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Cypress Semiconductor (NASDAQ:CY)

Q3 2011 Earnings Call

October 20, 2011 11:30 am ET

Executives

Shahin Sharifzadeh - Executive Vice President of Research and Development, Executive Vice President of Worldwide Manufacturing and Operations and President of China Operations

Dana Nazarian - Executive Vice President of Memory and Imaging Division

Christopher A. Seams - Executive Vice President of Sales and Marketing

T. J. Rodgers - Co-Founder, Chief Executive Officer, President, Director, Director of Cypress Envirosystems, Director of Agiga Tech, Director of Bloom Energy and Member of Board of Trustees at Dartmouth College

Brad W. Buss - Chief Financial Officer, Principal Accounting Officer, Executive Vice President of Finance & Administration and Corporate Secretary

Dinesh Ramanathan - Executive Vice President of Data Communications Division

Norman P. Taffe - Executive Vice President of Consumer & Computation Division

Unknown Executive -

Analysts

Charlie Anderson - Dougherty & Company LLC, Research Division

William S. Harrison - Wunderlich Securities Inc., Research Division

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

John Pitzer - Crédit Suisse AG, Research Division

Glen Yeung - Citigroup Inc, Research Division

Jeffrey A. Schreiner - Capstone Investments, Research Division

Rajvindra S. Gill - Needham & Company, LLC, Research Division

John Vinh - Collins Stewart LLC, Research Division

Ruben Roy - Mizuho Securities USA Inc., Research Division

Srini Pajjuri - Credit Agricole Securities (NYSE:USA) Inc., Research Division

Steven Eliscu - UBS Investment Bank, Research Division

Daniel K. Marquardt - Robert W. Baird & Co. Incorporated, Research Division

Christopher B. Danely - JP Morgan Chase & Co, Research Division

Sujeeva De Silva - ThinkEquity LLC, Research Division

Blayne Curtis - Barclays Capital, Research Division

Doug Freedman - RBC Capital Markets, LLC, Research Division

Operator

Good morning, and welcome to the Cypress Semiconductor Third Quarter 2011 Earnings Release Conference Call. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to Mr. T.J. Rodgers, President and CEO of Cypress Semiconductor. Sir, you may begin.

T. J. Rodgers

Good morning. We're here to discuss Cypress' third quarter results. We'll go to the usual manner, starting out with our CFO, Brad Buss.

Brad W. Buss

Thanks, T. J. Thanks, everybody, for joining. Welcome to our third quarter call. Just a quick housekeeping thing as usual. We'll be making a lot of forward-looking statements. Please check out our forward-looking language in the press release, as well as our SEC filings that we have. And as standard, we always have the GAAP to non-GAAP recons there and on the website.

I know the issue in Thailand will come up. It's very unfortunate what is going on there. Fortunate for us that we do not have any direct operations in Thailand. We have really no major subcons there. Some of our customers use some of the CMs there, but they're very minor amount of revenue. And they're not impacted at this point. Overall, we don't expect any issues right now or in the future, but we're continuing to monitoring it.

As well, don't forget we have our Analyst Day on November 9. It's at 9:00 a.m. to noon at San Jose. We have got T.J. and all the product line guys talking. We'll have a couple of interesting announcements, and we're also going to be unveiling our stealth startup and having a couple of outside speakers come in. So we hope that you can join us. So please RSVP.

I'll go through Q3 real quick, and then I'll get into the guidance. So we actually outgrew the industry pretty nice in Q2. I think as most of you knew, we grew 9%. We continue to grow into Q3, and we actually had our highest quarterly revenue since the 2000 boom. We ended up at $264.7 million. It was up along in the guidance, but it was up 4% sequentially as we saw strength in all of our major product lines focused on obviously PSoC and SRAM. But we saw a decrease in distributor sell-through in the last few weeks of the quarter. So I don't think that's been much of a surprise. I think you've been seeing and hearing that from most of the other guys as well.

If you exclude the partial revenue from our Image Sensor Group that we sold in Q1, our year-on-year revenue increased 18%, which, from what I've been seeing so far, is pretty good. We saw no real big surprises by any of the major end markets. Chris will go through those in more detail.

Mobile handset continued to be our largest end market at 28%, and we did actually have one of our major handset customers become our first-ever 10% customer, just a bit went over 10% in Q3. So we saw sequential growth in every major product line, and all of our channels grew, with the exception of a very minor decline in our direct channel.

If you look at it by divisions, you saw MPD increased 6% as we expected, with solid growth in our SRAM business. DCD decreased 9%, driven by, again, expected decreases in West Bridge and some of our legacy comm business. And CCD increased 8% and achieved record revenue for Q3. Our friends, TrueTouch, also had another revenue record, then they actually grew 208% year-on-year, obviously, with a very strong growth in Tier 1 handsets and due to tablet increases, which I'm sure you'll have a lot of questions for Norm later.

CCD continues to be our largest division at 54% of revenue and contributed the most to earnings. And TrueTouch continues to be our largest individual product family. Design activity is remaining very strong. Gen4 is kicking ass. And I think T.J. and Norm and Chris will talk through that, and we are going to cover that very heavily at the Analyst Day because it's definitely setting us ahead.

On TrueTouch guidance, while we're on that subject, we increased it to $230 million to $250 million in Q2. We're not changing that guidance at all, and if anything, we expect it to track closer to the mid to the higher end of that $230 million to $250 million. So I'm sure that will be a relief for some of you out there.

On a GAAP basis, we had net income of $40 million or about $0.22 per diluted share, and that was a year-over-year increase of 22%. Our non-GAAP net income was $69.2 million, yielded a whopping $0.37 of EPS, which exceeded my guidance even with revenue at the low end of my guidance, due to good gross margins and a lower share count.

Just to put it in context, it's our highest level of net income since 2000. It's a 32% year-on-year EPS growth. Again, I don't think many people are putting up year-on-year growth like that. And it's actually a rate of growth 2x faster than sales. So, again, we continue to drive a tremendous amount of leverage. And that's also with us investing very heavily, guys, into the Emerging Tech division. And like I said, we'll talk about the self one [ph] in a couple of weeks.

If you look at the Core Semiconductor business, which includes the impact of our Emerging Tech division, we had $0.42 of EPS and a PVC of 31%, so extremely pleased with their earnings power in that group. The non-GAAP gross margin was 57.9%. It was at the high end due to product mix, some customer mix. And, actually, the factories continue to do a very good job in there. If you exclude Emerging Tech from that, we're up at around 59%, which is back in the range of our model of 58% to 60%.

Utilization in our Minnesota fab was 83%. It was down from 89% and 82% and obviously have adjusted wafer starts to reflect a much lower level of bookings. I think you'll see Q4 utilization run in the high 70s to about 80%. And our wafers from foundry partners decreased down to about 39%. So, again, our FlexFab model has been paying off very well. You're seeing us deliver very good gross margin. I think the gross margin guidance will be good as well, and I'm real pleased where that's went.

The average corporate ASPs decreased slightly to $1.43. And just as a sidenote, ASPs for CCD increased 17% year-on-year. Our non-GAAP operating expenses were $83.6 million, $2.5 million better than my guidance. Like most people, we then put in a few enhanced cost controls. We're seeing lower sales cost due to the decrease in the Q4 revenue, and we have some litigation expense timing.

Headcount is tightly controlled. We decreased slightly quarter-on-quarter, and we actually achieved the highest revenue per employee again since 2000.

We're very focused on OpEx. We're going to continue to be focused on OpEx all the way through 2012. And, again, in Q3, we dropped 91% of the incremental GP dollars we generated in the quarter right through to the bottom line, stuff that I'm very proud of what the team's accomplished to do that.

OIE was $1 million, mainly due to interest income and some exchange benefits. The non-GAAP tax charge was $1.8 million. That was about a 2.5% ETR. And I expect to maintain a rate between 2% and 2.5% for the rest of the year, which is pretty much close to our actual cash tax rate.

The balance sheet continues to be really good. We spend a lot of cash buying back stock, and we repurchased 8.3 million shares. We have about $148 million in cash and investments exiting the quarter. We completed the $600 million buyback, as you know. We also announced that the board re-upped a new buyback for about $400 million. And like I said before, we'll continue to deploy that on an opportunistic basis. About 17.5% of our total assets were in cash and investments. And, again, we have no debt.

Very good cash from operations. We netted $106 million. That was up almost $30 million sequentially due to strong working capital management. We paid out $15.3 million in Q2 for the Q2 dividend, and today, we paid out another dividend of $0.09 a share, which was yielding before we -- before today, 2.2%. So, again, we're very pleased to deliver a real man's dividend, as well as buying back stock and delivering good financial results.

Our return on assets for Q3 was 8.2% and almost 28% on a rolling fourth quarter basis. And I expect to see continued strong cash and returns going into next year. Net inventory of $111.6 million increased from Q2, and our days increased by about 4, really due to the HP tablet cancellation that we've talked about before. We're hoping to get that all resolved this quarter. And we also saw distributors slowing their orders obviously in the quarter, which means we hold the inventory, but it didn't ship out to them. Nothing I'm concerned about. The team is managing it very tightly.

If you exclude the last signed bills, capitalized inventory, FAS 123R costs our inventory that, really what I look at as true operating inventory, is around $91 million or 75 days. Very good with the focus that we have on proprietary products. And I'm hoping to see inventory dollars remain flattish in the quarter.

73% of our revenue went through distribution, again, another new record. This continued to be very cautious, right? I think you're hearing and seeing that everywhere. They don't want to hold anymore than they need to. And we're seeing that actually around the globe, including the Asian guys as well. And I don't see that really changing, exiting this year. They tend to like to address their balance sheets exiting the year.

So you saw deferred income dropped from 192 to 169. And the average weeks of inventory on hand, these have increased to 6.7 weeks. But just to put it in context, that's down to almost 20% from the 8.3 weeks we saw in Q310, and it still remains in our target of, we'd like to see them carry 6 to 8 weeks. Remember, we're 100% on sell-through, so we have no incentive for them to carry any more inventory than they need.

AR dropped nicely because this went down. We were down 22% quarter-on-quarter. Days dropped to 46. Aging continues to be really good. CapEx was $18.2 million. Our [indiscernible] is virtually complete. It's gone very well, and we're well positioned for the upturn.

Depreciation for the quarter was 12.9%. And on a share count, we ended up at $164 million weighted basic shares, 186 fully diluted. And like I said, we increased -- we repurchased 10.3 million shares, which was almost 11% of the Q2 outstanding at the time. And, again, we don't get the full benefit of the repurchases in the quarter due to the waiting, so you're going to see the share count continue to go down nicely in Q4. And we ended Q3 with 155.3 million shares outstanding.

So turning to the guidance, right, we kind of gave you a little bit of hint in the press release. But we're seeing the macro issues, we're concerned with the political non-ability to do anything across the world. We've seen a couple of customer-specific issues. But more importantly, we've seen about a 50% decrease in distributor bookings. And coupled with the lowest lead times we've had in a while, you're obviously going to see backlog and bookings drop.

So we ended the quarter with a book-to-bill of 0.61. So that was well below our normal seasonality of kind of the mid-80s to 90, and it's the lowest that we've seen for Q3. We were 84% booked going into the quarter, and as such, we're comfortable putting up hopefully a conservative revenue range of $232 million to $242 million. That would be down 9% to 12%, but still growing somewhere between 2% to 7% year-on-year. I'd expect that all divisions and all product lines will decrease sequentially, obviously some at different rates.

Even with this Q4 decline, I still expect our full year will be strong. I expect our growth rates to be well above our peer group on revenue and our profits growing at least 2x faster than everyone else. I think gross margin will be, again, around 57%, plus or minus, a little bit depending on obviously the mix of products and where we're making it. OpEx will be down around $83 million, give or take a little bit due to lower sales and variable comp costs, offset by some increases in litigation expense timing. And, again, we're still continuing our investments in our Emerging Tech division.

OIE will be about 400k, minority interest around 300k. Tax, again, should be around 2, 2.5. CapEx $8 million to $12 million. Depreciation around $13.5 million. And the fully diluted share count, you can plug in around $177 million, and that will bobble around $1 million or so depending on what we do on buybacks or how people exercise options. You roll all that together and we still get a pretty impressive earnings per share of $0.28 to $0.31, which, again, I expect to be about a 12% to 24% increase year-on-year. So considering where the revenue has gone, I'm very happy that we'll still see our second half earnings probably being 20% higher than what we reported in the first half.

So I'm very pleased with the products. I'm excited in a lot of the stuff we have going. The costs are being well managed. We have the good margin. So I think when the macroeconomic stuff stabilizes, we're in a very good position to continue to outgrow the industry.

So I'll wrap it up and send it over to Chris.

Christopher A. Seams

Thanks, Brad. Some of the usual in the season, color on markets and our backlogs and booking patterns. Splits on geography, Asia-Pacific was still the big dog. 59% of our ship went to Asia-Pacific. North America and Japan actually tied for second place, both at 15%, with stronger Touch shipments into our Japan panel partners. And Europe finished up at 11%.

Units were up, strong 8% quarter-on-quarter, up to $186 million for the third quarter. And on ASPs, Brad talked about our ASP declining to $1.43. Really, it was more of a mix issue than anything on a part-by-part basis. Each part actually only declined just over 1% in the quarter. So pricing environment is still pretty stable.

From an end market perspective, the wireless and wireline comp segments drove our growth. It was the largest growth in Q3, led by SRAM share gains. It was followed, as Brad said, by handsets, driven by TrueTouch. And then the industrial segment was fairly strong, not from an end market perspective, but, again, with SRAM share gains.

Looking forward, given the guidance that Brad talked about, we expect most of our end segments to actually go backwards quarter-on-quarter.

Our lead times, as Brad talked about, have come back in line. SRAM has tracked back below 8 weeks, and our corporate average now is more towards 5 weeks than the 6-week number. With that contraction, the end market weakness, we talked about our backlog being down. It's down to $272 million in the 6-month window, still pretty healthy. As Brad stated, that we have our book-to-bill down to 0.61. All 3 divisions are below unity, and they're all actually very close to the 0.61 number. MID is 0.6. CCD is 0.61, and DCD is just above 0.7.

Throughout the quarter, let me give you a little color on the booking patterns. We did see much more than the normal amount of pushouts and cancellations, order reposturing, and that's as customers adjusted their backlogs to the present outlook. That activity actually peaked in August, and September got back to kind of normal visibility. And people weren't changing orders around as much. It's interesting throughout that period, however, we experienced about normal expedite request levels. To me, that just shows that supply managers are really getting their pencils sharp in actively managing both their inventory and their supplier backlog.

As Brad stated, our -- beginning on quarter, percent booked was 84%, still a fairly strong number to the guidance that we gave.

Given that backdrop, let me hand the call back to T.J. for more details on the quarter.

T. J. Rodgers

Okay. A few comments, and then we'll go right to questions. I want to reiterate that our ASP dropped from $1.48 to $1.43. That normally would concern me. Last night, I reviewed ASPs we have -- I track ASPs by category for about 12 types of products in Cypress, asynchronous static RAM, USB, et cetera. And I detected no significant price decline in any sector of our business on a product-by-product basis. Therefore, the 143 gives more about mix than anything else.

The next piece of news is by far the most important for Cypress employees and shareholders. I'll dwell on it. We introduced at ECS (sic) [ESC] in Boston what we call our Gen4 family of TrueTouch touchscreen controllers. And it's just that it's our fourth-generation product. This product was designed -- and we took a risk to leapfrog our competitors. We believe our competitors would make incremental improvements on their Gen 3 product. Our Gen 3 product, codenamed indium internally, we sold over 200 million units of it. It is a PSoC derivative. And in Gen4, we decided to move forward in pretty much every front.

The first thing we did is we moved away from the traditional PSoC processor, and we put in a 32-bit ARM machine. That's a bit of an overkill for what's required, what's required in touch controllers. But it's industry-standard. Everybody knows that in the ARM, architecture is optimized really for 2 things. One is energy consumed per cycle. So in touchscreens, that's obviously important. And the other one is compactness. So a 32-bit machine, although it sounds like a big powerful computer, is approximately -- is actually a little bit less than a square millimeter silicon in our silicon. So we put in the horsepower. That's point one.

Secondly, we worked on the analog channel. Analog channel is what senses people's finger on the screen. Your finger, in effect, is a capacitor, and when you touch the screen, you, in effect, bridge 2 lines that you can't see. And there's a slight transfer of charge through your finger from 1 line to another. And that's the signal. And, therefore, when people talk about signal-to-noise ratio or SNR, all they're seeing is that tiny little signal from your finger, which isn't even directly connected, it's only capacitively coupled. It needs to be sorted out of a bunch of noise.

The noise primarily comes from 2 sources in a touchscreen phone. One is the display itself. The display is being driven. It's got rows and columns. And when you want to light up a pixel in the screen, you drive a row and a column. And, therefore, you're looking at thousands of lines in the screen that are moving up and down with waveforms. These waveforms are directly linked to the sensor, the touch sensor, which is laminated onto the screen. And, therefore, they couple into it. So you're getting noise, which -- from the screen, which is actually larger in magnitude than the signal. That's no big deal. Every day, you turn on the radio in your car, and you get signals that range in microvolts. And you hear your radio, anyway. And that means you have to have a circuit, like a radio in your car that's tuned to screen out the noise and let the signal in.

We've done -- there are 2 aspects to signal-to-noise. By the way, the other noise source -- I want to finish that story -- is the charger. When you plug in a charger to charge the battery in your phone, some people like to run their phone when it's plugged in. That's the worst case because then the noise coming from the charger goes into the phone. And unfortunately, some of our customers have opted to buy the very cheapest chargers that can be made in China. And that charger, while it supplies a nice 9 volts with your cellphone to charge your battery, also has the ground -- the supposedly ground 9-volt lines riding up and down on a waveform that sometimes can be 100 volts, the so-called common mode signal. And as you might imagine, 100 volts of noise coupled into a cellphone might play havoc with the time signal on your finger. So the 2 sources of noise that we have to deal with, our screen noise, display noise and charger noise. And we worked on both of them.

Some of our competitors who are trying to break into the touchscreen market, in the analog, there's 2 kinds of guys trying to break in. The microcontroller guys who look at it as microcontroller, plus some stuff to sense charge. And then there's the analog guys, the entire world of signal-to-noise, plus some digital crap you got to do in order to be in the business. They're both wrong. The interesting aspect we have as a PSoC is a balanced analog and digital chip that's programmable. We look at a balanced solution, so we attack it from multiple directions.

For example, I can have the best amplifier in the world and if I assign it with a type of waveform from the charger -- excuse me, from the display, that will disturb that signal. So what we've done there is digital in nature. We have -- we put an extra channel in our Generation 4 product. And that extra channel is not used. The extra channel just hangs out there. It hangs out in the environment of the screen. So it looks for noise coming from the screen. And it allows you to detect the noise and subtract it.

So there's a system-level way. It's not about having a better sensor, better analog. We are such and such a company. We've been doing analog for x years. It's not about having a better front-end. It's about being intelligent with the entire systems attracting off the noise before it ever gets to your analog circuitry. That's one thing that we do.

Another thing that we do in this chip, which kind of relates to my own background, and I actually -- I was involved in this thing and a champion of it, is we drive the signal at 10 volts. Capacitors charge up according to voltage. The charge in the capacitor is directly proportional to the voltage. So if you put 10 volts on a capacitor, you get 4x more charge on the capacitor than if you put out 2.5 volts. So the other guys, 2 man, put on the small signals, typically 2.5 volts, in the environment of the cellphone. And our chip, we actually boost up the voltage to 10 volts internally. So we take the 2.5-volt supply, crank it up to 10 and we have transistors that can handle 10 volts. That's nontrivial in sub-micron technologies. And we drive our lines with 10-volt signals. That's a big deal.

That can be done. It's been done before. We didn't invent it. For example, the first time we're aware of it is Apple did it in their recent touchscreens. But they saw the benefit of it, but they did it by adding other chips. So they took their 2.5-volt signals, ran it in to another chip. And then out of that chip came a signal 10 volts or above. And then that chip is what drove the screen. So we, in effect, if you want to look at it a different way, have integrated those extra high voltage drivers into our chip. That gives you about another factor of 3 to 4.

So the first advantage in signal-to-noise is system-based. The second advantage in signal-to-noise is device physics base and neither of them have to do with we're the hottest analog company in the world. We're also getting better analog, and we believe our analog is in the ballpark right now than anybody's analog. But the other guys who are analog only don't think about the other aspects that I just described.

When you get better noise reduction from the screen, what it allows you to do today, the noise is so bad that people actually have to separate the display from the screen. So if you took your cellphone today and sawed it in half and looked at a cross-section of it, you would find an air gap of 0.4 millimeters. So if you think about the finest pencil lead that you buy on a mechanical pencil, it's 0.5 millimeters, so approximately the thickness of a pencil lead. And they actually go to the trouble of trying to hold their sensor 0.4 millimeters, pencil lead thickness away from the display. And that air gap, as it's called lessens the noise, and prevents the coupling into it. Major pain in the butt, as you might imagine. And we deal with companies to talk about sag. So when you get to 0.4 millimeters at the edge, you don't get 0.4 millimeters in the center. And if your sag is 0.2 millimeters, then you have to have more in the edge and less in the center. And you have to have a stiffer piece of glass, blah, blah, blah.

What you really like to do is just take your sensor and smack it directly onto the display. That has been unachievable in the past because it couldn't tolerate the noise. We have some marketing name, what do we call it?

Unknown Executive

Display armor.

T. J. Rodgers

Display armor, yes, okay. We have display armor. That's all you really need to know. It's like a cleaning product, and this cleans away the noise. And that allows people to smack their display directly onto -- smack their sensor directly onto the display.

Okay. I blabbed for 4 or 5 minutes because it's worth it, and I'm just telling you that I have personally been involved in the development of Gen4. We have worked on every aspect of it, the horsepower, the central processor, so we can do more sophisticated noise reduction algorithms. In addition, high voltage transistors, which is my background to the transistor physics, and other system aspects of it, along with analog design, to take a step. That's a good news. The bad news is we just got it out. When did we get it up?

Unknown Executive

Been sampling last quarter.

T. J. Rodgers

So we're sampling, and we've been sampling for a while. The thing really works, and the customers really like it. The bad news is, nobody is going to design that thing in starting 4 weeks ago and ship product in the first quarter. And the second -- therefore, the fourth quarter, which is a just a lull in a weak economy, and the first quarter are going to be weak because of that. But next year, we're going to come out with a brand-new product that is a fundamental generational change. And we're all happy with our position.

Okay. PSoC Creator is a software for PSoC. It is a system on which you design chips. We introduced PSoC Creator 2.0. It's a big deal because we are trying to make our software more user-friendly to make PSoC broader. We're very proud of PSoC 2.0 , won't mean a whole lot to investors, but I'm just telling you, that's an effort where we have 30 people working all the time. And if you think about what a differentiated companies like Xilinx and Altera caused them to win in the programmable logic space it has been their software. And we are doing the same thing, following that same track with a programmable system software.

We announced a partnership with Qualcomm. So it's an Android platform. They call it DragonBoard. It goes with their Snapdragon processor. There's 2 flavors to this board where you can make a call, com android chip work with a display. One drives a 10.1-inch screen with one of our TrueTouch chips, and the other one drives a 4-inch screen with another of our TrueTouch chips. So we've gotten inside and with Qualcomm at the development level. That's obviously good. It won't pay off in the next 6 months, but it surely will pay off after that.

Before we did touchscreens, we did touch buttons. Our touch buttons are called CapSense. We maintained leadership in CapSense, and we intend to maintain leadership. And we just announced the thing called CapSense Express. What it is, is buttons, and instead of being 1 button or 2 buttons or 3 buttons or a slider, it's a 4x4 button array. So you get 16 buttons in 1 chip. And the good thing about it is that it's self-tuning, meaning, typically, you put a button down and the button has a capacitance and a parasitic, and you tune up your microcontrollers so that button works exactly right the middle of its range. The problem is the real small customers don't know how to tune up or can't afford to tune up. So what we did was we created self-tuning software, we put it on a PSoC. The basis of our touch capacity sensing stuff is the microcontroller with a brain, not a dumb chip. And what it does is it tunes in real time. So, for example, you can have humidity changes, you can have board relayouts, you can have other things, you can have manufacturing variations set [indiscernible]. And this thing automatically tunes up the button sensitivity real time so you can ignore it, and you can drop it in. And we're talking pennies a button. So this, we believe, will keep us in the leadership position for touchscreens.

We introduced our PSoC 3 CapSense Plus Design Kit. This puts the touch I've just been describing in the PSoC 3, which is the next-generation product.

We introduced a new radio, 2.4 gigahertz. We've been shipping radios for a decade. This is our next-generation product. There's nothing, for example, that's completely differentiated from a radio you get from another company. What's different for us is it's all CMOS, and therefore, it's completely compatible PSoC. And therefore in the future, in addition to selling radio, we will be able to have a radio channel built in the PSoC and have PSoC able to communicate with radio to home as opposed to just with wires.

We've gotten the design win with Altera, similar to the design win we had with Qualcomm. Altera's proprietary product is the Stratix V, a field programmable gate array. Their forte is datacom. So many people make the routers and switches with field programmable gate arrays so they can get time to market. The name of the game there is to get 100 gigabits per second, which is the next level in networking. They've got a board that does it, and they've chosen our QDR static RAMs, which are designed again for data communication, to be the example memory that goes on the board. Again, something for the future, but a nice space design win.

Samsung has sent letters to many of its customers, and of course their customers gave us the letter shortly thereafter, indicating that they are going to end the life of the asynchronous static RAMs. They've exited the rest of the static RAMs business, asynchronous static RAM business a couple of years ago. These are the high-performance static RAMs for routers. People are concerned because in that space, for the last 2 years, Cypress has been #1. Samsung has been #2. So there's a hole in the market.

We have made a commitment, an equipment commitment, a capacity expansion commitment, buying all the line, which is a $7 million investment, to make more products. So basically, we are in the process of convincing our customers that we are going to expand our SRAM capacity to take up that hole in the market.

Along the same lines, we've introduced 3 new static RAMs. This is Micropower. These are SRAMs that run on batteries. They are 32 bits wide, 128 megabits, 64 megabit and 34 megabit. There's nothing, from a citizen point of view, that is amazing about them. They just fill in the family. We have the broadest family of static RAMs in the world.

We've got a partnership with United Microelectronics, UMC, the foundry in Taiwan. We have transferred the 65-nanometer SONOS, Silicon Oxide Nitride Oxide Silicon, a non-volatile memory technology, to them. We've transferred our technology, including the highly proprietary oxide nitride oxide memory storage element to UMC. We did that because we want to get ready for a next-generation of PSoC, which will be at that level. UMC, asked if they could actually sell the product, and we thought about it and we agreed with them. So they are going to make the technology available under license from us.

If you ask, why are we giving away the family secrets, we're not. But our competitors, if they want to use that very nice technology, they'll end up paying us. So we look at it as a way of cost reduction in a way where we can maintain a robust process development organization and offset the cost by royalties. We do have the right to prevent competitors, right? And the contract gives us a say over having a really hard competitor of ours getting and using our technology.

Finally, in Japan, we scored a coup. There's a guy named Kazu, nickname, Kazu Yamada. We are well aware of him because he was a competitor of ours. At Renesas, he ran a $3.6 billion system-on-chip business of P&L. And we just brought him across to run our Japanese office. So we are ecstatic to have a true inside Japanese person in our Japanese office to take us to the next level in that market.

Now we're done, and we're ready for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Ruben Roy.

Ruben Roy - Mizuho Securities USA Inc., Research Division

Mizuho Securities. I want to start off with Chris. You talked about most segments going backwards as you look out into Q4. Can you talk about if there are any outliers, negative outliers by segment or geography, please?

Christopher A. Seams

Ruben, on our end, you are very hard to hear, and we're getting that adjusted. I think what you asked me was -- could you just repeat the last half of your question for me, please?

Ruben Roy - Mizuho Securities USA Inc., Research Division

Yes. Just end segments, geography -- and geography, if there are any outliers in terms of how you're looking at Q4?

Christopher A. Seams

No real outliers. I mean, there are some stronger and some weaker but overall everyone is following that same type that we talked about.

Ruben Roy - Mizuho Securities USA Inc., Research Division

Okay. And then the wireless and wireline commentary, in terms of the growth in Q3, was that – that was mostly share gains? Or was it end-market-related as well?

Christopher A. Seams

Mostly share gains.

Ruben Roy - Mizuho Securities USA Inc., Research Division

Okay. And then I just had a question on Gen4, given the -- Gen4 TrueTouch, given -- is it more a complex processor? Is the design cycle time for your customers any longer with the increased complexity of the processor itself?

T. J. Rodgers

Let me answer that one. The design cycle time, as perceived by a customer, is not related to any of the parameters I discussed. The design cycle time is related to the tool and the methodology by which a customer utilizes a chip. In that realm, we have suffered a disadvantage in the past in that we offered them a PSoC, and they have to understand how PSoC worked, program a PSoC and then program their system, meaning, create firmware, a software, really, for that PSoC chip. For the most sophisticated customers, that was an advantage because they could put in a lot of proprietary stuff. Our competitors offered gooey-driven register-based designs. Meaning, the design was fixed, it was one-size-fits-all, and the design was parameterizable. So, for example, you put in how many rows in your display, how many columns in your display and other parameters, and then those would go into a pre-done program by our competitors and create a product that was essentially the standard product to that customer. We're going both ways, and this was -- we were offering a register-based design that offers simple quick time-to-market. And of course it's a PSoC. So for our customers, the big and sophisticated ones who want to get into the guts of the chip and do something fancy, they can still do that. So time-to-market will be faster, not because of the changes I mentioned earlier, but because we're also offering a new way of programming device which is register based. In other words, put in a bunch of numbers that configures the product, and then the product is ready to roll, day 1.

Ruben Roy - Mizuho Securities USA Inc., Research Division

And then just the last question for Norm. Around the TrueTouch guidance reiteration for the year, given some of the challenges that some of your tablet customers have had and are having, I assume that you're seeing continued strength on the handset side. Any further comments on kind of your design pipeline on the handset side and how you're looking as you look out into 2012.

Norman P. Taffe

Ruben, yes, I think, in general, despite some surprises, I think it says a lot that we're reiterating the guidance and talking about going more towards the high end. Obviously, we had some disappointments there, but I'll tell you that we did better in tablets this year than we expected, even with those surprises. So it's been a good year in that side. I do think that strength has been handsets, as you alluded. We've definitely gained market share this year. And as T.J. pointed out with Gen4, I think we're positioned to gain even more market share throughout next year in handsets.

Operator

Our next question comes from Vijay Rakesh.

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Sterne Agee. So sort of your handle on Gen4, how does the BOM look on the TrueTouch versus [indiscernible] on the older Gen 3 for handset guy?

Norman P. Taffe

Vijay, this is Norm. That's also a very good point from a BOM standpoint, while we will get an ASP bump when we move to Gen4 because we're in so much added value, the fact is our customers will see the BOM reduction. Not only do you get a benefit when you remove the air gap of thinner and sleeker designs, but you can also often use a cheaper LCD, for example. Because we have so much better noise control, you can get away with maybe optimize some other part of your system. And you can also reduce material costs from things like shields, layers that we had in the past to go completely away. So we expect to have higher ASPs for our customers to enjoy better performance at a lower cost with Gen4.

T. J. Rodgers

Let me add a little bit of a technical depth to that discussion. Once I had a buyer, not a buyer, VP of procurement in my office from one of the major cellphone companies, we were discussing our third TSG, the Touchscreen Generation 3 chip, and we were talking about price. And he looked at me and said, "You can get me a dime off the chip," to that guy at that time was $1.50 or so, "You can give me a dime off. You can give me $0.20 off." And it's really irrelevant. He said, "What I would like you to do is make a chip that is good enough to allow me to make a cheaper display. Because if I get a display that can go from 3 to 2 to 1 layer of conductor on it, I can save more than the entire price of your chip. So one of the things I -- thank you for the question. I really forgot to mention -- is that with this great noise reduction, you can go to displays that are inferior from the signal-to-noise point of view, but very cheap. If you think about a display, a display on a cellphone is a lot like a printed circuit board. So visualize a green printed circuit board and it's got copper on both sides. And if you saw it in half, you might find 3 or 4 layers of copper, and that's how things are hooked up. The cellphone sensors are made exactly the same way, except for instead of having green fiberglass, they have a clearer polymer you can see through. And instead of having copper, an opaque metal, they have indium tin oxide, which is an inductive material which is transparent. So it's like a circuit board that you made completely transparent. So when you touch it, you're simply touching over where there are conductors running up, down and left and right. Two years ago, a typical IPO conductor would have a shield layer, a solid piece of IPO that would block all the noise coming off the display and prevent it from getting to the touchscreen. And then the touchscreen would have a layer of x conductor rows and a layer of y conductor columns, and the rows and columns would, in effect, be what you touch. And the intersection of the x and y is what would, say, where your finger was. So if you look at that display, you'd have an insulator to protect a layer of shield, an insulator to protect an x column, an insulator to protect a y column and another layer protects. And it will be relatively thick and very expensive, like several times more expensive, like 5 or 6, 7x more expensive than the chip. With the new chip Gen4, we actually allow people to go from all of those layers I described to 1 layer, actually not even to have x and y to have -- simply, it -- we'll call it a back-end pattern, which is a single-layer pattern. Now it doesn't offer the same performance. You would never use it on an iPhone level product. But for a value phone, which is where the volume is, you now can have a single-layer interconnect, which is faster, cheaper than a single-layer sensor, rather, which is faster, cheaper than the old one. And that's enabled by our chip. So Norm made the comment, "We will get a bump in ASP because of the value we bring, and our customers will see a reduction in their BOM cost." That is the predominant thing. They will be able to use cheaper sensors with less layers of protection, with no separators in air gas and stuff like that. And they'll make a crappy sensor with bad noise. But we're going to filter out that noise for them in an intelligent way and allow them to reduce their cost by way more than the extra little bit $0.02 we get for that chip.

Vijay R. Rakesh - Sterne Agee & Leach Inc., Research Division

Got it. Great. Very helpful. One last question. You had this commentary on TrueTouch and your RAMs and SRAM comments. Could you give us like an outlook for 2012 on what you think TrueTouch does and what SRAM does for next year?

Brad W. Buss

Good try. But we're not doing any guidance yet. We're trying to figure out where October and November and December are going. We'll probably give some better directionals at the Analyst Day if we think it's appropriate, Vijay. But it's a little uncertain right now.

Operator

Our next question comes from Blayne Curtis.

Blayne Curtis - Barclays Capital, Research Division

Barclays. Just following up, maybe a question for Norm on touch. You talked -- I mean, you obviously sensed, you said your full-year guidance had a couple of tablet programs go the other way. Could you talk about what did go the right way for you in the quarter? And then I just want to make sure -- I think you said all segment is down. So I just want to make sure that applies to touch as well. You obviously have a tablet program offsetting. If you could maybe talk about what's going on in the handset market. And then just an update, you mentioned that tablets actually were better than you expected. You had talked about being 15% of the mix. Does that still hold true?

Norman P. Taffe

All right. Let me try to go back to the first question. Relative to overall markets and kind of ups and takes, in general, we've had a lot of strength in a broader set of handset guys maybe than we had last year, for example. That's really driven our growth. So we're a significant player. Many of the top 8 had strength throughout the year, continuing in Q2, Q3. We're seeing that roll-up a little bit in Q4, I think more just seasonality and model variations than anything else, not that dramatic. We are certainly seeing a roll-up in the tablets for kind of the well-known reasons there. But we have tablet success that a broader set, there's just 1 major customer there. So that's enabled us to beat our plans for the year. I don't remember giving specific guidance, maybe Brad did.

Brad W. Buss

Yes, on the $230 million and $250 million, I think the tablet being down around the 15-ish percent. 10-ish percent was more where we're guiding you guys. And I think that's still true. I mean, shipping on some new guys in the quarter, and we got a couple of new guys that will start in Q4. But we'll have to just continue to monitor the sell-through. But I think the big thing is that, that business has more than doubled what we expected. And between the chips we have and the chips that will come and the movement to a single-chip next year, I think we're in very good position for tablets and other eReader format as well.

Blayne Curtis - Barclays Capital, Research Division

And then maybe, Brad, just on the Emerging Tech, will you talk about why that was down and kind of what's going on with Optical Nav or anything else notable there?

Brad W. Buss

Bingo. Optical Nav, so I think the lead customer in that area, I think as you know, there is some product rollout challenges, and that's been working through a good chunk of the inventory that they had in Q2 that I think will be back to a very normalized run rate in Q1. We're very pleased. The penetration of that has gone very well, and I think we'll see continued designs in that area next year as well. So that's it.

Blayne Curtis - Barclays Capital, Research Division

And then just on the comment that mobile was up, there's 3 segments in there. Obviously, Optical Nav is down. Just any color on West Bridge, kind of what happened in the quarter and then kind of where your plans going forward. You talked this could grow with USB 3.0. Any updates there would be helpful.

Dinesh Ramanathan

Sure. Blayne, this is Dinesh Ramanathan. As we mentioned, the West Bridge revenues in Q3 were in line with what we expected, which is lower than what it was in Q2. As I've mentioned before, our expectation for that business to ramp up is going to be related to the USB 3 product, which we are now sampling with our customers. Overall, the USB 3 market is actually looking quite nice for us. We have over 100 customers engaged with our FX3, which is our device-only part. We have about 10 customers engaged on our West Bridge USB 3 base part. We are looking for increased [indiscernible] option of USB 3 in the coming months. And based on that, the ecosystem for USB 3 will take off, and we're extremely well-positioned to actually be the leader in that market as we go forward. We had the only USB 3 device out there in the market at this point in time.

Operator

Our next question comes from John Vinh.

John Vinh - Collins Stewart LLC, Research Division

It's Collins Stewart. Just a follow-up clarification. I was wondering if you could clarify, if you exclude the HP revenues that roll off in Q4 and you exclude the tablets and you just look at the TrueTouch smartphone business, did you mention whether that business would be still up in Q4? Or would that still be down?

Brad W. Buss

We didn't give any specifics on it.

John Vinh - Collins Stewart LLC, Research Division

Got it. Okay. Next question is, if you could talk about the competitive front, you guys excel and many of your peers, kind of continue to dominate market share in this space, and you guys talked about performance. And we haven't seen until now that you're starting to see some of these lower-end kind of competitors start to get some traction, some high-profile design wins such as the Amazon tablet that was just introduced. Can you give us your perspective on that? Is that a little concerning to you that you've gotten a low-end player getting this much traction in the market?

Norman P. Taffe

Hey, John, this is Norm. I guess I would -- I'd say I'm not totally good with the premise. I think you'll see some spot opportunities go that way. But to a 95th percentile at every major win, you see the main 3 guys continue to essentially jockey for share and continue to grow. We have -- of course, there's a lot of people trying to get in, and I think they're running with some of the issues. And I'll flat out and say I think some of the guys who might get in at one place or another we’re finding those very same customers come to us. And I imagine our other competitors realizing that this was quite a bit more complex solution than maybe just a little cost chip can provide. So I continue to, despite the lot of announcements over a year ago, I'm actually surprised at how little traction I'm seeing that's real. There are certainly spot cases here and there, but for the most part, it's the main guys. And Cypress is going to participate in every piece of the market. We have a great solution we call Gen 2 at the low end that has great share. We've got Gen 3 with very high-volume. We've got Gen4. And as a company, we are very good at competing in any market, and we have great costs. And then we're -- while Gen4 just came out, I can tell you Gen5 is well underway and using the same kind of platform to deliver the next level of capability. So I feel very confident from that perspective. I will also say, though, Cypress has a very, very strong IP position. And we will not sit by if we see people we think are clearly copying our IP. And you can expect that we will be doing something along those lines in the future because we are working to protect position where we have over 200 patents applied for in the touch space. So we will defend from people that's trying to copy what they do. And for competitors that decide to invent their own stuff and compete, we're happy to take them on.

John Vinh - Collins Stewart LLC, Research Division

Great. That's helpful. My follow-up is, if you look at forward pricing on touch ICs, it seems like it's starting to get pretty competitive. My question for you is, are you guys seeing that -- what do you think is driving that? And then also related to that, on the tablet front, it seems like going to the single-chip solutions effectively, ASPs are going to get half. And given kind of having ASPs going to next year, is it reasonable for us to still expect to see a good growth there in the tablet front?

Norman P. Taffe

It's a very good question. So I'll take the second half first on the tablet side. That absolutely is a trend that's going to happen, and we actually -- we knew that was going to happen. And I think one of the strategies would to push ourselves to be the front of the single-chip tablet. It was enjoyable to get some multi-chip design. There are still some out there, but from a realistic standpoint, as tablets become mainstream, there's not going to be room there. And our strategy was with the TMA before we get the first single-chip solution [indiscernible] out there that's being well-received. We haven't announced something yet, but we're going to announce something shortly in the next generation on the single chip area. So from a revenue standpoint, that will impact certainly areas where we had that. I still expect growth because the volume is going to go up, I think, particularly on sell-through next year. So we do expect to grow in that space. But you are right. The content dollars per tablet is going to go down that’s just reality. And we actually are focused on strategically being at the forefront to that. On your other question relative to overall ASPs, I mean, obviously, in the handset market, there's always pressure on costs because the volumes are so terrific. We know that well. We have been doing very well in terms of keeping ahead on the cost side. So our margins have been very, very strong. And as I mentioned earlier, when we bring out Gen4, that gives us uplift because from the customer's perspective, they really care about their BOM cost. So I expect our ASPs will fluctuate, but I expect them to rise overall as Gen4 becomes a bigger part of our story. And I expect this will be able to maintain our margins.

T. J. Rodgers

Also, I'd like to go back to a comment I made earlier. CapSense, capacitive buttons and touching goes to 2 dimensions in the touchpad on your computer. So that's nothing but an x and y array of capacitive buttons forming the copper. But the technology for sensing it is almost identical to the technology that's used on touchscreens. And we are the leader in capacitive sensing. That technology is not a decade old. I already told you about the 4x4 array of buttons that penny each that are self-tuning, et cetera, earlier. So we're not planning on losing those markets. We are planning on innovating in the touchscreen market exactly the same way. So we are able to manufacture at low cost, and we're planning on improving the products all the time. So our low-end screen, we don't talk about it. We always talk about the big new hot one that everybody brags about. But right now, you can get superior touchscreen performance on a cellphone from Cypress for…

Norman P. Taffe

A few dollars or less.

T. J. Rodgers

Okay. My value-based pricing, guys, give me [indiscernible] $100 all day long.

Operator

Our next question comes from Raji Gill.

Rajvindra S. Gill - Needham & Company, LLC, Research Division

Needham & Company. Just a question on the guidance as it relates to book-to-bill. Maybe could you characterize the backlog going into the fourth quarter? It would seem that your guidance could be a lot lower, given that only 61% was actually booked in the third quarter. So maybe if you could maybe characterize if there are -- if you see orders that were being pushed into the fourth quarter that you expect to see as revenue? Any color there will be helpful.

Christopher A. Seams

Raji, it's Chris. I gave a number besides the 0.61. I gave a backlog of $272 million. Last quarter, this time, it was $379 million. And a lot of the backlog for Q4 was already on the books. And it's been rejockeyed and repositioned, and we think it's very solid for the guidance that we gave. And we're 84% booked entering the quarter. So I made comments before about being able to take a vacation since I was over 100% booked. Obviously, I'm working overtime this quarter. But we have 16% of our orders [indiscernible].

T. J. Rodgers

Yes, we get 2 numbers every quarter. The book-to-bill affects effectively the bookings we get in the quarter for the next quarter divided by the billings from the prior quarter. That's 0.61. That just says quarter is going down. There's a certain forecast to $232 million to $242 million. With regard to that forecast, we're 84% booked on day 1. We only have the book and turn 15%. So we're quite confident that we can achieve that forecast, and the 0.61 just tells us that the forecast we will achieve is less than what we did last quarter.

Brad W. Buss

And one of the other things pushing it down, don't forget, was the 1 customer tablet cancellation issue, right? So you've got to flush that through the system, which is all flushed through those numbers.

Rajvindra S. Gill - Needham & Company, LLC, Research Division

You don't see kind of a reduction in distributor bookings in the SRAM business because you had very high book-to-bill in the second quarter. I think it was like 1.4.

Dana Nazarian

Yes. This is Dana. We were seeing a little bit of a softening. I don't think the underlying end business is affected that much, but I think there's an inventory correction going on. At the beginning of the year, bookings were very strong, and then there was the tsunami disaster. And that drove a lot of bookings in inventory and the distributors. Now that's kind of settling out, and things are rebalancing.

Brad W. Buss

I mean, every [indiscernible] like I said, I mean, we've never seen them pucker up this much really across the board, right? So I mean there's definitely a high level of caution. And the big guys that are heavy Europe-dominated, they're freaking out every day with the news. And you're even seeing caution in the Asian guys, which again I think is appropriate. I think it's good. That way, we'll make sure that their stuff isn't flooded. And I think the comments that Chris made, we're not seeing signs of whether this inventory is stacked up anywhere. The fact that [indiscernible] gets expedited periodically is a very good sign. I mean, expedites really actually haven't dropped over the last couple of quarters, which again shows the leanness that's in a lot of these supply chains. It's a very different world than it was years ago.

Dana Nazarian

And one last point on that. We've also -- with our capacity expansion and our inventory position, we're able to provide world-class lead times now. So as the SRAM lead times have come down into the 5-, 6-week range, the distributors don't need to place that much backlog upfront.

Rajvindra S. Gill - Needham & Company, LLC, Research Division

Any visibility kind of into Q1? Is Q1 normally seasonally down? I guess this is the first part of that question. And would you maybe see a potential uptick from Q1 to Q4 after the kind of reduction in the distributor bookings that you're seeing in the fourth quarter?

Brad W. Buss

Yes, we normally are seasonally down. At this point, I think it's too hard to call personally. I mean, myself, I'm modeling it, just because I'd rather be conservative and not surprised again. And a lot of it is just going to hinge on confidence that people have globally. And I think to your point, the little guys all balance out and distributors kind of firm up a little more, I think that could definitely help. But way too early to call. We've got backlog visibility into Q1, but it's nothing wild above normal. And it can change quickly. Because, again, our lead times remain very, very low. Our ops team have done a very good job in managing that, which I like. I would rather go into periods of uncertain demand with low levels of inventory out there and low lead times. I'm sure it will be better for all of us because we'll come out of it much quicker.

Rajvindra S. Gill - Needham & Company, LLC, Research Division

Yes, that's what it -- it seems like that's going to be the main thing. This is the last question on a different topic, T.J., on the technology on touch. Any traction with on-sell or in-sell implementation from the handset OEMs? And if so, how do you think you're positioned there relative to, say, Synaptics or other competitors? Or do you think that's even a real transition that's going to happen?

T. J. Rodgers

Yes, Norm deals directly with our customers, and I'm selling it. So let me have him answer that. He's got the best data.

Norman P. Taffe

Raj, the answer is yes. We have, actually, projects going on with OEMs on both those type of technologies. And that actually we have projects along the Gen 3 products. In fact, we are producing some products already to do that. Reiterating what T.J. spoke a lot about earlier, Gen4 only makes those designs even easier.

T. J. Rodgers

When I described getting rid of the air gas and putting the sensors directly on the LCD, that's on-cell. And then in-cell is part of their way, and that's where they actually -- the sensor stops being a separate thing that you laminate on to the display. And the display makers actually had more layers to their display and put the sensor inside the display. And that's the in-cell. And as you move from an air gap away to touching, to actually inside of the display, every time you do that, it gets cheaper, thinner, more efficient, et cetera, and noisier. So -- and the noise, by the way, like I said, is not noise from the classic sense of an electrical engineering signal-to-noise ratio. The noise is systematic noise. You got to deal with the system. And I spent a lot of long time discussing the way we've attacked that, which is much more than just a circuit design for an analog channel.

Operator

Our next question comes from Sujee De Silva.

Sujeeva De Silva - ThinkEquity LLC, Research Division

ThinkEquity. So stepping back, you've given us a lot of color on the order environment. Can you talk about the design environment, if you're seeing any impact there? Or on the flip side of that, does that continue strong across PSoC, touch phone -- touch technology and so forth?

Christopher A. Seams

Sujee, this is Chris. I heard the first part of your question. What color did you want on the end specifically?

Sujeeva De Silva - ThinkEquity LLC, Research Division

No, design activity, whether that's being slowed down by the current environment or proceeding as expected given the macro uncertainty across PSoC.

Christopher A. Seams

From my perspective, design activity is higher than ever. The competitive market out there today to bring innovative products to market is causing every company to frankly channel all the resources they have into more products than ever, and actually leaning on suppliers like us to do large parts of if not entire portions of a design for them. Looking at our trends over the last couple of years, we just closed the quarter. My design-in metrics reached an all-time high in the last 3 years. So when the market goes down, you got to innovate your way out. So guys are not stopping, they're not laying off engineers. They are just going straightforward to beat their competitors.

Sujeeva De Silva - ThinkEquity LLC, Research Division

Okay. And then a follow-up specifically on touch design. Can you talk about how Gen4 design wins are tracking relatively to, say, Gen 3 at this stage? Or is that too early to talk about?

Norman P. Taffe

Yes, this is Norm. We were -- we've got the first multi-point solution. We had tremendous demand with Gen3, and it's obviously turned in. We're seeing exactly the same kind of hold for Gen4. And obviously, it's constantly at the top guys. But we've got many, many projects going already.

T. J. Rodgers

And I think you're going to see them penetrating some guys we haven't been as penetrated in 1 or 2 that we haven't been really penetrated at all. So I think we're going to have a very nice stable of customers and levels of phones really across the board. And, again, like the tablet, the eReaders, the cars, everything else that we continue to talk about, we're selling very strongly there as well.

Christopher A. Seams

And Sujee, my comments were not touch-centric. There's tremendous activity outside of touch for us to do both in the high-speed synchronous RAMs and USB 3 PSoC platform. There's traction across the board. I'm challenged to have enough engineers to serve all those customers.

Operator

Our next question comes from John Pitzer.

John Pitzer - Crédit Suisse AG, Research Division

Credit Suisse. Brad, I apologize if I missed this. But when you look at the guidance for the December quarter, is the range kind of the same across all the business segments? And as you think about going into a bottoming process, are there any segments you feel better or worse about? And then I got a quick follow-up on TrueTouch.

Brad W. Buss

John, when you say the range, do you mean kind of by the divisions in that?

John Pitzer - Crédit Suisse AG, Research Division

Yes, you look at the sequential revenue growth range that you gave for the December quarter, how does that break out by division if there's...

T. J. Rodgers

The revenue goes from $264 million to $230 million, $242 million.

Brad W. Buss

Yes. They're all going, like I said, I expect every segment and really every product line to go down obviously various degrees, right? Some will go down a smidge, some might go down 10% or 15%. I think it's really -- again, it's across the board. The big wildcard is distribution, right? I mean, we're just trying to figure where that is, you don't get the best information out of them real time. But I think it's fairly evenly spread at this point in time.

John Pitzer - Crédit Suisse AG, Research Division

And then as a follow-up, T.J., when you look at the tablet and smartphone markets, away from you guys at the OEM level, a lot of patent disputes going on, there's been some decisions that have led to some injunctions and some lack of shipments that are starting to become more than a little bit meaningful. How should we or how do you guys think about the patent lawsuits that are going on and how that might be disruptive to any given quarters? In your view, what's kind of the end game here at the OEM level?

T. J. Rodgers

That's a very good question. Background, we broke-in in 1983, I left Advanced Micro Devices, and Jerry Sanders was not happy about that. And over the next few years, they sued us 3 times. And in addition, we received threats or suits or threats of suits from IBM, Motorola Semiconductor, et cetera. And therefore, as an IP spare company amongst giants, we had to fight our way against the IP battle for a bunch of years, so I developed a strong mentality. People say this is a platitude. We'll fight them in the marketplace and not in the courtroom. Of course, it's easier to fight them nut the courtroom. And you don't have any patents, which we didn't. Second point, in the world today, there is a litigation war coming. There's going to be Armageddon patent litigation. There's many aspects to it, the big companies have large portfolios. There are some companies that have gone very big, very fast, named Google, that had been so successful that their revenue has outpaced any possibility of getting patents. The United States patent office has become so colossally inefficient that it takes 5 years to get a patent. So suddenly if you have patents, it's kind of like having a treasury that the other companies can't fill up for 5 years even if they have all the ideas and put them in the front end right now. It's been so bad in patents, for example, if I want a patent fast today I'll go to Korea, believe it or not. Of course you believe it. You go to Japan for cards. So basically, when we have the government involved in something, it becomes incompetent, and therefore somebody takes development. And today, if you want the patent fast, you pay for a patent in America, you pay for a patent in Korea, you pay twice. The Koreans get you a patent in 2 years to 2.5 years, the Americans get you a patent in 5 years. But when you get your Korean patent, because of the exchange relationship between the countries, you also get your American patent. Then the next aspect that's going to fuel the patent wars coming up is the rise of the -- non-practicing entities, NPEs. So mega trolls. So you got people that are spending hundreds of millions of dollars collecting patents, and their business, which is legal, and you can have your opinion about whether or not it's good for industry, but their business is to collect patents and therefore, lay out positions and then license companies. And the bad news is you're going to have to pay, the good news is you can move into an area, be a licensee and feel like you've got intellectual property rights to go in there since the patent office is so inefficient you can't get your own IP rights to your company. Okay, that's the background, where is Cypress. With regard to touch, we have -- in static RAMs, we have extraordinary patent portfolio. We have 1,800 patents. In touch, we've got 25 issued patents, and these are core patents. The reason they are core patents is that a lot of touchscreen, I described earlier, touchscreen is nothing but a transparent printed circuit board. And therefore, any patents you'd have on a printed circuit board for touch would apply directly to a printed circuit board that happens to be transparent because the patents really applied it to everything that's got that configuration. So those 25 we've got, that we got -- we started 10 years ago and were issued 5 years ago, are fundamental patents. And furthermore, we've got another 175 in line. I think there's another 25 or so of them that have been allowed but not issued yet. So we've got a 200-patent portfolio in touch. Okay. So now what does that mean to us? One, it means that when customers buy our touch they've got a patent portfolio behind it. We will back them. They're not going to save a nickel in some fly-by-night outfit, we talked earlier about some people penetrating here and there, into the unpriced, into the touch domain. Those people are taking a risk. If the chips they pick got invented separately and don't infringe primary system-level patents, congratulations. That's a free-market. If those chips copy, and we have reason to believe that some of those knock-off companies are copying, like for example, one of enhancement data sheets that looks a lot like ours, we will protect our intellectual property. So we are -- I've been paying my dues in patents for a couple of decades. I've been going in my patent bank with award every year. I've been paying off millions of dollars every year to Cypress inventors. To show the flag at Cypress, I've been filing my own patents and I've got 14 of them and a couple more in the pipe myself. So we've been paying our dues, we've got a great patent portfolio, we've been doing it for 2 decades. We have the luck that CapSense patents read directly in touchscreen patents, so we have an extraordinary old and therefore effective patent portfolio in this new area. Therefore, we're safe to deal with and if you rip us off, we're going to be a handful for you.

John Pitzer - Crédit Suisse AG, Research Division

Well, I guess, T.J., my concern is less with you guys on the silicon level and more to your customers at the OS level, what's the risk that you're in a hot phone today, and tomorrow we wake up, and that phone can't be sold on a region that has meaningful volumes, and how should we think about that?

Christopher A. Seams

John, this is Chris. Brad has a nice phrase for this, we'd like to consider ourselves arms dealers, we'd like to sell as many touchscreen controllers to everybody as we can. And the world is going to consume X amount of phones, so a program going up or down here or there as we get across many, many different platforms and many, many different customers, it will affect us less. We're shipping to 8 of the top phone OEMs today. Number 9 is coming quickly and we have very serious hopes for a 10 out of 10 within our foreseeable future. So we're going to serve all customers, we're going to let them duke it out and we're just going to ship where customers buy.

Operator

Our next question comes from Chris Danely.

Christopher B. Danely - JP Morgan Chase & Co, Research Division

JPMorgan. On the Q4 correction, if you guys had to guess, how much of that do you think is inventory versus demand softness?

Christopher A. Seams

Chris, this is Chris. I'm not going to hazard a guess. As Brad -- the one true insight we have in the inventory is distributor inventory and frankly, it's up less than a day quarter-on-quarter. So I don't have complete visibility in then to the supply chain after that in the OEM inventory, so I can't answer that question.

Norman P. Taffe

I think if you look at it right, I mean, the fact that it's really kind of all over the place, it's kind of all over the entities, it's kind of all -- like there's not one end market you have to cross, there's not a one customer specific thing. It's fairly broad-based so I'd have to say it's 50-50. I talk to the sales guys, I talk with other of my peers, I would say it's probably 1/3 to 40-ish percent inventory-related is what I kind of hear, and the rest is just demand uncertainty. As I think this is a theme that's coming up more than there's no demand, people are just uncertain and you're just pulling back. Like, F***, I don't know where I put a fab in 2013 with the economics, the tax rate, why am I going to go invest money if I was somebody, why are you as a consumer going to do something, do you know what the hell is going on, right?

Christopher B. Danely - JP Morgan Chase & Co, Research Division

And then as my follow-up, [indiscernible] if you could get like a normal seasonally down quarter in Q1 so we can kind of get back to normal, what would your best guess on OpEx and gross margins do in that environment?

Christopher A. Seams

In Q1-ish?

Christopher B. Danely - JP Morgan Chase & Co, Research Division

Yes.

Christopher A. Seams

I don't think the margins would move too much began assuming life comes back in Q2. And if I look at our design pipeline and a lot of new things that are coming, that even if the macro still sucks, I think we'll do a little better than that. I would expect our fab would start producing again. So maybe you bobble around to half a point max. And OpEx, we tend to go up. You got all the FICA resets that go on all about fun stuff. We've got some litigation hit in the pipeline. We could be up a smidge, but if things are really going down again, we would obviously enact some tighter cost controls. So not vastly different I think in the endgame. As you know, we're very good at managing OpEx. Our OpEx is lower than it was in '08, yet our profits double and our revenue is up, so we're definitely machines in that area and we won't let you down, I'll guarantee that.

Operator

Our next question comes from Steven Eliscu.

Steven Eliscu - UBS Investment Bank, Research Division

UBS. First question is just trying to drill down again into what's going on here in the macro. Xilinx last night did talk about enterprise networking growing in the December quarter. I'm just trying to get a sense if you're seeing any end markets, at least where you sense, based on knowing what the OEMs are doing, that you're no longer under-shipping end market demands and more or less shipping in line with end market demand, whatever that is.

T. J. Rodgers

Let me answer that question. It's market specific and it's really not quarter up, quarter down kind of thing. Consumer, you're shipping in line with demand. A, Their models change all the time. Their procurement departments are top people in the world, and basically, they would lose all of their profit if they bought a bunch of extra chips and then threw them away. So with regard to consumer, you're shipping an in-line demand. So when our consumer is down, that means that market is going to go down. With regard to communications, you take companies like Cisco, they're also very sophisticated in procurement. Problem is that they use chips that are 2 digits of dollars as opposed to $1, $2 kind of chips. There are fewer manufacturers, the quals are more difficult. Therefore, they keep a little bit more inventory. But within one quarter, the demand for communications company reflects the end market. The place where you get the inventory effects that lift up and down, the 2 big ones for us are not synchronous RAMs we shift to communications, but asynchronous static RAMs which are generic RAMs that everybody else uses and USB chips which everybody uses. And the mechanism for it is we have an upturn, which we had a couple of quarters ago, distribution sees the signal and then they start ordering. And distribution, for example, way overstocks on asynchronous SRAMs and way overstocks in USB and then it takes a couple of quarters to burn off your inventory. So right now, one of the sort of perfect way factors that adds up to take our book-to-bill in the 0.6 range as opposed to a typical 0.8 range, is that we've got excess inventory in those 2 categories at distribution and they're burning it off. With regard to the other guys, the supply chain has been rationalized and you're pretty much seeing reality. So back in the answer to the prior question, the question before that, if I had to pick between burning off inventory and demand for the decline, I would pick demand over inventory. We pretty much got lid on that because we even were now starting to work on the overshoot in distribution. So for example, we were monitoring SRAM inventories at our distributors and been actively managing the excess inventory and distribution and not allowing it to shoot up. There's this empty [indiscernible] for us, we shift RAMs to distribution, we get no revenue credit, vague inventory, we hit a returns jeopardy, they can return 5% of their inventory every quarter to us. And if it's no good for us, when they sell-through we get revenue. So the deal for us is we like to keep their shelves stocked, but not overstocked. We're looking -- our industry is maturing, when we go down, you're looking more at demand than anything else.

Steven Eliscu - UBS Investment Bank, Research Division

And just one other question here on the touch controller competitive landscape. One of your major competitors has hired a new CEO. They're making -- they've announced a transition of their strategy to selling mainly chips. What are you seeing in terms of any change in the landscape? Because, as there, you've talked about IP. They have IP. So it's really going to be about who has the better products at the lower price, and I guess that's one of the areas we're focused on where you either may see share shifts or ASP pressure. If you could elaborate, Norm, that would be helpful.

Norman P. Taffe

Yes. No problem, Steven. Relative to, you mentioned IP position, I think that -- our comments are related really to the guys that are the Johnny-come-latelys in the marketplace, that I think is really the point there. Relative to the puts and takes on market share, among the top guys, you're going to see those things go back and forth. I think relative to the competitor that you mentioned, we will come to the foresight we had 3 years ago that this is going to be a chip market. So I think that, that is reality and I guess from our perspective, there's no better playing field we'd like to compete on, and I think the solution we just brought to market, Gen4, is without a doubt the best touchscreen solution in the world. And I think that's one of our other competitors kind of claims that position and I don't think they have an answer yet for what we've just introduced. So I think on that playing field, we feel great.

T. J. Rodgers

Yes. I think, Steve, big picture, the overall market share, I don't think they're going to see a change significantly. The big 3 guys is still going to be the big 3 guys, and I think there's a lot of worrying and putting a lot more emphasis on really what the reality is dictating, but time will tell. We'd love to compete, and we're going to continue to innovate, and again, we're the only programmable solution that goes there, which is giving us really good time to market.

Operator

Our next question comes from Glen Yeung.

Glen Yeung - Citigroup Inc, Research Division

From Citi. I was interested to hear that the push outs and cancellations peaked in August and obviously, that tells me something about September. But what is going on in October with respect to cancellations and push outs?

Christopher A. Seams

Glen, it's Chris. They've only come down from that August, start of September 8. So they're fairly low right now. Anyway, I've got 2 weeks in October by the way.

Glen Yeung - Citigroup Inc, Research Division

And then Brad, you used the word pucker up, and I hate to have to repeat it, but you said it. You said that with respect to distributors reducing inventories. And you said that it was -- you've never seen them really, again, pucker up as much as they are now. But I wonder if you can just compare and contrast what you're seeing now to what you saw in 2008. And then just, because you're only going to allow me to ask one more, just let me squeeze one in also, which is any impact from an early Chinese New Year in the way your Q4 is shaping up?

T. J. Rodgers

On the first part with my choice of word, I'm glad it's actually resonated and you were listening. I think the interesting thing, though, right, like that keeps going back, is it's very consistent. You tend to get lumpiness in the distributors and we've got big global guys, we've got more regional guys and there's a very consistent team. Our guys have been out there, they've been meeting with them all. And at the same level of caution, and like I said, more in the Asian guys which they tend to be a little more of a cowboy, they kind of run quick turns. A little bit of hesitation there. But again, nothing dramatic. And again, you can't compare anything right now to '08. I mean, they're whole different animals. Everything went away in '08. And I think one of the guys early on mentioned design activity. That's a very big leading indicator to me. Because in '08, they didn't even want to see these guys, don't even bother coming out, I don't know if I'm around, I can't afford guys to travel, blah, blah, blah. Where people are plowing ahead, right? Everyone is getting used to going, okay, what is the new growth rates going to be? That's it. No one's throwing in the towel, no one's, I think, overly concerned. It's just the slope. And I think whatever that slope ends up being, I'm very confident, the products that we have and the new ones coming out, and the competitive change even in the SRAM area, we're going to outgrow that slope. We just, like everyone else, don't know what it is right now. But I don't think it's down and I don't think it's down forever, from the hundreds of data points we look at in customers and the ideas we got there.

Glen Yeung - Citigroup Inc, Research Division

And Chinese New Year?

T. J. Rodgers

I have not participated in it. Let me ask Chris.

Christopher A. Seams

I don't see anything and we talked about our visibility being about our lead times. So at 6 weeks, we're well in advance of Chinese New Year and it's still going to be the same time next year that it is every year.

T. J. Rodgers

The other aspect to 0.6, which I deliberately didn't mention this morning, because 0.6 is a number

that is startling. The other sort of perfect way of contributor to 0.6 is we've been ramping our manufacturing, we bought some fab equipment to make our capacity higher. So our lead times are down to 5 weeks. So all of a sudden, you're just not going to do any bookings. If you've already booked and we threw in this inventory, you go into a four-week hole, where you don't need to book the next four weeks, because you've already booked it. So that's another thing that causes us to have a lack of visibility and appear to be sort of vague because we really can't see the future that well anymore. When you got long lead times, you can talk about the backlog for next quarter and even the backlog for quarter after next and not relate to prior history. And when you're doing this kind of free fallback to the short lead times, again, you're in a period of uncertainty.

Operator

Our next question comes from Sandy Harrison.

William S. Harrison - Wunderlich Securities Inc., Research Division

Wunderlich Securities, I'll be real quick. Just real quick on the fab light strategy that you have, 39% from outside foundries. Is there any opportunity or are the foundries coming to you saying, "Hey, if you could crank that up a little bit to help us through the times, there'll be something in there." Is there any leverage to be had since you guys are really calling in the shots on what you take or don't take from them?

Shahin Sharifzadeh

This is Shahin and I run the manufacturing. We have had discussions with our fab partners about those opportunities and we are sort of discussing that with our -- the sales and product lines and we'll make decisions as we move forward this quarter. But certainly, there are opportunities to have some products and also get good prices.

T. J. Rodgers

Short form, yes, we've been offered deals to take wafers we wouldn't otherwise take.

William S. Harrison - Wunderlich Securities Inc., Research Division

And then last, synchronous SRAMs, Samsung getting out of it, I mean is there any other alternative out there to replace synchronous SRAMs from another technology or -- that I haven't seen, but it would seem to me that synchronous SRAM's demand is only going to continue with other players getting out, this just sort of a gift in disguise?

Dana Nazarian

Hi, Sandy, this is Dana. First of all, with respect to Samsung "getting out", that's really not -- although they've sent letters to their customers, you shouldn't think of it as a specific event. This is pretty well known for a period of time that deemphasized SRAMs. I don't think they've been developing these synchronous SRAMs for almost 3 or 4 years now. So this was inevitable and business have been shifting to their competitors most, and we're getting more in our fair lion's share of business. In terms of alternative architectures, there are some alternative architectures there in one sector of the networking infrastructure, the big packet buffers that require super large densities, that's a DRAM solution that's already shifted to DRAMs several years ago. Where we operate is the very high-performance part of the sector where random transaction rate is king and SRAM provides the best resolution. And I should reiterate, although they're getting out, there's still several suppliers that can produce these SRAMs.

T. J. Rodgers

The big offshore supplier right now is our partner in the consortium that defined the Quad Data Rate SRAM that is the staple of the Datacom industry and that's Renesas.

Operator

Our next question comes from Jeff Schreiner.

Jeffrey A. Schreiner - Capstone Investments, Research Division

Capstone Investments. I was just wondering, gentlemen, quickly if you could just talk a little bit about your customers and what they're looking at doing with touchscreen ICs and how maybe their perception has or has not changed in the value working with touchscreen providers like yourself. If you could comment on that, obviously, there's some discussion about one customer, at least Samsung, during the quarter, looking into making their own products and I was wondering if you could give us some color about where customers are at and is that really an option at this point?

Norman P. Taffe

Hi, Jeff, this is Norm, again. Overall, the touchscreen, you were kind of asking what their position, strategically, is the critical component to these guys in that obviously, the shift is not a dramatic shift in the user interface of products very often and this is a total sea change. You mentioned that one comment about a particular company making just -- I see that as, well, unique in its own way and insignificant at least at this point. We see no impact to that at any other suppliers. We don't see any customers even talking about that other than that at one instance. So I don't really see that as a player in this game. I think the relationship we have on the top account is really very much partnership-oriented, I think, with the big guys. And I think the other piece is they are the ones that do recognize the IP benefits of making sure that they're working with suppliers that can defend and are inventing their own IP. So I think as those things happen, it becomes more and more of a benefit to the entrenched suppliers and more on tough on the small interim.

Jeffrey A. Schreiner - Capstone Investments, Research Division

And just one quick follow-up for Dana. Dana, with the decrease and kind of what's implied in the guidance for the memory business, the memory image business, I know it's not called that anymore, but what was the impact besides maybe some inventory or correction you're seeing in SRAM? Also is there some impact of maybe the Renaissance benefit that you had seen hitting the December quarter that kind of rolled off?

Dana Nazarian

Not sure I understood the question. If you're just talking about general demand, overall, in SRAMs, T.J. talked about 2 different kinds of customers, infrastructure customers and consumer customers. And actually, they're not too differently linked than you might think. The fact is, these routers and switches, these are being driven by consumer applications. So I think when there's a general market softening, you see it across all the sectors. And when we look at our long-term book-to-bill or backlog trends, my business isn't very different than Norm's when you look at those trends.

Jeffrey A. Schreiner - Capstone Investments, Research Division

Okay. I guess just what I was trying to go is that obviously there's a part of the business following the trend of the overall macro environment, but was there also some roll-off of a benefit that the SRAM business was receiving from Renaissance that you supported, which is a partner that T.J. alluded to during their time of meet.

Dana Nazarian

I see. I'm sorry, I misunderstood the question. I don't think that's a significant factor. The fact is, as we took care -- we got a decent bump up in their business. However, we took care of some of their customers and share a lot of the same customers as well. And that business is pretty sticky, so I would say the bigger-picture trend in the macro is a much bigger factor than a significant shift back to Renaissance.

Norman P. Taffe

Yes, Jeff, the other big -- he's done a very good job with the consolidation where [indiscernible] the king, the technology leader and he's definitely picking up share in a lot of the bigger accounts. And those share awards depend on when the contract come in and roll off. And net-net, I think you'll see a continued share gain there.

Operator

Our next question comes from Charlie Anderson.

Charlie Anderson - Dougherty & Company LLC, Research Division

Dougherty & Company. Norm, just on the tablets, you mentioned you expect unit volume to be higher in '12. I wonder if you could just tell us about sort of the composition you're seeing of the tablet market based on sort of the build plans from your customers. Is that the same cast of characters minus HP, are we going to see a smaller number of players sort of moving down market and hoping on sort of price elasticity as Amazon is at a lower price point to compete with Apple? Any color there would be appreciated.

Norman P. Taffe

Well, I think -- that's a good question. Hard to mention a little bit because that is just incredible volatile market and obviously, there's been a lot of stuff introduced and the sell-through is very spotty. I think that's going to stabilize as kind of the OS situation improves and we get more competitive offerings out there. And I also think, really, I think the PC guys, obviously with the exception of HP among, things changed, actually, even HP did have complications, that I should say. I think there are going to be more players going next year. So I think there will be a little more of a breadth, and I hope we'll see and expect to see a little more stability of sell-through in 2012, '13 and beyond. I do think this is going to be a real segment and it will be significant. I think it will be dominated by single-chip solutions, and that's where our focus is. I also think that the eReader segment is an important segment, and I think will drive a lot of volume. It's an area we're very much focused on, and I think they will be looking for continued higher-quality touchscreen solutions as well to make sure they offer competitive products. So that's another segment I think will drive good opportunities in '12 and beyond.

Brad W. Buss

Yes, I think net-net, we'll more than double the number of OEMs that we're shipping into next year on tablets. The sell-through and the format will obviously be up to the market to decide, but penetration looks very good.

Operator

Our next question comes from Doug Freedman.

Doug Freedman - RBC Capital Markets, LLC, Research Division

RBC Capital Markets. Guys, can you talk about PSoC 3 and PSoC 5 traction? Those products have been in the market now for about 1.5 years. How is the design conversion been going? And what is your outlook on that for next year in terms of revenue?

Norman P. Taffe

Hey, this is Norm. One thing I'll be careful on the next -- the second part of that because we're not going to talk too much about guidance for the next year. It certainly addresses the longer-ramping products we talked about all along. We did just reach full production on every single member of the PSoC 3 family. That was an important milestone in Q3. And if you still remember, I mean, that's actually 66 devices. So we do have a broad family fully out there. And we got first revenue on PSoC 5 the last quarter. Those were important milestones. So we're very happy with the broad adoption. It is definitely in the opposite market from my touch business. Frankly, we've had extraordinary success in the automotive space, big success in industrial accounts and medical accounts. And so they are complementary but by nature to my touch business because they are certainly longer term, much more stable, generally higher ASP, but they also ramp a lot slower. I will tell you that traction is quite a bit ahead of what we achieved with PSoC 1, which we expected. That's about 3x the rate of adoption that we had in PSoC 1 family which 10, 11 years now after introduction, continues to be a substantial base of revenue for us. And PSoC 3 and 5 is going to be the same kind of thing. Ten years from now, it will probably still be growing.

T. J. Rodgers

PSoC 3 and 5 were the polar opposite of the touchscreen stuff we've been talking about. So we said before, we're getting design win traction. Gen4 is getting best design win traction we've ever had, and as we do a transition, we're going to have a light quarter or 2 followed by a rocket ride. Exact same statement applies to PSoC 3 and 5. We're going to have a great 2013. And so this is the deal where you dig out little design wins one by one, they're 10,000 unit design wins, not 1 billion unit design wins. Your ASPs are higher, the business is more stable, and has a long, slow buildup. And I'm a very, very happy we're building that up but it's not going to materially matter to you guys. Next year, maybe in the last half of the year, it'll be enough that we'll have a good quarter that kind of fills up the cost of it, but it's a slow, slow ramp.

Doug Freedman - RBC Capital Markets, LLC, Research Division

If I could just ask a clarifying question, the 84% booked comment, that was at the beginning of the quarter. Can you give us an update given that 2 weeks are done and 2 weeks out of 13 is sort of a material number.

Brad W. Buss

You really want to know numbers.

T. J. Rodgers

Hang on, we got to pull up our backlog. We'll give you last minutes number. Doug, the number is just shy 90 right now.

Operator

Our next question comes from Srini Pajjuri.

Srini Pajjuri - Credit Agricole Securities (USA) Inc., Research Division

CLSA. Hey, Brad, on the buybacks, you announced a new one here. Just curious if the philosophy is going to be similar to what it's been in the last 12 months? I'm also wondering if it makes sense to lever up the balance sheet a little bit here to be a bit more aggressive.

Brad W. Buss

I don't think you'll see any change in the philosophy, right? We want to be opportunistic. We obviously don't have the excess cash like we did before. The gung ho and buy 10 or 15 million shares in one quarter. And to your point, depending on where the markets trend, I would not be opposed to looking at leverage, whether to buy back stock, pick up a little tuck-in or whatever it may be. But we don't have any plans to do so right now, but we definitely keep those options open. We have a lot of financial flexibility, which I like to have.

T. J. Rodgers

Our cash from operations was over $100 million last quarter. So we, in effect, drew down our bank account to what we consider to be the prudent minimum in cash because we saw the opportunity to buy back stock, but if you don’t like that amount of cash just wait 2 or 3 quarters and then it will be back.

Brad W. Buss

I mean, like the key is we're going to put it to use, right? Like I've said, I mean, between the dividend and the buy back, we want to return a substantial portion of our cash on an average basis. So it may not be every quarter, but we're not looking to go pork up like a bunch of guys out making 0.3%.

Srini Pajjuri - Credit Agricole Securities (USA) Inc., Research Division

And, T.J., I guess in this cycle we have see a decent amount of pickup in M&A and I'm just wondering if you see any opportunities out there for Cypress one way or the other, and also if you can comment on what might be causing that pickup in M&A in the industry.

T. J. Rodgers

There's never a time that -- we have an M&A group, we meet monthly, we always have 5 or 6 sacks of things we're talking about. There's never a time we're not talking about it. The old Cypress, during 2000, bought 24 companies. The new Cypress wants to achieve 20% profitability in a down quarter and therefore, is phobic about picking up new cost. So we're a lot more picky about acquisitions right now. But, yes, we are looking at acquisitions all the time. The real issue is, with PSoC, you have so many places to invest inside the company. You're always looking at like forming new division or getting into new area with products you've got and understand and a sales force that understands what you got. And every time you look at something outside, we look at all the downsides and do we -- if we buy something, we buy something to tuck-in, but we buy something we don't really want, and are you going to get rid of it, and then we remember it took 2 years to get rid of the Image Sensor business. So I wouldn't look for anything, but it's not that we won't do it if something comes along that makes sense for the corporation.

Brad W. Buss

Yes, we're not looking at a new line of business but again, don't forget, Emerging Tech is really our growth that most companies buy growth, right? So we got growth coming out of our ears in the main business and we're organically investing in new growth rather than overpaying for some acquisition. And we'll talk a lot more about that. I think you're getting a far better return than us doing a 50% premium deal and wondering if we can culturally fit it, if the products makes sense, doesn't line up with our design manufacturing and sales methodology.

T. J. Rodgers

We're going to on the night of the Analyst Day, we're going to unveil our stealth opportunity, on the 9th, not right now.

Brad W. Buss

A company we've been nurturing for like 2 years that is close to getting first revenue and that will be our sort of internal acquisition. It's designed right, I think it's a great opportunity. I think you will enjoy hearing about it.

Operator

And our final question comes from Daniel Marquardt.

Daniel K. Marquardt - Robert W. Baird & Co. Incorporated, Research Division

From Robert W. Baird. I just want to ask a question on the time frame of Samsung's pullout of SRAMs and kind of what you estimate their market size is and what percentage of their shares you expect to take?

Dana Nazarian

Daniel, this is Dana. And since this is the last question, I'll try to answer it without any F bombs. I think our understanding of it is they're taking last time orders midyear 2012 with final shipments up till the end of next year. I will reiterate that historically these things take a lot of time. They can announce timeframes but they are a significant SRAM supplier, and you shouldn't expect a point in time and a massive step function up. So it will happen slowly, steady. We think they are roughly 15% of the market right now. And we are roughly about 40% of the SRAM market and the number one position. So we expect to get it at least that much over the long term. But again, it will be slow and steady, not a step function.

Brad W. Buss

That's it, thanks, everybody.

T. J. Rodgers

Thank you for calling in. We've announced that the book-to-bill that, that is a little bit less for the quarter, and we've announced a down quarter in the fourth quarter, although we're going to be quite profitable and happy with the fourth quarter. And most importantly, I think we've announced the new product, the Gen4 touchscreen family, which has got tremendous momentum in the market in that fast-growing market. Thank you very much for calling in.

Operator

Thank you, and this does conclude today's conference call. We do thank you for your participation and you may now disconnect your lines.

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