Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Molex (NASDAQ:MOLX)

Q4 2011 Earnings Call

August 03, 2011 8:30 am ET

Executives

Martin Slark - Vice Chairman, Chief Executive Officer and Member of Executive Committee

David Johnson - Chief Financial Officer, Executive Vice President and Treasurer

Steve Martens - VP of Investor Relations

Analysts

Matthew Sheerin - Stifel, Nicolaus & Co., Inc.

Rahul Chadha - Crédit Suisse AG

Anil Doradla - William Blair & Company L.L.C.

Shawn Harrison

Brian White - Ticonderoga Securities LLC

Jim Suva - Citigroup Inc

Amit Daryanani - RBC Capital Markets, LLC

Anthony Kure - KeyBanc Capital Markets Inc.

Amitabh Passi - UBS Investment Bank

Sherri Scribner - Deutsche Bank AG

Steven O'Brien - JP Morgan Chase & Co

Ruplu Bhattacharya - Bank of America

Craig Hettenbach - Goldman Sachs Group Inc.

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 Molex Incorporated Earnings Conference Call. My name is Chanel, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today to Mr. Steve Martens, Vice President of Investor Relations. Please proceed.

Steve Martens

Thank you, Chanel. Good morning, and welcome to our June 2011 conference call. I'm here today with Martin Slark, our CEO; Dave Johnson, our CFO; and Liam McCarthy, our COO. [Operator Instructions] Please visit the Investor Relations section of our website to download the presentation materials and to access a replay of this call later today.

Before we begin, let's review our Safe Harbor statements, which are Slides 1 and 2 of the presentation materials. During the course of this presentation, we will be providing forward-looking information and referring to non-GAAP measures. Please read carefully the forward-looking statements section of our press release and Form 10-K for an understanding of the risks and uncertainties associated with forward-looking information and the reconciliation of non-GAAP measures to GAAP. And now, I’ll turn the call over to Martin.

Martin Slark

Thank you, Steve, and hello to everybody on the call. I'm going to split my presentation today into 3 sections. I'm going to talk first of all, briefly about fiscal year 2011. I'll then focus more attention on the June quarter just ended. And then after Dave reviews the financials in detail, I'll talk about our fiscal year 2012 priorities before we open the call to Q&A.

Fiscal year '11 was a good year for Molex. And if you look at Page 3 of our presentation materials, we've summarized what we thought were the key points. We established new records for orders, revenue and earnings per share, and we are pleased with the way that the Molex team performed in what has been difficult and dynamic environment.

While we completed our reorganization roughly a year ago, we continue to see new benefits beyond the restructuring savings. CapEx has been in the range of 6% to 7% for 4 years now, even while expanding our manufacturing base. We are better aligned with our customers, and we have realized marked improvements in our key metrics, such as delivery and quality.

2011 was also a good year for Molex in the area of expense control. We were able to get our SG&A below our target of 18% of revenue, even while investing in R&D and selling expenses during the year to support future growth. Our challenge is to continue to leverage our reduced admin costs wherever possible and improve the efficiency of our selling and R&D efforts.

During the year, we worked to further diversify our customer base, continuing to penetrate our larger global accounts with our extensive product portfolio and driving growth with our Focus Accounts. For the year, our Focus Accounts grew by 46%. We are very well diversified in every way today, by customer, by geography and by end market. We believe that this reduces our risks and affords us many avenues for growth in reasonable economic conditions.

For the year, revenue grew 19% from fiscal year '10. EPS, including non-GAAP charges in fiscal year '10 grew 55%. Our operating margin also expanded from 9.4% to 12%. As a result, we generated cash flow from operations of $466 million for the year. This was more than sufficient to fund CapEx and growth initiatives for the business and increase our dividend twice during the year.

Please turn now to Slide #4. What I'll talk about here is our growth by industry for the fiscal year. The broad-based recovery continued for our fiscal year, with all markets realizing double-digit growth on a year-on-year basis for revenue. Tablets were a major contributor to the increase in the infotech market. But we also saw a good sales growth into service and storage equipment, as companies upgraded their data centers.

Industrial market grew 23% from fiscal year '10 as the recovery in global GDP drove the need for factory automation equipment and spending on industrial equipment. We were very pleased with the contribution from our Woodhead acquisition fiscal year '11. After a few years of struggling with this acquisition, it is now making a very positive contribution to both our sales and profitability growth.

The drivers for the growth in telecom last fiscal include the ongoing penetration of smartphones, which have better connector content than mid-range phones and increased spending on network equipment, primarily due to the rise in video Internet traffic. This was an exceptional year for Molex in terms of overall growth when we've clearly rode the overall economic recovery. And we obviously do not expect to continue growth at this pace in the years ahead. Revenue now exceed the precrisis levels, and we seem to be returning to a more normal demand environment. Moving forward, we'll continue to work to change our end market mix, trying to increase our exposure to areas of business that have higher margins.

Please turn now to Slide 5. On Slide 5, we have our quarterly progression of revenue of -- and orders. We achieved record revenue of $914 million and near-record bookings of $906 million during the June quarter. Revenue was up 5% from the March quarter and up 8% from June 2010 quarter, while orders were up 3% sequentially and down slightly from the same quarter in 2010. It's worth noting here that with the benefit of hindsight, Q4 fiscal year '10 was an abnormal quarter for bookings. In Q4 last year, we saw abnormally high bookings from our distributors and for the infotech market. And if you look at the chart above, the spike in Q4 clearly is out of sync with the overall progression throughout the remaining quarters.

The book-to-bill ratio last quarter was 0.99:1. This primarily reflects strong shipments, up particularly at the end of the quarter, but a slight slowdown in orders at June. We believe that the impact from the natural disasters in Japan was largely in line with the assumptions that we used to prepare our guidance for the June quarter. Going forward, we would expect to see a slight recovery in the September quarter in Japan with a more substantial recovery in the December quarter.

While the June quarter is fairly linear due to limited holidays during the quarter, the September quarter is back-end loaded due to summer holidays and customer shutdowns during July and August. Orders in July were fairly flat with June, but we saw a good recovery in consumer bookings in Japan, offset by a slowdown in global distribution orders in the same month.

On Slide 6, we have revenue and orders by end market for the quarter. Automotive revenue was down slightly from the March quarter, but they were up 13% from the prior year. The sequential reduction is a result of lower production in Japan. Orders were down for the March quarter, reflecting July shutdowns. We expect a solid, above-seasonal September quarter, as the carmakers are signaling to us that they will increase inventory of finished vehicles as end demand continues to recover. And we also expect growth in China to strengthen, and that production will increase in Japan to replenish inventory and make up for lost production.

In the infotech market, revenue was up 8% from the March quarter and 17% from June 2010 quarter. Demand for components for several -- for server and storage markets was quite strong through the quarter. Continued growth in tablets also contributed to the strong performance for infotech, and that was largely offset by weakness in laptops. Orders were up sequentially by 13%, giving us some guided optimism for the September quarter in this segment.

In telecom, revenue increased 6% sequentially and 8% for the June 2010 quarter. Components for infrastructure drove the increase after being flat to several quarters. Mobile phones were mixed, as smartphones somewhat offset the decline in mid-range ones. Orders were up 2% sequentially, and we expect this market to be relatively fat -- flat in fiscal year '12 Q1 before improving slightly in the December quarter.

Consumer revenue was up 1% from the March quarter and down 2% from the prior year. Orders increased 3% sequentially, but decreased 11% from June 2010 quarter. The consumer market has flattened out, as consumer spending has slowed along with the global recovery slowdown, and year-over-year decline in orders was primarily driven by continuing issues in Japan. We expect the consumer market to be stronger in the second half of fiscal year '12 Q1, and we've already seen stronger orders from our major customers in Japan starting this quarter.

Industrial revenue was up 7% from the March quarter and 6% from the June 2010 quarter with most of the increase this quarter coming in Asia. Orders increased 4% sequentially, but declined slightly from 2010 quarter, and we had a significant spike due to restocking; in addition, a strong performance in factory automation, our industrial Focus Accounts are performing very well, generating good growth and further diversifying our exposure to this key market.

If you turn now to Page 7, I will briefly pass comments on our growth by channel and geography. On a channel basis, we saw strong sequential increases in distribution and EMS orders. Our OEM business was weaker, particularly in Japan and in the mid-range mobile market. By geography, orders in Asia Pacific North, obviously dominated by Japan, were flat on a sequential basis, but down year-over-year due to the lingering effects of the natural disaster in Japan. Orders for Europe decreased 5% for March, as order companies cut back on orders in anticipation of summer shutdowns and mobile changes.

Let me now turn the call over to Dave Johnson for commentary on our financial results.

David Johnson

Thank you, Martin. Let's start on Page 8 with a high-level summary of the full fiscal year that ended on June 30.

Both revenue and earnings per share were records for Molex in fiscal 2011. Revenue of almost $3.6 billion was up 19.3% from the prior fiscal year, while earnings per share of $1.70 was up 55%. Gross margin of 30.3% has improved sequentially in each of the last 2 years, but remains below our target of 32%. The primary factor impacting our gross margin is the high cost of commodities. The average price of gold and copper were both up 20% to 30% in fiscal 2011 versus 2010.

SG&A as a percent of revenue was 17.9% for the full year, just below our targeted 18%. On an absolute dollar basis, SG&A was up $32 million year-over-year, of which $30 million was for R&D and sales costs, while just $2 million of the increase was for administrative expenses. And just as foreign exchange increased our revenue year-over-year, almost $30 million of the $32 million increase was due to foreign exchange. Therefore in local currencies, SG&A was up just 3.3% on a 16.5% increase in revenue.

In total, our operating income increased from 2.7% in fiscal 2009 to 9.4% in fiscal 2010 and is now 12% in fiscal 2011. On a full year basis, our incremental gross margin was 34% and our incremental operating margin was 26%.

Next is our quarterly P&L analysis on Page 9. Revenue of $913.7 million was up 4.5% sequentially and 7.8% year-over-year. Virtually all of our growth was organic. Our gross margin in the quarter was 30.8%, a sequential increase of 100 basis points, which is especially good in this environment of high commodity costs. Price erosion has been below our 3% to 5% range now for 2 consecutive quarters, which provides evidence that our price increase and new pricing methodology is beginning to gain some traction.

This is also the second quarter that our 60% hedge for gold and copper has been in place for the entire quarter. Our hedging program has been effective in taking the volatility out of the growing costs of raw materials. And as a reminder, we purchased one-year call options on a quarterly basis. And then every quarter, 1/4 of the hedges roll off and is replaced. Because these are call options, we do not take any down-side risk. If the price of gold and copper rises above the strike price, we receive a financial settlement from the bank. And if the price drops below the strike price, then we simply benefit from the lower costs of the raw materials. Our average strike price for the September quarter is $1,404 per troy ounce for gold and $4.21 per pound for copper.

Our SG&A of $167.9 million was about $6 million more than the level we had guided to during our last call. $2 million of the increase was in the admin area due to year-end adjustments in medical and other benefit expenses and investments in improving initiatives. $4 million of the increase was in sales and marketing.

Looking forward, we have decided to make some strategic investments in our sales and marketing group in order to prepare for the next wave of growth for Molex. This includes additional people resources in division product marketing, as well as direct sales resources and direct sales training activities. These resources will be used to further diversifying our customer base.

Continuing down the income statement, we had some minor sequential variability in our Japanese legal costs, net interest expense and other expense, but nothing noteworthy to report specifically. Our effective tax rate for the quarter was 29.1%, bringing our full year effective tax rate to 30.5%. And our earnings per share for the quarter of $0.44 was almost double the prior year and up from 39% (sic) [$0.39] reported in the March quarter.

Our balance sheet and operating metrics are presented on Slide 10. Net cash increased by 36% to $208 million, driven by increased net income and improved working capital utilization. Both receivable days outstanding and inventory days outstanding reduced sequentially, with DSO decreasing to 72 days and DSI decreasing to 84 days.

Capital spending of $65.3 million was 7.2% of revenue. And looking back over the full year: roughly 50% of our capital spending was for product-specific molds, dies and assembly equipment; 30% was for generic capacity increases such as molding and stamping presses; and the balance of 20% were for other items. So true to our strategy, the great majority of our capital is dedicated to new product introductions.

Our R&D spending was up just slightly sequentially, but up 7% year-over-year as we invest strategically in our new product development program.

And finally, cash flow from operations of $139 million was comparable to the sequential quarter, and free cash flow of $74 million was roughly in line with the reported level of net income.

Page 11 shows the progress that we've made in our return on net assets or RONA. As expected -- as we expected, we exceeded our goal of 20% for the year, and we made steady sequential progress in each quarter. A year ago, our RONA was 15.8%, and we reported 21.6% in the most recent quarter. We are clearly earning our cost of capital, and we've demonstrated the importance of managing not just the P&L, but the key balance sheet metrics as well.

We struggled some with the level of inventory during the year, as we were still adjusting to the significant relocation of production tools related to our reorganization and required safety stock that was needed to ensure steady customer supply. And we effectively transitioned a significant number of shipments to sea freight from air freight, which was done in order to reduce the costs to serve our customers.

Looking forward, we have undertaken a supply chain initiative that will further improve the management of our inventory levels and permit us to operate efficiently over the longer term with lower levels of inventory.

And finally, our outlook for the coming quarter is shown on Page 12. After reaching record revenue in the quarter and the full year ended in June and considering the continued economic uncertainty in the world around us, we expect revenue for the September quarter to decline sequentially to the range of $880 million to $920 million. At this level of revenue, we expect earnings per share in the range of $0.39 to $0.45. Gross margin is expected to decline slightly sequentially for the current quarter, depending upon the revenue level. And SG&A is expected to reduce sequentially by $2 million to $3 million due primarily to year-end adjustments in Q4 that will not repeat in Q1, as described earlier in the call.

This guidance assumes a consistent 30% effective tax rate and constant foreign exchange rates and commodity prices. It further includes $0.01 per share for legal expenses related to our Japanese litigation matter.

And now, I'll turn the call back to Martin for comments on priorities for the coming fiscal year.

Martin Slark

Thanks, Dave. If you turn now to Slide 13, I'll comment briefly on our focus areas for fiscal year '12.

First and foremost, our challenge is obviously in this challenging environments to grow our business. We think beyond the current slowdown that we've seen, there are very strong long-term growth trends in each of our core markets that should give us ample opportunities for revenue growth in a normal economic environment. And we will continue to make certain that it's profitable growth to ensure that we make the best use of our available resources.

We'll also be working to further improve our returns on our R&D efforts. We now have tools in place to track assumptions around projects throughout their life cycle so we can improve the accuracy and rigor of our new product development process. Our new supply chain initiative will also bring us operational improvements to a better, more coordinated production and demand planning. And we'll improve our cost base through procurement actions and stronger logistics.

We made pricing a priority in fiscal year '11. And using our new pricing software, we were able to effectively make price adjustments to partially offset commodity costs increases and more accurately priced to market conditions. The end result was price erosion below the low end of our normal range. We'll continue to make pricing a priority to ensure that we price more effectively on a global basis.

Our last initiative is around portfolio management, where we will work to change our end market mix to further diversify our exposure, balance product life cycles and ensure we are participating in high-growth, high-margin areas. Acquisitions will clearly be part of this initiative, as we move -- as we're moving into adjacent markets, such as acoustics and solid-state lighting.

In conclusion, it was a good year for Molex with record sales and profits. It was our first full year after lengthy and complex reorganization restructuring program. We've made outstanding progress and continue to make progress in each and every quarter. We're very excited about our prospects for the future, and we look forward to reporting continued progress as the new year unfolds.

And now, let us open up the call for questions. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Craig Hettenbach.

Craig Hettenbach - Goldman Sachs Group Inc.

Martin, you talked about the improvement at Woodhead after a couple of tough years. Can you just discuss the company-specific demand drivers that you're seeing in the industrial space as we go forward here?

Martin Slark

Yes, sure. I think one of the markets, Craig, that's been interesting, when you look at some of the volatility we've seen, is that the industrial market itself has been slower to recover in some ways after the financial downturn, but has been more stable over the last few quarters. And what we have done is -- and we're continuing to do now, is expand the amount of sales resources we have, focused particularly on the industrial market. And there seems to be around the world, particularly in North America and Europe and now increasingly in Asia, more investment in factory automation. And the product range that Woodhead has given us and now Molex's global sales capability is enabling us to expand our sales into that market globally. And Asia in the last quarter, was particularly strong. I think the other encouraging thing is when we look across our end markets for last year, it's pretty clear that the gross margin in that industrial market -- because it tends to be lower volume, higher mix by customer. I mean there's a lot of small customers in that end market. It's more positive. So I think we believe that's a market we need to continue to focus on and look at ways that we can continue to grow it.

Craig Hettenbach - Goldman Sachs Group Inc.

Okay. And if I could follow up more broadly, the decision to increase some SG&A on the sales side against what, as was called out on the call, just some uncertainty in the macro, anything specific you're hearing from customers or design that has you -- that you have enough conviction in to increase the spending in the current environment?

Martin Slark

Yes actually, Craig, if you don't mind, because I think it's a question that some other people are going to ask too. It might be helpful when I answer that question to sort of describe what we've seen over the last few months. Because through May or the end of May, frankly, we were very enthusiastic about what was going to happen in fiscal year '12. And we had only seen during the front half of the calendar year, I would say, weakness in the consumer market that was largely driven by what was going on in Japan and weakness in the mid-range mobile market. And I think that's been pretty well documented. I mean there are 2 major customers in that area that are clearly having some struggles. But everything else looked pretty solid. What we saw happen in June and now in July is a couple of things. First of all, we saw some slowdown in automotive, which has been attributed by automotive customers to model changes and preparing for the summer shutdowns. And then we also saw a significant correction in global distribution that had been very strong. But when you look back, it appears that distribution did some stocking after the Japan issues when there was fears of component shortages and that now are correcting inventory today. The positive has been actually, in the last month in particular, a bounced back in consumer business. Now our view looking back on last year is that the margin opportunity for us in industrial, medical and military markets are more significant. And our mainstream sales force is not penetrating those customers as fast as we would like. So we've added some additional resources, particularly focused on those markets, which isn't going to come to fruition in the next quarter or 2, because the design cycle in those markets is longer. But we think in the long run, we'll will change our customer profile and mix and will also help us grow our margins because it's very apparent that when you look at the different end margins in those different end markets.

Craig Hettenbach - Goldman Sachs Group Inc.

Okay. Last one if I could for Dave, just on the capital allocation front. The dividend has been a big focus. And as mentioned, you had increased to 2x. That said, given the sharp increase in cash flow in the year and expectations as a go forward, what are your thoughts around the buyback? Company hasn't bought back stock since prior to the downturn. How are you thinking about buyback at this point?

David Johnson

We haven't made any announcements on any buybacks, so I think I shouldn't discuss that in any great detail. But we're looking at how our cash is being generated, where it is. A lot of our cash is being generated offshore. So as we go through and analyze where the cash is and the ability of bringing that back to the U.S. we'll then make a decision on whether or not we do a buyback.

Martin Slark

And let me add one comment to that, Craig. I think we want to be very clear about what our cash priorities are. And obviously number one, reinvest in the business, but as you can see, we generate more than enough cash to do that. Number 2 is to protect, and where appropriate, expand the dividend. And then thirdly, I think look at acquisitions. And we think we continue to see consolidation in the industry and acquisition opportunities, particularly in some of those target markets, which are very hard to predict timing-wise, but they're certainly out there in the pipeline. And then I think over time, we obviously want to make sure there's a buyback there to offset dilution from equity incentives, et cetera. But clearly, that's our priority for cash.

Operator

Your next question comes from the line of Wamsi Mohan.

Ruplu Bhattacharya - Bank of America

This is Ruplu filling in for Wamsi. Martin, I was just wondering if we could focus a little bit more on Japan. You had guided to a $20 million impact for the June quarter. And just looking at the September quarter guidance, it doesn't look like we're seeing a big snapback or reversal on that. So just if you can mention what revenue impact are you factoring in from Japan for the September quarter?

Martin Slark

Good question. Actually what we've seen and we started to see on Japan, you're absolutely right, the $20 million was about what we saw in revenue in the last quarter. And what we've seen is the order's starting to come back in Japan. And the good news about Japanese customers, more so than elsewhere around the world, is that they give you pretty good forecast in terms of what they're planning to do. And as you know, a lot of that market for us is consumer-driven. And they have basically told us there would be a delay in Christmas build. And so we're expecting the second half of this quarter to be stronger for the consumer business. What that has been offset by, frankly, has been some weakness in the distribution channel. And obviously some uncertainty that I think everybody has been seeing in the general market of late. But our view is that as we get to the second half of this next quarter and going into the Christmas quarter, we believe that the strength, in terms of relative to what we saw in the fourth quarter, would be in consumer electronics coming out of Japan and in automotive.

Ruplu Bhattacharya - Bank of America

Okay, that was helpful. Just focusing more on the distribution channel, are you seeing any inventory buildup? Is that why you're seeing an order slowdown? And I mean is there -- do you think there's an inventory correction happening in the distribution channel in September?

Martin Slark

I think that question's probably better directed to the distributors themselves. But what I can tell you is we keep some charts here that kind of show the underlying growth rate of each of our channels and sectors and what's happening on a quarterly and a monthly basis. But when you look back at that chart, what is very apparent is that after Lehman Brothers went bankrupt, the distributors seem to overcorrect on the downside. They now overcorrected on the upside through last summer, and there were some burn-off in inventory through Christmas. It also seemed that we saw a spike in distribution business in March right after the Japan earthquake. I think there were some questions about component shortages, et cetera. And then distribution business seems to slow down the last 60 days. Now whether that is because they're seeing slowdown in the end market or there's some inventory correction going on, frankly I don't know the answer to that.

Ruplu Bhattacharya - Bank of America

Okay, great. That was helpful. And the last one for me if I could, you're very strong in tablets and smartphones. I was just wondering as we go into fiscal '12, how you see your content, dollar content per unit, increasing? And can you mention any new design wins that you had?

Martin Slark

We are very excited about both of those segments, as you correctly pointed out. We have good content across all of the major players. On a calendar year basis, the data that we have seen is that the mobile market year-over-year for '11 is probably going to grow from about 1.45 billion units to past 1.55 billion units. But within that, there could be up to 50% growth for smartphones, and so we view that as good news. And obviously the content in the smartphones is better than it is in the mid-range phones. And when I think the interesting thing in the tablet market is we do well with the dominant player there today, but we have seen a huge proliferation in new devices. And it was interesting for me to see that a couple of quarters ago on our CRM system, we had projects with about 80 different projects in different tablets. Now we're starting to see revenue streams in various companies. Obviously who's going to win in that market? Really hard to predict. The key for us is to get designed in to make sure that we're with all the likely leaders. What's also interesting, I'm sure you've seen in the mobile market, is how different software platforms are now starting to drive that. I mean the ILS Android platform's clearly getting a lot of growth in the market. And then it remains to be seen whether the Microsoft-Nokia combination is ultimately going to have success in the long run too.

Operator

Your next question comes from the line of Brian White.

Brian White - Ticonderoga Securities LLC

Martin, when we look at the September quarter, looks like at the midpoint, you're guiding for a 1.5% decline. Normally, we're up about 3%. And I think it's really the only decline in the past 9 years that we've had, other than the downturn in September '08. So I'm just wondering what markets do you think will grow in the September quarter? And what markets do you think will decline quarter-over-quarter?

Martin Slark

Good question, Brian. I think the markets that I think will be down based on the order trends that we have seen in June and July -- and again what I want to stress here is to put it in context is through May, we did not have any concerns. We saw our June orders dip a little bit. And then we've seen July stay fairly flat. What we're trying to figure out is, is this a summer slowdown? Is it a result of the knock-on effects of the -- what was going on in Washington? Hard to predict. And obviously, we knew the automotive market would slow down this period because this is when they go into the summer shutdowns and the model changes, et cetera. And distribution is 25% of our business. Obviously when they slow down, that has an impact. What we're seeing today is I would say the following: one is we're assuming distribution's going to be weaker in this quarter; we're assuming automotive will be stronger sequentially; we're assuming data will be fairly flat. What's happened there is it varies by segment. I mean tablets is good. Notebooks is weak. The storage market has been very strong for booking and billings. But the server market was strong for billings, but weaker for bookings. We think consumer for us, which is very much Japan-driven, will be stronger in the second half of the quarter based on the forecast we're seeing. And industrial flat, and we think mobile overall will be flat. So the key growth drivers, I think, in the next quarter would be automotive and recovery in consumer.

Brian White - Ticonderoga Securities LLC

And just to be clear why do you think -- consumer, usually you start to see the pickup already. Why are you saying second half of the quarter before consumer starts to come back?

Martin Slark

Just based on the fact that a lot of our consumer business is obviously driven out of Asia. And I think even though we were very pleased with the recovery that we made from the issues in Japan, the knock-on impact on Japanese customers was certainly bigger than it was globally because of the correct 2 supply chains there. And if you look at the forward forecast and orders from those consumer companies, it's clearly starting to pick up now. I mean it would have picked up for us normally, and that's the big difference. We probably lost $20 million in revenue in the June quarter and at least that in bookings in Japan based on what we saw happen in consumer market. We're starting to see that come back in bookings, which would obviously end up in shipments as we get into August and September.

Brian White - Ticonderoga Securities LLC

And Martin, just on the networking market within the IT data, what are you seeing there? Sounds like storage is good, servers aren't so great. But how about networking?

Martin Slark

Networking was weaker earlier in the year through March, April. We've actually seen, particularly with a couple of major players, a little bit of a bounce back there in the last month or so. It was certainly -- what we did see last year was the networking companies were the ones that drove a lot of that blip in demand in the middle of last calendar year. And there was some inventory burn-off through Christmas. What we're seeing now is a little bit of recovery in that networking sector.

Operator

Your next question comes from the line of Amit Daryanani.

Amit Daryanani - RBC Capital Markets, LLC

Just wanted to, first off start with the -- you talked about changing your end market mix going forward to higher margin segments. Could you just talk about what segments are you exactly focusing? And is that going to be done via acquisitions in fiscal '12?

Martin Slark

The key markets for us in terms of stronger end market margins would be industrial, medical, military and telecom infrastructure. And initially, it obviously would be organic because that's what we control. And -- but obviously what that -- we've said before that our focus for acquisitions would be to help us strengthen our position in that market, which is why we made the Woodhead acquisition. But we're going to look for the right opportunities and obviously not just buy something to get extra revenue.

Amit Daryanani - RBC Capital Markets, LLC

Got it. I was looking at September quarter, I think the mid-point margins are dipping down 20 basis points or something. Is that just revenue-centric, or is there anything else that's driving it? And can you just remind us what levers can enable us to get back to 14% margin operating margin target that we have?

Martin Slark

It's absolutely revenue-driven. And as you know, I think we're very pleased that we got our SG&A at the 18% target level for us. The key for us going forward obviously is to grow the revenue. And then we talked, I think in the call, about the fact that we spend rough numbers, about $1.8 billion in the supply chain area. One of our big new initiatives for this year now, we're done with our restructuring is to look at what we could do to reduce our supply chain costs. And that's around leveraging our global volumes to get better purchase prices, which I think is critical given what's happening to materials, doing a better job of planning our production around the world now. We have this global network in place. And also looking at further reductions in our logistics costs, which we think are there. So we think there's great opportunity there. We've demonstrated some real benefit from our pricing initiative, and we'll see that continue. And we also are very excited about the pipeline of new product opportunities we have. We actually released over 1,000 new products last year with the largest number we've ever had. We have a lot of good design wins going. And so I think if there's no economic major correction here. We think we have a lot of opportunities to continue to grow. And frankly, we're a little surprised by what we hope is a pause over this period.

Amit Daryanani - RBC Capital Markets, LLC

And just finally for me to just understand, the auto trends that you guys talked about, it sounds like you guys are saying there's a bit of a correction or adjustment going on at the distribution at the channel level. But when I look at the June orders, it looks like distribution EMS were up double digit while OEM was down. When do you expect the channel to be actually be down in terms of orders if they're going through correction?

Martin Slark

No, because what happened is if you look at the data, I -- it was interesting you asked the same question because I asked the same question too, is what we saw was massive orders in the March, April period, which impacted the quarter. And then what we then saw is slowdown in June and July. I mean distribution in total had a very strong quarter, but it was driven by what happened in March and April and May.

Operator

Your next question comes from the line of Amitabh Passi.

Amitabh Passi - UBS Investment Bank

Martin, my first question for you is any commentary on trends you're seeing across your geographies? You talked about slowdown in June and sort of flattening trends in July. I would love to hear just from a geographic perspective what you might be seeing? Certainly, there's a lot of noise particularly in Europe and North America.

Martin Slark

Yes, sure. Obviously, a lot of the press today is very much North American-focused. And there's no question, I think, that what went on in Washington, which I won't comment on, had an impact on confidence generally, I think both consumer and industrial confidence. So -- but what we see in terms of end market was the typical end geography the typical summer slowdown that we used to see prior to these massive economic cycles in both North America and Europe. And we're clearly seeing that. What we've seen in Japan is things stay fairly stable versus where they were in the March quarter, but now start to pick up in terms of orders, which we're encouraged by. The big issue in Japan, I think that big hangover there, was you probably know in mid-July, was the turnover date for digital TVs in Japan. And all TVs went digital there, and they were giving out these eco credits for people to purchase TVs, that is now over. And I would say burning through the TV inventory across Asia is one of the challenges going forward. And obviously what you've seen in Asia I think is some governments there focused a little bit on trying to control inflation versus growth. But our expectation I think is we're seeing a summer slowdown in North America and Europe, fairly stable conditions across Asia and the start of or a little bit of a pickup in Japan relative to what we saw in Q1.

Amitabh Passi - UBS Investment Bank

Great, and then just a follow-up for Dave. Dave, I might have missed this. Did you give any color on your expectations for inventory days even the September quarter? Or even as we look further up for fiscal '12?

David Johnson

I did not give any color. But we would expect our inventory days to continue to trend down. We are at 84 days at the end of the year, and we would expect that to trend down to roughly 80 days by the end of this next year.

Operator

Your next question comes from the line of Matt Sheerin.

Matthew Sheerin - Stifel, Nicolaus & Co., Inc.

So question regarding ASP. Sounds like ASPs have held up well, sounds like you've had success with some price increases. Given that we're in a more sluggish demand environment and that lead time for products are generally at normal levels, would you expect to be -- to see a continuation of sort of the flat ASPs, Martin? Or would you expect to see some erosions, some more competitive pricing environment?

Martin Slark

Matt, I think it's a great question. I think it depends a lot what happens to end demand. I mean if what we're seeing today deteriorates into a major slowdown, obviously there is a correlation between when the market gets weaker, you come under more pricing pressure. If we see what we think we're going to see, which is a delay in Christmas build and some recovery in the market in September as we get out of the summer period, then our goal I think would be to hold the gains that we've made. And we're really excited today. I think about the pricing tools that we had in place and our ability there to price that capacity more effectively on a global basis. I mean it's pretty apparent in the past that we were giving margin away in Asia unnecessarily. And we weren't holding customers accountable for the volumes that they were supposedly going to give us, which drove price reduction. So I think we can do a better job in that area. How much better job? I think depends a lot on end demand.

Matthew Sheerin - Stifel, Nicolaus & Co., Inc.

Okay, great. And I know it sounds like you have some optimism about a little bit of a bounce back in September. I know if visibility is as tough as it's been for a while. But as you look to the December quarter, typically you're up a little bit single digits, down in some markets and up in others. You have a sense of how that might play out? Or will we see another sluggish quarter because of this pause that you're talking about?

Martin Slark

Well Matt, give you a couple of data points that might help because I do think what's going on in Asia and going on in Japan is a big, big factor in all this, outside of what's going on in North America that you're seeing. In the normal March quarter, our revenues in Asia Pacific North sequentially would have been down about 3%. With the Japan issues, they were down 12%. And then in a normal June quarter, they would have been up 10%, and they were actually flat. And so obviously, there was a big chunk of revenue lost there between those 2 quarters, which we think we're going to get back between now and Christmas. Now the exact timing of it, our belief right now based on customer forecasts, is that we would see in the back end of August into September and then into October. But that and that's certainly just looking at the customer data we get from the major Japanese customers in that market. So I think that's the single biggest wild card there. And also I think the other factor we've looked at, which has surprised us is what's happening in distribution and really understanding -- are they seeing a slowdown in end demand? Or is this some inventory correction going on in that channel?

Matthew Sheerin - Stifel, Nicolaus & Co., Inc.

What are you seeing in terms of point-of-sale numbers out of distribution? Does that indicate that their sales level have slowed?

Martin Slark

Through the end of last quarter, they were pretty good. So I think if there is a slowdown in that sector, I think it's happened in the last 30, 45 days.

Operator

Your next question comes from the line of Shawn Harrison.

Shawn Harrison

Wanted just to talk on the SG&A drop-through, given the step up this quarter. Maybe as we look throughout 2012, with each incremental dollars of sales growth, how we -- would we expect SG&A to track going forward?

David Johnson

As we said in this current quarter, we would expect SG&A to drop $2 million to $3 million. So starting with that base, which is roughly $165 million for -- than the first quarter. We have the usual step-up in the second quarter because of our annual merit increases. That step-up is roughly a $4 million impact for us. And then after that, I would estimate just gradual increases for the balance of the year. So because of the merit increases, it's hard to give you a percent increase, but that's how we're looking at it.

Shawn Harrison

In that $4 million, that's all within one quarter, correct?

David Johnson

That starts in the second quarter, yes.

Shawn Harrison

And it will flow through a bit into the third quarter. Okay.

David Johnson

Yes, in the third quarter and fourth quarter.

Shawn Harrison

And then Martin, just on distribution, to be clear, looking at the guidance down 3.5% at the low end, does that assume that distribution in terms of what you're seeing through the end of July does not improve throughout the entire quarter? So kind of other than some of the commentary coming out of Japan getting better, some of the automotive getting better, that distribution kind of the lower order rates do not improve through at least the end of the quarter?

Martin Slark

Yes, that's the assumption that's in there. So I would say is if what we're seeing in distribution orders is a short-term phenomenon, a recovery in distribution would give us some potential upside.

Shawn Harrison

And then final just quick question, capital spending for 2012 given some of these SG&A initiatives to grow into some of these other end markets. Would we expect capital spending to be at the high end of the targeted range or low end? Maybe just a little guidance there.

David Johnson

Just use a 6% to 7% range, and if you want to pick going at mid-point, use 6.5%.

Operator

Your next question comes from the line of Sherri Scribner.

Sherri Scribner - Deutsche Bank AG

I wanted to see if I could get a sense of what you're hearing from your OEM customers and what type of visibility you have? I mean, clearly you've talked about a delayed Christmas season. But I wanted to get a sense if those OEM customers have given you any indications about what their demand looks like for the back half of the year.

Martin Slark

Sherri, that's a great question. Unfortunately, doesn't have a simple answer. I think it varies a lot by end market. I think in consumer and automotive, our customers are pretty good about giving us longer-term forecasts, and so we have a feel for where they're going to go. I think if you look in the data markets, there has been obviously some weakness in some of those sectors. But things like the tablet market and the data storage market appear strong, and we've been talking to companies there about now having appropriate capacity in place to support them. I think the industrial market is pretty stable. And anyway, it doesn't have the same kind of volatility that you see in some of those end segments. I think if you look at the mobile market, clearly the mid-range has been hammered by a couple of major companies they're really struggling. But I think the companies that have been emerging there in the smartphone market are very optimistic and bullish about what they're going to sell as they go into Christmas. So there's no one answer there. I think it varies a lot by end market and even within segment within those end markets. But I'd say overall, there is definitely more caution today than there was 90 days ago.

Sherri Scribner - Deutsche Bank AG

Okay. I guess I asked a question and it was pointed out earlier. You're guiding down for the September quarter. And you've really only seen a September quarter be down when we were going into a recession. So are your customers indicating to you that they think we're entering another economic slowdown?

Martin Slark

Well no. I think, as you quite rightly said, if you look at the normal September quarter for us, we would normally expect September to be up 4 or 5 points, and we're talking about it being down 1.5 points. And that's largely based on what we've seen in bookings in June and July. And the challenge, I think, is that we've seen a very rapid recovery over the last 2 years from the economic slowdown. And I think people are trying to determine where the end market is going. My view is, and frankly this is just based on talking to customers, talking at our distributors, looking at order patent by end market. At this point, we think we're seeing a summer pause that has driven for us a lot by a correction in automotive and in the distribution sector. But certainly, the longer term forecasts we have to customers don't predict going into recession. But frankly, given the way the media and the government works here, we can always talk ourselves into one.

Sherri Scribner - Deutsche Bank AG

Okay. And then I wanted to follow up on infotech and the telecom segments. I know earlier this quarter, you were talking about those segments being strong in the back half of the year. It looks like maybe we're seeing some softness. But are you anticipating that we see an IT hardware refresh in the back half of the year and that telecom improves in the back half of the year?

Martin Slark

Telecom actually was reasonably good last quarter, particularly the infrastructure side of it for us. And if you look at the infotech sector for us, we saw good bookings and billings from both data storage and the server market. But the storage sector was clearly stronger than the server part of that market for us. And then I would say that having had a weak 4 or 5 months in the networking area, we started to see some recovery in that end market as well. So I mean when I look at the markets and you look at the longer-term trends, infotech in total even though segments within it are varying because the notebook market I think has been hammered a lot by success of tablets. Within it, there are segments that are up and down. Overall, that looks reasonably good. The areas that we're most concerned about in terms of a potential slowdown in this quarter, I would say, would be what we've seen in distribution and making sure that automotive does bounce back up to the summer.

Operator

Your next question comes from the line of Steven O'Brien.

Steven O'Brien - JP Morgan Chase & Co

Martin, you talked about a couple of headwinds in the infotech and the telecom business from respectively feature mid-market phones and telecom and notebooks and infotech. My perception was that, that generally Molex had more exposure to the smartphones and to tablets. But I just wanted to see if you could give any color around where the relative size of those businesses are, between sort of next-generation product and older-generation products because it seems like there's clearly a headwind going on from some of these older generation products falling off.

Martin Slark

Yes, Steven, I think that is true. I think the good news, though, is if you look at the overall market data, the share of the market now controlled by smartphones continues to get bigger and bigger. I mean I don't know what data you look at, and it depends obviously what you define as a smartphone. But we're definitely at a point now where 1/3 of the market is smartphone-driven by some definition. So I think if that segment continues to expand, I think going into Christmas, the big upside here is going to be other people buying smartphones who don't have them, particularly in the developing world where the upgrade cycle tends to happen faster than it does here. And what's going to happen I think in the tablets sector is you're going to see continued strength from the market leader plus the emergence of a lot of competitive products. Whether they sell or not, we don't control it. The key for us is to be designed into them.

Steven O'Brien - JP Morgan Chase & Co

But in the interim here, Molex is seeing weakness or headwinds from future phones and from notebooks? I mean how big a portion of the business is that today?

Martin Slark

Not one segment for us is going to -- has a massive impact overall. But there's no question that if you look back the last 6 months, the mid-range part of the market and the leading players in that, you've seen what's happened to their results, has taken a hammering. And there's no question that if you look at the tablet market, the real -- what's happened with the tablet market is the loser there has been the notebook sector. To the extent that if you look at some of the Taiwanese ODMs, they're trying quickly to get into that notebook market -- sorry the tablet market themselves either directly or by supporting U.S. companies who are also trying to get into it.

Steven O'Brien - JP Morgan Chase & Co

Let me move on. On the automotive side, can you just clarify the expectation is for a better-than-seasonal September quarter, but the orders are down? And your customers are heading into a shutdown, so I'm just trying to rectify or maybe I heard that outlook wrong.

Martin Slark

Yes, see understand that in the automotive market, much of our business there is through what we call vendor-managed inventory. So you effectively end up booking and billing in a very short period of time. And so we have seen and you obviously see the summer shutdowns in the U.S. and Europe relative to the automotive market. So we have seen bookings and billings in those sectors slow down, somewhat offset by some strength in Southeast Asia in that market. But the forecast in those companies going into Christmas is usually good news. As you know, if you look particularly in North America, largely because of what happened in Japan, there is actually relatively low inventory levels in the automotive market. Now one of the challenges there I think is that, through about March or April, the expectation was we were on a run rate to ship about 13 million vehicles plus in North America. If you look at the last couple of months, the run rate would take that back to 11 million. The automotive customers that we have talked to still feel that if consumer confidence holds or, let's face it, is restored after this summer, with the average age of the vehicles in America, there has to be some reasonable strength in the second half.

Steven O'Brien - JP Morgan Chase & Co

Lastly, can I just ask regarding the merit increases set to come on in the December quarter in sort of a flattish environment and year-over-year EPS declining in the September quarter? I mean what are the metrics you're using to measure your team here going into fiscal 2012? And I'll just leave it at that.

Martin Slark

Okay, a couple of things. I think first of all if you look at how we control our expenses, we obviously, before we proceed in October, we'll look at what the business conditions are like at that point in time and determine what we need to do. The situation obviously varies a lot by end geography because there are some markets where there are labor shortages. And to be competitive, you need to make appropriate adjustments. There are other markets where they're not. I think I should point out the fact though that in our new model, we have about 25% of our headcount around the world. These are either temporary or contract labor. And we've already flexed down the headcount by almost 2,000 people since the end of March. So there are a lot of levers, I think, we can pull to hopefully maintain our profitability should we see a sustained slowdown. So we're going to look at the whole picture. And I think part of our job as management is to look at that. And our whole management team in terms of metrics is primarily driven by year-over-year gains in operating income. And so obviously, if we don't get any year-over-year gains in operating income, that's going to impact bonus accruals and other things like that as well. So we'll make appropriate adjustments as we move forward.

Operator

Your next question comes from the line of Jim Suva.

Jim Suva - Citigroup Inc

A quick question. With these new strategic initiatives going, which will bring some more near-term costs in, can you talk about is there a change to your financial goal update? I believe last, it was $900 million of sales of 32% gross margins, resulting in 18% SG&A and 14% operating margins. Does the raw material environment and these new initiatives change that? And if so, what are we looking at for your financial goals?

Martin Slark

When we established those goals, I think as you well know, the dollar was a lot stronger as a currency. And the key raw materials that we buy were a lot lower than they are today. And in fact, even had the dollar and the raw materials stayed where they were at the beginning of this fiscal year, we would have exceeded those goals on a fiscal year basis. So I think trying to predict exact revenue levels that you're going to hit those targets, it's kind of a fool's game because it very much depends, I think, on what happens to the dollar, what happens to raw materials and what happens to our end market mix. What I can tell you is that we believe that there are opportunities in the long run to continue to grow in the connector market. We're a strong player in that market. And we do believe that one of the things that we have to do is keep driving improved profitability. And all the initiatives you heard about in the call today is I think we got a good step there based on the reorganization and restructuring. We were very happy with our global organization today and the fact we've been able to grow faster than the market over the last couple of years, and we believe we can do that going forward. But we now will look at some other areas to supplement what's already in place to continue to drive margin improvement. And clearly that's what our focus is on. But we're not going to set specific dollar number because I think it does depend all on the factors I just discussed.

Jim Suva - Citigroup Inc

Okay. that's fair. The question though I guess will be, if you're not setting a dollar number, do you have margin goals or is it just a focus on sales growth? Because it sounds like that prior framework is no longer valid, which I understand.

Martin Slark

Jim, Jim, we absolutely have margin goals. I think if the question you're asking me is are we abandoning our 14% operating goal, the answer to that question is absolutely not. We are -- that's the goal we want to get to. We set those goals as you know. And I think people felt that we would never get to the 18% SG&A, and we demonstrated we could do that. And I think in appropriate market conditions, we'll get to the 32% gross profit. We would have got there with the steps we took, but for extraordinary increases in raw material costs. We've got to assume that raw material market is not going to be favorable going forward. So we've got to look other levers we can pull in terms of market mix, operational efficiencies, supply chain initiatives and pricing, et cetera, to help close that gap. We're absolutely not abandoning that goal. That's what we're driven to accomplish.

Jim Suva - Citigroup Inc

Great, that's very, very clear. My follow-up question is you gave some commentary around the mobile phones segment. And you said it'd be flat. I guess when we think about all the new model launches coming out this quarter, plus seasonality in calendar Q3 or your September 1 -- September fiscal 1 quarter, typically mobile phone is up. So can you help me understand why it's flat? Is it big drag on the feature phones that are still coming down? Just one would think seasonality in new phone launches would help out the mobile segments.

Martin Slark

Yes, Jim, I think that's a good, good question. And obviously when some people look at mobile, they combine tablets and all kind of other devices into that segment. As you know, our mobile sector is purely mobile phones. And what we try to look at there is the net impact of what appears to be a struggling mid-range market with the very good growth that we're seeing in the smartphone markets. So we're split 2/3-1/3 today, we think that looks flat overall. But I think again it depends on to what extent the smartphone market is strong going into Christmas. And there's an upgrade cycle in Asia because given our design-in position in those sectors, if the smartphone market volumes grow dramatically, that could help offset some of the headwinds I think in the mid-range.

Jim Suva - Citigroup Inc

And just housekeeping CapEx outlook, now that we're starting a new year?

Martin Slark

We guided to 6.5% of revenue. Take that as a midpoint.

Operator

Your next question comes from the line of Anil Doradla.

Anil Doradla - William Blair & Company L.L.C.

So Martin, would it be fair to characterize that your outlook takes into account some form of snapback in Japan, with flattish dimensions in North America and Europe?

Martin Slark

I think that's a fair overall description. That's what's baked in. We're assuming that the second half of this quarter, the orders that we are actually now seeing from our Japanese customers will be realized. But that we would see a fairly flat market in North America and Europe. And obviously I think a lot of it depends on now the debt crisis, a result in North America, what happens to the overall confidence levels in this market.

Anil Doradla - William Blair & Company L.L.C.

Right, so if I look at North America and Europe, typically at least for the semi space, people start preparing for the Christmas season. So if we haven't seen that, if we haven't seen the uptake -- uptick sorry, does that mean that people are drawing down on their inventories? Or do you think that ODMs and OEMs have actually recast their forecasts downwards? How do you interpret that?

Martin Slark

I think a couple of things. One is I think the global supply chain is a lot more efficient today, so I think what the Christmas build season has been pushed back anyway. Number two, I think there is some uncertainty. So I think there's probably been some ratcheting down of expectations and concern about not building products that wouldn't sell. But I think what we're going to see -- the real key I think is going to be September in terms of what happens with bookings then and what's happening to the sort of microeconomic environment at that time.

Anil Doradla - William Blair & Company L.L.C.

So that's what you mean by moving out the Christmas build is, instead of actually doing something in maybe June July and now people are going to do, focus on September.

Martin Slark

Yes.

Anil Doradla - William Blair & Company L.L.C.

Being a devil's advocate here, when was the last time when we saw a snapback when we entered into these macro consumer confidence, weak consumer confidence environment? I mean has it ever been a one-quarter event where it snaps back? Or typically this does prolong into a couple of quarters, at least, right?

Martin Slark

Yes, I mean you probably have more macroeconomic data than I have. I think the one comment that I would make, because obviously there's a lot of people out there trying to figure out what's going on is, when I have seen previous slowdowns, I mean you're absolutely right. Typically, a slowdown would last for a couple of quarters. One or two things have happened. Number one is there's been a significant inventory build that needs to be corrected. With exception of perhaps the TV market in Asia, we haven't seen that. Number two, you see a dramatic slowdown in orders. And I would say what we've seen is not being a dramatic cutback. It's been -- we haven't seen the month-to-month increases that we would normally have expect. I mean normally if you look at the June quarter, normally we would have expected April followed by May to be stronger, which was the case. And then June to be the strongest month of the year often for us, and that didn't happen. But it wasn't a massive correction. It was a minor slowdown in relative terms. But I think what is done is, when you see weaker June and July like that and particularly coming on the back of 2 years of dramatic quarter-over-quarter increases, is giving people a lot of pause to think about well where are things going? And the reality is anyway is, if you look at Molex in total, in fiscal year '10, we grew 16%. In fiscal year '11, we grew 19%. We're clearly not going to see that kind of growth rate on an ongoing basis. So we were going to see a slower growth rate this year anyway. Now the question, I think, is to what extent do we see a recovery in September? Or is this going to be the start of a more dramatic slowdown? And of course I think that will impact everybody if it does. Our view based on forecasts from our customers today is that we believe that this is more of a temporary slowdown rather than major correction. But I think our external economic factors are going to drive that.

Anil Doradla - William Blair & Company L.L.C.

And finally, just remind me once again? Now you talked about the mid-range mobile phone market softness. Was it specific to a certain geography? Or was that kind of just the categories diminishing as far...

Martin Slark

It's really a category driven by a couple of significant customers as you well know, manufacturer both in Europe, but primarily in Asia.

Operator

[Operator Instructions] Your next question comes from the line of Tony Kure.

Anthony Kure - KeyBanc Capital Markets Inc.

Just a quick one on the pricing expectations going forward. You talked about the expectations for the quarter. But just given the more normalized growth that we're going to see here in '12 after 2 strong years, do you expect for the full year that you're still going to be at that low end that sort of 3% to 5% range for the full year, just factoring in the effectiveness of your initiatives here?

Martin Slark

I think -- and this is obviously just an opinion because it's hard to project those things, because I think there is generally -- if you look back over the last 20 years, there's a bit of a correlation between less pricing pressure and strong demand and more pricing pressure when there's weak demand. So whatever happens there is going to have an impact. Our view though is that the pricing tools that we have is you're probably not going to see it be as low as it's been the last couple of quarters. But we don't think we'll spike up as high as it has in the past because you have better tools in place to manage it. .

Actually, we'll take the last question now, which I think is from Will Stein and -- because we're over the hour. And then we'll hopefully make ourselves available later in the day for individual questions.

Operator

[indiscernible]

Rahul Chadha - Crédit Suisse AG

This is Rahul Chadha on behalf of Will Stein. Regarding the December quarter relative to normal seasonality, where do you expect the revenues to come in? And then what was the book-to-bill in July?

Martin Slark

The book-to-bill for the quarter was 0.99. We don't talk about specific book-to-bills in -- on a monthly basis because frankly, that's a -- I don't think a data point that is relevant when you think about month-to-month fluctuation. But I can tell you it's well over 0.9, if that will help you. And then if you think about normal seasonality, Q1 for us as people have said, is normally up about 3%, and we're guiding down about 1.5 points versus Q4. And then Q2 for us if you look back over the last 10 years will be up about 1.5 point versus Q1 on an average 10-year basis.

Rahul Chadha - Crédit Suisse AG

And do you expect December quarter to be -- to come in, in line with -- at this point?

Martin Slark

One of the things that we've said that we're sticking to as a company, I think, is that there -- it's so little visibility in our industry today and about 60%, 70% of what we ship is booked and shipped in the same month. So we're going to stick with quarterly guidance. So I'd be very happy to give you an idea of where we're going to go when we release the first quarter because I think what we see for September bookings is really going to determine that.

Well thank you very much for all the questions today. A number of us will be available later in the day for follow-up questions. And we look forward to talk to you soon. Thank you very much. Bye-bye.

Operator

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Molex's CEO Discusses Q4 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts