But all of that I think the overall economy has sort of adjusted to know what it is and are not in a panic mode whereas back in 2008 we thought people were more in a panic mode.

Operator

Our next question will go to Craig Ellis with Caris & Company.

Craig Ellis - Caris & Company

Thanks. Nice profitability guys. Paul, helpful end market color on industry and com infrastructure. Can you talk a little bit about what you're seeing at automotive at the margin? Are the incremental assignments coming in cabin? Is it more in the fuel systems, a little of both? How do we read the automotive business?

Paul Coghlan

Actually the automotive business is good for us to read it. We see -- the biggest, the opportunities for us are as the electronics become more complex in the automotive industry. We think we are at the forefront of supplying IC solutions for that. So, with the continuing strength of stuff in cabin or if you will in the gas driven vehicles, that business continues to be good for us but really more of what we are anticipating in the growth to come from is the more penetration of electronics into the engines, the breaking and also the electric and hybrid vehicles.

LLTC Management

Yeah and again automotive for us is a long term play. This is not a business that you get in and out of and we have been working on penetrating into the automotive market here for quite a number of years. You go to have the right products; you got to have the right quality, reliability. You got to have the delivery performance and I think we have kept all those boxes and so we have got design-ins right now that are not going to go to production till 2013, 2014.

So we see that this market now for a number of years and we are starting to see the results, it's steadily growing as a percent of our sales. I would be disappointed if it was 15% more of our sales at the start of the year. So this is a key market for us and we think it's a key growth market in general for electronics.

Craig Ellis - Caris & Company

And Lothar do you see that growth occurring across all three the main geographies or is it more Europe versus Japan versus the U.S.

LLTC Management

I would say it's mostly constructed in Europe and Japan and China and Korea as well. But not so much in North America, but again it's not that we are ignoring North American because a lot of the sub-assemblies that go into cars that are assembled in North American are actually designed and sub-assembled overseas. So, the content in North American cars will have LLTC products but just not done in North America.

Craig Ellis - Caris & Company

Okay that’s clear and then Paul with regards to the CapEx for this fiscal year. I think on the last call you sent out a $115 million bogies is that still the right way to look at it?

Paul Coghlan

Yes.

Operator

Our next question will go to Shawn Webster with Macquarie Capital.

Shawn Webster - Macquarie Capital

Great. Thank you very much. Just going back to the wireless infrastructure focus, can you give us some color on what is the content per system is if moving from 2G to 3G to 4G for linear.

Paul Coghlan

I am not sure I can answer exactly to that question. The types of products for the most part that we have in the base station infrastructure are to a large extent are data converters and they tend to have relatively high ASPs and they tend to have many multiples depending on how large a base station is so they have to have many multiples of these in the base stations but how that varies from base station generation to the next generation I guess have a hard time saying. The only thing I can say is that as the base stations become more become complex you go from 3G to 4G to LTE, they drive the higher performance of our data converters and clearly go through the ones that are priced the highest.

Certainly we are seeing penetration at the base stations with our module products and those module products as we said in the past; those all have quite high ASPs. So, I think as you go up to complexity chain on the base stations you will see the types of the products that we design in or higher value products and as such generate higher ASPs.

Shawn Webster - Macquarie Capital

Okay, thanks. That’s helpful. And then on the extra week for the December quarter, you say it doesn’t add anything material related to revenues because of the timing of where it's landing. As we move into the March quarter, should we assume that there is no headwin from that extra week in the prior quarter from a sequential perspective?

Paul Coghlan

Yeah, that’s there. I can't tell you it will have no real impact on the December quarter and then use it as an excuse in the March quarter. I won't do that.

Shawn Webster - Macquarie Capital

Okay. And then just to clarify again on the OpEx. So the full $100 million of operating expense you had in September with the legal charge, that’s the base that you think OpEx, will be $4 million to $5 million higher on for the December quarter?

Paul Coghlan

Yes. Let me make sure. That’s the second person that asked that. So I wasn’t adequately clear in my introductory comments. If you take my expense base for this quarter, you back out the $5.3 million for the legal charge, you should look at that as your base and then there will be some labor increases from merit et cetera but on top of that I'll have a 14 week of salaries. And that’s that impact of $4 million to $5 million I referred to.

Shawn Webster - Macquarie Capital

Okay, so 100 minus 5.3 plus -- yeah I think so. I just went -- 100 minus 5.3 plus 4 to 5. So roughly flattish quarter-on-quarter with the legal in.

Paul Coghlan

Yeah. Yeah. You could look at it that way. I will have some merit increase. There is some specific costs relative to any 13 week quarter, right?

Shawn Webster - Macquarie Capital

Right.

Paul Coghlan

So you can't counter pick one of those. And there is the14th week which you could isolate and I've tried to help you identify or quantify that and so you would add that and then you would subtract out the non recurring costs which would be the $5.3 million.

Shawn Webster - Macquarie Capital

Okay. And then utilization rates as we go into December, March, do you expect them to stay at a similar level or start to come down?

Paul Coghlan

Certainly in this quarter we're going to be pretty much fully utilized in our factories because we're still shipping a lot of product and I have to tell you that still the expedite activities from our customers remains very, very strong presently and hopefully that will turnaround as we get more caught up on capacity. In the March quarter, it’s a little bit hard to say but somebody had asked earlier. We've committed to capital equipment either what's here already or what's going to be delivered in the next quarter or two to support about $420 million in sales.

Shawn Webster - Macquarie Capital

Okay. And then last one, can you -- what was that one time legal charge that happened in September?

LLTC Management

There was a case where we were not victorious and we wound up paying legal fees.

Operator

Terence Whalen with Citi has our next question.

Terence Whalen - Citi

This is actually revisiting a question before but I think there is a little bit of a lack of clarity because of the terminology used. My question is, if I think about international distributor and I think about the dollars of inventory in the international distribution channel. Will those dollars be flat, go up or decline next quarter and my assumption is you have to make a projection about that a quarter out as you set revenue guidance because of your recognition of that revenue. Thanks.

Paul Coghlan

Well we don’t precisely know the answer to that question. What we do as we look at -- going a quarter we look at what our inventory levels are, we look at what we expect or what our distributors are telling us they think they will POS in their marketplace. And then we look at what their opportunities are and our inventory relative to those POS opportunities.

So generally we look at the quarter and I can say this quarter we generally looked at it and thought that we will try to keep inventories reasonably and in line with what our in-customer would POS. So if we do that the amount of inventory in that channel should increase very much next quarter.

However, the turns are high there and if they see business coming the following quarter that they don’t think they will inventory we would then increase the inventory to match what they think their business would be. The result from that is if they saw things that they have planned on that they didn’t see coming from there could be change in the other direction.

So, we try the best we can at the start of the quarter but there are a lot of variables that will come into play.

Terence Whalen - Citi

Okay so just so I understand Paul in the release you say customers are more confident in their ability to get part and they may continue to adjust inventory levels and safety stock downward. That’s referring to OEM, it sounds like on margin you think distributors may actually increase inventory in March.

Paul Coghlan

I didn’t say they would increase inventory in March what I said again is the customers will have better confidence in getting product from Linear. Those customers will be primarily OEM customers as you said, primarily customers like with sub-contractors who are do a fair bit of business with us from many end customers.

Someone that’s ordering through distribution is going to look at what the distributors lead times are and my ability or my lead times can impact distributor but the moment my inventory distribution is extraordinarily lean. So that what I am telling you is that I think we'll keep it roughly the same. It may go up depending on what the distributor see in his business but it will probably not.

Terence Whalen - Citi

Okay thanks for the clarification.

Operator

Next we will hear from Steve Smigie with Raymond James and Associates.

Steve Smigie - Raymond James and Associates

Great, thanks. I just wanted to follow-up a little bit on the auto-market so I just if you look a little bit short term seeing autos roll over somewhat on a year-over-year basis generally speaking maybe because there were seamless programs a year so ago. With that said you guys continue to see your dollars go up I think, so obviously there is some dollar content gains on autos. Could you comment to those if you stay focused on a particular part of the market, maybe high-end autos that are selling better and that’s where the majority of semis are going right now? Is it fair to characterize it that way?

Paul Coghlan

Yeah for us our growth in sales into the automotive market is not strongly connected to how many cars get sold every year. It's much closer connected to the amount of electronic content which we are seeing is just going to continue to go up and so the electronic content first gets picked up in high end vehicles and that’s something that’s kind of been driving our business for the last couple of years but it doesn’t take long for the electronic features that our luxury and high end vehicle start to become standard features in mid-tier and even lower tier vehicle. So, you see that overtime that electronic content being pushed down and then layered on top of it you have got all of these programs to improve the efficiencies of the cars.

There is hybrids, sometimes the future electric vehicles but even with gas powered vehicles there is stop-start systems that are coming and there is lot of new safety issues, night vision, lane departure systems. Automatic parking systems and there is just these features both from an environmental standpoint and from a safety standpoint that are going to be driven obviously first in the high end cars but that’s going to drive into the mid and lower tier cars in the future.

Steve Smigie - Raymond James and Associates

Okay, and then just with regard to the penetration that you discussed into say changing the steering to semi conductors or breaking, can you talk about how much the penetration is in that now versus say the 2013 - 2014 designs you mentioned. 1% of cars now have made the switch to 2013. Maybe its 5% or what would those numbers look like do you think?

LLTC Management

Yeah, I don’t have those statistics in front of me but I would say the current content is extremely low and the slope of the curve going forward is very steep because its -- some of these things are going to be mandated and some just by the cost of energy its going to be something that our manufacturers have to do to remain competitive.

Steve Smigie - Raymond James and Associates

Great. Last question was just; could you talk a little bit about how you see your power business over the next year to two?

Paul Coghlan

It’s a good business for us. We've always been a leader in that business. We've had I think the very first product in the market. I think we're in our third or fourth generation products. We've got new products in design that we've shown to some customers that we think is the best performing product out there. So its just one product family that we're committed to and I believe we still have the highest performing POE products out in the marketplace.

Operator

Next we'll hear from David Wu with GC Research.

David Wu - GC Research

Yeah. I was wondering if your lead times go back to normal and we don’t have a global economic recession by the early part of next year. As I recall you're seasonally March is a very good quarter for you and over the stronger quarters of the year. Are there any reasons to suspect that this time is different?

Paul Coghlan

Well we cant so early. We don’t like to forecast more than one quarter out. So now you're asking us to do that and so we're going to try to refrain from that. But what we can tell you is we'll have to see where we are and where we are with lead times when January comes up, how the customers reacted to those lead times, what the end markets are. So we really don’t want to forecast much now.

David Wu - GC Research

Okay, fine. But from all the comments you have made so far, you never mentioned that there was any specific end markets that look weak, particularly your core end markets in industrial and com infrastructure, correct?

Paul Coghlan

What we said was the bookings decreased proportionately across all end markets. We didn’t say any one specific end market was weak and others were strong. We said bookings were reduced proportionately across all end markets.

David Wu - GC Research

That’s fine. I guess the turns business, if you're successful in exiting your December quarter with back to normal lead times, the turns percentage I assume will go back to normal also.

Paul Coghlan

We would hope. We have to see what it looks like and have to see what the order patterns are and how the customers are reacting to our lead times. If we get to our lead times December 31st, is that different than if we got to it November 30th? All of these things, we have to see how they play out to be honest with you. Over the long term though, if our lead times go back to where they were before, mathematically it's all going to balance out and the turns will go back to historicals.

LLTC Management

I didn’t get to talk today very much any more and I think what has happened here is that the way customers are dealing with the reducing lead times is they are using their bookings levels to get to where they want to get to. So, when that will be over is what none of us know for sure. It could be over the end of this quarter or it could move in the next quarter from additional adjustments.

David Wu - GC Research

I had a question on your customer sell through at their end markets in Q4.

LLTC Management

Right and I don’t think any one of us are saying that we see any difference in that right now.

David Wu - GC Research

Okay. Fantastic. Thank you very much.

Operator

We will now hear from Chris Caso with Susquehanna Financial Group.

Chris Caso - Susquehanna Financial Group

Hi guys, thanks for fitting me in. Just a question, just a follow on few one seasonality and I guess typically for you guys I guess the seasonality has changed over the years depending on your exposure that consumer now the consumer know that if you want historically as stronger as an industry but I guess you got the difference on the extra week now. I mean obviously you don’t want a guy (inaudible) and you call the guy in terms of the puts and takes as we go into the first quarter kind of what the head winds detail substantially would be.

Paul Coghlan

I don’t think we have anything extra to add, you know what we said in our opening comments and you folks have a good, a better pulse than we do on a overall economies and overall industry, not just industrial but overall product strength. So, we gave your best look into it and we don’t want to forecast the March quarter because we don’t have the data to do that. So, we just would like we are kind of watching the cross currents and see what happens.

Chris Caso - Susquehanna Financial Group

And I guess just summing it up obviously lots have been discussed here but I guess my take away here is that you have kind of seen a bit of deceleration in bookings as the lead times came down, as the lead times come down further. That still a bit of a headwind but I guess at the current it's difficult for your guys to judge how much of it is about the lead times, how much of it is about the end markets. Is that kind of a fair share?

LLTC Management

That’s right.

Paul Coghlan

I could not have said it better.

Chris Caso - Susquehanna Financial Group

I am sure you could have, but thank you.

Operator

(Operator Instructions). We will now go again to Christopher Danely for a follow up question.

Christopher Danely - JPMorgan

Thanks guys. Just a kind of quick follow up, I am just first of all I am wondering (inaudible) chips are coming out but beyond that can you just take us through the linearity of I guess orders, last orders and how that’s trended into this quarter?

Paul Coghlan

Well we told you we had a strong start to the quarter when we talked to you in July and then we told you that bookings were less this quarter than they were last quarter. So that July was the strongest month for us and then September bookings again tailed off a bit but we still wind up with a positive book to bill ratio.

Christopher Danely - JPMorgan

Got it and as we look into 2011 what end markets do you feel best amount and what end markets are you I guess more concerned with regarding Linear?

Paul Coghlan

Well I thought we have said the infrastructure, we told you some things that are going strongly in that market, the infrastructures build out and how that’s been good for us and we think it will continue to be good for us and we have good product positioning and good customer repo there. We have talked to you about automotive which we think we will have a growing impact you will see some of it in 2011, more of it in 2012, and more of it 2013.

And then industrial which is really hard for investors to grasp, not that they couldn’t grasp but there's so many inputs into it. We've told you about pretty big trends, one being the energy efficiency trend, portability trend. The earning guys like Intel say corporations are buying more IT stuff.

So I think those are the markets which are the strongest, the opportunistic markets we're in. The computer consumer markets, they are a smaller percentage of our business. Those depend more on overall consumer confidence and elements like that and product positioning and those we don’t have as much data on.

Operator

We'll now take a follow-up question from Ross Seymore.

Ross Seymore - Deutsche Bank Securities

Hey people, one quick question for the OpEx. When you go back to the normal amount a week in March, is it safe to assume that extra $4.5 million to $5 million disappears or is there any other kind of normal OpEx that would change in the March quarter.

Paul Coghlan

No I think -- well I'll be back to 13 weeks of labor. So I'll have 13 weeks of staff com charge, 13 weeks of labor as opposed to 14 in the December quarter. So you're right about that. But that is another six months out and you've have merit raises. There could be some differences in hiring, all of the things we'll talk to you about 13 weeks from now, 14 weeks from now.

Operator

And it does appear that there are no further questions at this time. Mr. Coghlan, please go ahead.

Paul Coghlan

Okay, thank you very much for your attention. Thank you for this nice long conference call and we hope you have a good day. Again to summarize, we had a record quarter. It was our sixth consecutive quarter of revenue growth. We have a return on sales of 35.3%. The company had a good quarter and we wish you a good day. Bye-bye.

Operator

Once again, that does conclude our conference for today. Thank you again for your participation.

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