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

Super Micro Computer, Inc. (NASDAQ:SMCI)

FQ1 2012 Earnings Call

October 25, 2011 05:00 pm ET

Executives

Charles Liang – Chairman and Chief Executive Officer

Howard Hideshima – Chief Financial Officer

Peter Hayes – Senior Vice President Investor Relations

Analysts

Mark Kelleher – Dougherty & Company

Aaron Rakers – Stifel Nicolaus

Rajesh Ghai – ThinkEquity

Glenn Hanus – Needham & Co.

Amelia Harris – Sterne Agee

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Super Micro Computer Inc. FQ1 2012 conference call. The company’s news release issued earlier today is available from its website at www.supermicro.com. In addition, during today’s call the company will refer to a slide presentation that it has made available to participants which can be accessed in a downloadable PDF format on its website at www.supermicro.com in the Investor Relations section under the Events & Presentations tab. (Operator instructions.)

As a reminder this call is being recorded Tuesday, October 25th, 2011. A replay of the call will be accessible until midnight November 8th by dialing 1-877-870-5176 and entering conference ID #4551906. International callers should dial 1-858-384-5517. With us today are Charles Liang, Chairman and Chief Executive Officer; Howard Hideshima, Chief Financial Officer; and Perry Hayes, Senior Vice President Investor Relations.

And now I would like to turn the conference over to Mr. Hayes. Mr. Hayes, please go ahead, Sir.

Peter Hayes

Good afternoon and thank you for attending Super Micro’s conference call on financial results for the FQ1 2012, which ended September 30th, 2011. Before we begin I’d like to advise you of upcoming investor conferences in which Super Micro will be participating. On November 9th we will attend the Wells Fargo Technology Conference in New York and on November 17th we will attend the Southwest Ideas Conference in Dallas where we will present and participate in one-on-one meetings.

By now you should have received a copy of today’s news release that was distributed at the close of regular trading and is available on the company’s website. As a reminder, during today’s call the company will refer to a presentation that is available to participants in the Investor Relations section of the company’s website under the Events & Presentations tab. Please turn to Slide 2.

Before we start I’ll remind you that our remarks include forward-looking statements. There are a number of risk factors that could cause Super Micro’s future results to differ materially from our expectations. You can learn more about these risks in the press release we issued earlier this afternoon, our Form 10(k) for fiscal 2011 and our other SEC filings. All of those documents are available from the Investor Relations page of Super Micro’s website at www.supermicro.com. We assume no obligation to update any forward-looking statements.

Most of today’s presentation will refer to non-GAAP financial results and outlooks. For an explanation of our non-GAAP financial measures, please refer to Slide 3 of this presentation or to our press release published earlier today. In addition, a reconciliation of GAAP to non-GAAP results is contained in today’s press release and in the supplemental information attached to today’s presentation.

I’ll now turn the call over to Charles Liang, Chairman and Chief Executive Officer.

Charles Liang

Thank you, Perry, and good afternoon everyone. Please turn to Slide 4. First let me provide you with the highlights of our FQ1. FQ1 revenue was $247.9 million or 4.8% lower than last quarter, and 19.6% higher year-over-year. After-tax net income was $10.5 million or 19.3% lower quarter-over-quarter and 13.2% higher compared to last year. Super Micro’s diluted earnings per share was $0.24 per diluted share compared to $0.29 last quarter or $0.22 last year.

Slide 5, please. With this FQ1 results we have demonstrated a strong start to our earnings fiscal year in the seasonally soft quarter. We anticipated this softness in our August guidance and this quarter unfolded as expected by achieving approximately 20% revenue growth year-over-year. In the past two quarters we have sold more than $0.5 billion of server and storage products, indicating good growth momentum, although in these past quarter there were lots of macroeconomic concerns in the United States and in Europe in addition to somewhat seasonal softness. This impact was relatively minor to our business.

From a geographic productive perspective, the United States accounted for 62.1% of revenue and Asia was 15.8%. While both regions were lower quarter-over-quarter the European share rose to 18.8% last quarter as a strong September was offset by a generally slower summer period. Last quarter OEM and Direct customers accounted for over 44% of revenue and both groups continued to grow steadily. Internet Data Center reached 16.4% of total revenue in FQ1 as certain new products were deployed as the result of the higher OEM and Direct business. System sales also continues to be strong and accounted for over 39% of sales.

I will start with details regarding the progress of our new Generation X9 Sandy Bridge dual processor and H8 Interlagos solutions. As most of our customers are eagerly anticipating them, we have been investing heavily on the final push of the development cycle with our consistently growing engineering team. We will again be first to market with our phase of the product among competition.

We overcame the technical challenge and had carefully tuned and test-engineered a subsystem and a completed solution to ensure them of optimized performance and features before full bore putting us in. Last quarter we began entering into our presale activities through simple and qualifying servers for Sandy Bridge and Interlagos with our customers on specific projects. We are anticipating the launch of Interlagos with great momentum next month. For Sandy Bridge we will continue to increase our tempering and seeding programs and work with large datacenter customers for an early ship program during this quarter, and we expect they will generate additional revenue. However, we anticipate a significant revenue growth from those new solutions to begin in early 2012.

Let me briefly touch base on the Subsystems side of our business since they are essential to our complete system offering. Regarding components’ pricing and availability, we continued to see a decline in memory pricing last quarter and we did a much better job managing inventory and timing of our projections to the impact of the Japanese earthquake and tsunami. On the software side we recently have partnered with Microsoft to provide a Window OS as part of our complete system solution. We are optimistic that this collaboration will bring additional value to our customers and revenue to us in the long term.

I would now like to provide you with an update on our capacity expansion. We have made significant progress at our Taiwan facilities. Phase one is on track to be completed in the next couple of months and then we should begin outfitting the building and the setting of our first assembly line in December. We expect to have production going out of [29] in Q1 of next year. This is really a special achievement in our efforts to improve the logistical foundation of Super Micro. Furthermore, the completion of phase one in the next few months will allow us to house more engineers as well as some more administrative activities in Taiwan. When the facility is fully ready by the second half of 2012 it should provide a strong regional operation force to supply Asia and Europe at an attractive cost to the company.

In addition to Taiwan we are nearly complete with the expansion of our production facility here in the United States, our San Jose campus. This will add significant logistical capacity to our US operation and allow us to consolidate our warehouse. To prepare for our capacity expansion we have continued to add headcount in the last several quarters. For example, we have been adding production staff in Taiwan, scheduled to be online later this year. Additionally we have been adding on engineers in Taiwan because we intend to utilize the specialized local talent. We also added hardware engineers to help prepare for the upcoming launch of next generation (inaudible).

Regarding our current solutions, storage and GPUs grew sequentially and year-over-year as demand continues to grow especially in oil & gas, university, medical and finance. We began deploying rack solutions sales only recently and our rack sales were up strongly over last quarter. Other relatively new products such as Switch, MicroCloudTM and the 8-way server are ramping quickly now. Overall we are very excited to see the progress in the development of our product line to provide our customers with a total solution and our customers are responding with a steady, growing demand. Now Slides 7 and 8, please.

I would like to now update you with more detail on our new and leading technologies. First, our new X9 Sandy Bridge dual processor solutions are in simple stage now with targeted Q1 2012 for high-volume production release. We were up there, leading in industry performance such as Twin and introduce a new architecture such as 1 and 2U and [WIO]. The new X9 performs post additional memory connectivity, PCIE performance and the bandwidth.

Second, the H8 Interlagos solutions in seeding with our official November release is an [04 up to 16 GPUs] CPU which have proven very popular among HP, PC and other applications. Our GPU optimized product line in 1U, 2U, 4U and (inaudible) provide an extreme performance in calculation in high-density applications and have been the most popular GPU server in the market. While continuing the momentum of leading the market our new generation local GPUs are including 1U per GPU and 2U/6GPU support are in high-volume production now.

Our embedded server line featuring low power, low noise and small (inaudible) optimized for special server applications in enterprise and IPC applications. This new product line brings us additional revenue from the new market segments, and our new workstation product line features a new workstation in conjunction with the high efficiency super-quiet power supply and high-performance IO support. Our new specialized workstation product line will support the ever-rest processer optimized for high-frequency trading, a low spectrum for trading applications.

Our Cloud environment optimizer – 1G, 10G, layer two or layer three, and layer three switch have been in high-volume production now. Our 10G and 284 and 484 has [AOP plus] and 10G (inaudible) switch for play and for center on box. We’ll be ready for volume production very soon, and the cost and performance should both be outstanding in the market.

Our new generation MicroCloudTM is just in production. The first version is in 3U and conjunction with 8 uniprocessor nodes. Its high-density and high-efficiency design makes it an optimized solution for hosting and carrying applications in extremely low power consumption congregations. Our long awaited datacenter management and power management software is in formal beta stages today and will be ready for normal release later this year. This software will make it easier for our customers to manage their server and storage equipment.

In summary, our FQ1 results have shown a strong start to the new fiscal year. We have been successful in building our own foundation for a huge job with our strong product lines, our larger capacity expansion in Asia and our increase in engineering intelligence. We are fully prepared for a strong growth with the launch of our new generation of products in the near future. For more specifics on the FQ1, let me turn it over to Howard.

Howard Hideshima

Thank you, Charles, and good afternoon everyone. I will focus my remarks on earnings, gross margin, operating expenses and similar items on a non-GAAP basis, which reflect adjustments to exclude stock compensation expenses. Reconciliation of GAAP and non-GAAP is included in the financial statements of the company and in today’s earnings release, and in the supplemental detail in the slide presentation accompanying this conference call.

Let me begin with a review of the FQ1 income statement. Please turn to Slide 8. Revenue was $247.9 million, up 19.6% from the same quarter a year ago and down 4.8% sequentially. The increase in revenue from last year was primarily due to server solutions which incorporated our growing Blade, GPU forged product lines, as well as the ramp up of our full rack solutions. The sequential decrease in revenues from last quarter was primarily due to seasonal weakness in the industry. On a percentage basis, whole rack solutions and switches were the fastest growing product lines from the prior quarter. These products continue to gain traction as well as our new MicroCloudTM.

Turning to product mix, the portion of revenue from server systems was 39.4%, which was an increase from 35.7% a year ago and a decrease from 40.4% last quarter. ASPs for servers was $1700 per unit, which is up from $1500 per unit last year and down from $1800 last quarter. We shipped approximately 57,000 servers in FQ1 and 973,000 subsystems and accessories. We continue to maintain a diverse revenue base with over 500 customers with none of these customers representing more than 10% of our quarterly revenues. Internet Data Center revenue was 16.4%, which was an increase from 16% in the prior quarter. Furthermore, 62.1% of our revenues came from the US and 55.8% from our distributors and resellers.

Slides 10 and 11. Non-GAAP gross profit was $39.8 million, up 19.9% from $33.2 million in the same quarter last year, and down 1.5% from $40.5 million sequentially. On a percentage basis, gross margin was 16.1%, up from 16% a year ago and from 15.5% sequentially. Price changes from [Ablecomm] results in no change to gross margin, gross profit in the quarter with total purchases representing approximately 18% of total cost of goods sold compared to 20.9% a year ago and 14.9% sequentially.

The year-over-year increase in gross margin resulted from an increase in sales of server solutions which typically have higher margins, offset in part by a decline in margins of subsystems and accessories. Sequentially gross margins were up due primarily to the sale of less memory and hard disk drive components which we bought in response to the Japan earthquake, offset in part by higher inventory reserves.

Slide 12. Operating expenses were $24 million, up from $18.7 million in the same quarter a year ago, and up from $22.7 million sequentially. As a percentage of revenue, operating expense was 9.7%, up from 9% year-over-year and 8.7% sequentially. Operating expenses was higher on an absolute dollar basis year-over-year and sequentially. We saw year-over-year increases in absolute dollars primarily in R&D as we continue to invest in headcount to drive our innovation and product portfolio, especially in preparation for Sandy Bridge and Interlagos releases. Sequentially we saw an increase in operating expenses of about $1.3 million, primarily due to R&D expenses, growing about $592,000 related to annual salary increases and headcount increases to support new technology launches.

In addition general & administrative expenses grew by $365,000 primarily due to professional fees associated with the company’s fiscal year-end audit. The company’s headcount increased by 66 sequentially to 1338 total employees. Operating profit was $15.8 million, or 6.4% of revenues, up by $1.3 million or 8.8% from $14.6 million a year ago, and down $1.9 million or 10.6% from $17.7 million sequentially. Our building expansion in Taiwan is scheduled to be completed at the end of this quarter. This expansion will drive our ability to service our customers and prove our operational efficiency around the world.

Net income was $10.5 million, or 4.2% of revenues, up $1.2 million or 13.2% from $9.3 million a year ago, and down $2.5 million or 19.3% from $13 million sequentially. Our non-GAAP fully diluted EPS was $0.24 per share, up $0.02 from $0.22 per share a year ago and down $0.05 from $0.29 per share sequentially. The number of fully diluted shares issued in FQ1 was 44,317,000.

The tax rate in FQ1 on a non-GAAP basis was 33.1% compared to 35.8% a year ago and 26% sequentially. The decrease in taxes from the prior year was primarily due to the R&D credit which was effective for this quarter but not in the same quarter last year. The increase in current quarter from the prior quarter was due to pending expiration of the R&D credit and lower tax deductions from stock options. We expect the effective tax rate on a non-GAAP basis to be approximately 33% for the December quarter.

Turning to the balance sheet on a sequential basis – Slide 13. Cash, cash equivalents and short- and long-term investments were $96 million, up from $75.2 million in the prior quarter and up from $89.4 million in the same quarter last year. In FQ1 free cash flow was a positive $17.1 million, the net change in cash was a positive $22.3 million for the quarter.

Slide 14. Accounts receivable increased by $2.8 million to $87.8 million and DSOs was 32 days, an increase of three days from the prior quarter. Inventory decreased by $3.7 million to $189 million with the days in inventory increasing by one day to 84 days. The decrease in inventory was due in part to selling off some of the inventory accumulated as a result of the Japan earthquake. Accounts payable increased by $10.3 million to $123.6 million with the days payable outstanding increasing by one day to 52 days, primarily due to the timing of payments to vendors. Overall cash conversion cycle days were 64, an increase of three days from 61 days in the prior quarter.

Now for a few comments on our outlook. As indicated previously during FQ1 we saw strength in our broad product lines, especially in Blade and storage products. We started to see ramping in our full-rack solutions and switch products which we started investing in during the past year. In addition we have young sampling and pre-sales activity for Sandy Bridge and Interlagos solutions, so as we enter the December quarter which is sequentially a seasonally strong quarter for the industry, we have a host of new products and platforms available for our growing customer base.

As noted earlier, we’re working with our vendors and partners to minimize the impact to our hard disk drive supply due to Thailand floods. In addition, we are scheduled to complete construction of our Taiwan facility at the end of this quarter. Therefore the company currently expects net sales for the quarter ending December 31st, 2011, in the range of $260 million to $280 million. Assuming this revenue range, the company expects non-GAAP earnings per diluted share of approximately $0.27 to $0.33 for the quarter. It is currently expected that this outlook will not be updated until the release of the company’s next quarterly earnings announcement notwithstanding subsequent developments. However, the company may update the outlook or any portion thereof at any time.

With that let me turn it back to Charles for some closing remarks.

Charles Liang

Thank you, Howard. Our results for FQ1 were strong when compared to the same quarter last year and we have made a good start to the new fiscal year. We look forward to moving into our Taiwan facility this quarter and beginning production. We are continuing to prepare our various product lines for the upcoming launch of Sandy Bridge. We have a strong foundation and base from which to execute our strategy to grow our revenue and increase our profitability.

Operator, at this time let’s open to questions.

Question-and-Answer Session

Operator

Thank you, Sir. (Operator Instructions.) At this time I’ll go first to Mark Kelleher with Dougherty & Company.

Mark Kelleher – Dougherty & Company

Great, thanks for taking the question. Congratulations on a good quarter. Howard, you mentioned the Thailand floods. Can you elaborate a little bit more on how that might be affecting your Q4 and maybe how much hard disk drive inventory you have as a cushion?

Howard Hideshima

Yeah, Mark, this is Howard. Thank you for the compliment. With regards to the hard disk drive inventory situation and the Thailand floods, we do maintain safety stocks so right now we’re assessing it. We’re looking through that and we’re working our way through our hard disk drive inventory to make sure we have enough for this quarter.

Mark Kelleher – Dougherty & Company

So you’re still evaluating that?

Howard Hideshima

We’re still looking through it. Right now it’s a developing situation but again we have maintained what I would call reserve inventories.

Charles Liang

It looks like a certain impact for sure, but because we have a very good safety inventory control hopefully that impact won’t be too big.

Mark Kelleher – Dougherty & Company

Okay, and as a follow-up there was some higher priced D-RAM in inventory that you were working through. Is that all gone now?

Charles Liang

Yeah, that situation indeed has been improving in the last two quarters. So this quarter we have less concern in that area.

Mark Kelleher – Dougherty & Company

Okay, thanks.

Operator

And we will move along to Aaron Rakers with Stifel Nicolaus.

Aaron Rakers – Stifel Nicolaus

Yeah, thanks guys and my congratulations as well. First question, I guess more of a clarification – you had referenced Internet Data Center vertical as being 16.4% of revenue. I’m a little bit unclear. I think your presentation kind of indicates that that was 16.4% of OEM plus Direct revenue, so can you clarify that for us? And I think upon that clarification I think you had one significantly large customer last quarter come into that vertical – can you update us on are there any large customers skewing that because it looks like an extremely continually solid number.

Howard Hideshima

Hi Aaron, thanks for the compliment again. Yeah, the 16.4% refers to total revenue, that’s a percentage of total revenue.

Aaron Rakers – Stifel Nicolaus

And any thoughts or indications on is there a significant customer contribution in that? Because I think you had one customer that was very large last quarter, correct?

Howard Hideshima

In the June quarter we had one customer that was 11% of total revenues and they were in the Internet Data Center area. This quarter we had no customer in any vertical that was over 10% of our revenues, so you see us being more diversified quite frankly into a number of new growing customers.

Aaron Rakers – Stifel Nicolaus

And then the other question is, I think I was surprised by the gross margin only 16.1%. By my math it would seem to imply that you had a fairly solid increase in the actual server system gross margin. Can you touch on what trends you’re seeing between the segments and how we should necessarily think about that over the next couple quarters?

Charles Liang

I guess the March and June quarters we both had some negative impact from higher cost of D-RAM price and however I’ve mentioned that that situation has been improved this quarter.

Aaron Rakers – Stifel Nicolaus

So you say both systems and subsystems gross margin increased sequentially?

Charles Liang

For September and June quarter, yes, we saw it from a little bit of higher memory costs.

Aaron Rakers – Stifel Nicolaus

Okay, thank you.

Operator

At this time we’ll move along to Rajesh Ghai with ThinkEquity.

Rajesh Ghai – ThinkEquity

Yes, thanks. Congratulations from my side, too. On the Romley ramp up, what’s the timing that you’re assuming at this point in time? I noticed that your guidance for the December quarter is a little neutered compared to the historical growth rate. Are you assuming some sort of a pause ahead of a big ramp in the first half of next year, calendar year?

Charles Liang

Okay. Yeah, our December quarter growth, we tried to be more conservative for two reasons. One is the Thailand flood. We are closely inspecting and surveying the impacts, and the second is our Sandy Bridge going into very high-volume production in Q1. So this quarter we will see some seeding but not really high volume.

Rajesh Ghai – ThinkEquity

And in case, you said you were evaluating the Thailand situation – I just want to make sure that right now it looks like you have significant hard drive capacity that’s going to be impaired. Is it a possibility that it impacts your ability to produce product this quarter or do you think that you might just have an opportunity to address that situation? And what kind of pricing impact are you modeling in your gross margin assumption for this quarter?

Charles Liang

Yeah, this quarter we have some safety inventory for sure but it is concerning about if the impact will become bigger; then we may have to pay a higher price to fulfill some demand especially by December. That’s why we tried to be more conservative.

Rajesh Ghai – ThinkEquity

So what kind of price increase have you modeled in the gross margin assumption for next quarter?

Charles Liang

At the moment we have… And I don’t know if people are talking differently but it can be 10% higher in some hard drive costs, and some other models may even be 20%. But as of this moment still none, not quite solid.

Rajesh Ghai – ThinkEquity

Okay, and then one last clarification. You said the Taiwan facilities will ramp – is that going to be in the March quarter of 2012 or is that going to be in the September quarter of 2012? I just want to clarify that.

Howard Hideshima

Hi, Rajesh. We’re on schedule as I think Charles mentioned also. We’re on schedule for complete construction by the end of this quarter in the December timeframe so then we’ll begin to ramp right after that, and taking off (inaudible) of that and putting in lines and beginning to ramp that.

Rajesh Ghai – ThinkEquity

Great, thank you so much.

Operator

(Operator Instructions.) Moving along we’ll go to Glenn Hanus with Needham.

Glenn Hanus – Needham & Co.

Hi, and congrats as well. Let’s see, so gross margins this quarter, should we look for some sequential growth in gross margins in the December quarter and can you talk about the puts and takes on the gross margin this quarter?

Howard Hideshima

Yeah, Glenn, I think one of the main things that we talked about is the Japan inventory, that being behind us. It was pretty good in the June quarter. We saw less with that as we talked about in the September quarter so we think we’re beyond that per se. Obviously as we have new products onboard and starting to sample and getting ready for the Romley and Interlagos, that’s always a good thing for us. On the flipside of that, and I’ll say also that the memory pricing or UM pricing was pretty stable this quarter so that was also good for us. We’ve talked about the hard disk drive situation – that can go plus or minus, let’s put it that way, depending on how it turns out at the end of the quarter. And then on the negative side I guess… Like I said, we’re on schedule to ramp the Taiwan facility, we look pretty good there but we’ll still be incurring some costs to ramp that, to get it ready for production capabilities in Q1.

Glenn Hanus – Needham & Co.

Okay. Can you give us any color directionally on whether we can see some gross margin expansion this quarter or should we more think about that in March in conjunction with Romley?

Charles Liang

I guess the December quarter probably margins will be slightly better than before, but how much? You have something more Howard?

Howard Hideshima

Yeah, again Charles is pointing to like I said the benefits from some of the sampling we’re doing with Interlagos and with Romley, also with some of the componentry that we do have in stock, the higher pricing we may be able to obtain on that and its positive effect on margins. So there’s some positive things for us that we see right now in front of us.

Glenn Hanus – Needham & Co.

Okay. On the operating expenses, you came in a little ahead of what I was modeling. As you look out over the next few quarters do you think we can start to drive operating expenses back down below 9%?

Charles Liang

Yeah, in the past three or four quarters, we did increase a lot of manpower because we had to train our head people in production, in logistics, even in the quality control and offshore. And that’s why our overhead grew quite a little bit, but so far most of the people are pretty much well trained so in the next few quarters I believe our headcount growth will be more under control.

Glenn Hanus – Needham & Co.

Okay, great. And maybe at the macro level could you talk about what you’re seeing by geography? You did pretty well – do you think it was more share gain on your part or the overall macro situation was not so bad? Could you maybe talk about that by geography?

Charles Liang

Yeah, I mean as you know we did not focus that much on the USA East Coast before but we have depended a lot on (inaudible) to develop their market in the past few quarters. So we did see some gain over there and in Europe we had to continue to grow our sales and marketing team, and we have a good feeling about it. In Asia, yes, we had spent a lot of effort to develop the market there in the last twelve months and it looks like it’s getting mature to us.

Glenn Hanus – Needham & Co.

Okay, thank you.

Operator

And we do have a follow-up from Aaron Rakers with Stifel Nicolaus.

Aaron Rakers – Stifel Nicolaus

Yeah, thanks. In reference to one of your earlier comments, can you tell us how much expense overhang you’re currently deriving from the ramp of the Taiwan facility and how we should think about that after that facility comes online?

Howard Hideshima

Hi, Aaron. Like I said right now there’s none on the construction part of it, the investment part, but that’s not come onboard yet. They’re still building and those will be taken over a long period of time so the load from there won’t be that heavy even when it does come onboard. And as Charles mentioned earlier we did ramp some headcount there; that’s already built into the number. So it’s a matter of basically utilizing that excess capacity if you want to call it that, or excess manpower that we have – basically fully utilizing it.

Aaron Rakers – Stifel Nicolaus

And then the final question from me is if you think about what you guys, you know, $270 million mid-point of your guidance, how are you thinking about that sequentially between the two segments? If I look back you have historically a very strong December quarter; obviously Romley timing and everything else involved here, but I think on average you’ve done over 20% sequential growth in the Systems side. How are you thinking about the mix of business given your guidance for this quarter?

Charles Liang

I guess you are right – the Romley, Sandy Bridge will both have impacts in Q1, not December. That’s why we tried to be more conservative for the December quarter. But yes, December is usually our strong quarter.

Aaron Rakers – Stifel Nicolaus

So with that I mean are you assuming a fairly consistent mix of business that you saw this last quarter?

Howard Hideshima

Yeah, I think so, Aaron. If you look through the percentages of the last couple of quarters we’ve felt pretty steady with regards to our servers versus subsystems mix, albeit we had some componentry that we had to get rid of in the June quarter. But I think you’ll see us being fairly steady.

Aaron Rakers – Stifel Nicolaus

Okay.

Operator

Moving along we’ll go to Alex Kurtz from Sterne Agee.

Amelia Harris – Sterne Agee

Hi, this is Amelia filling in for Alex today. A quick question following up on the Internet Data Center question: how did you see the competitiveness in this vertical over the quarter in terms of the deals you saw? Were they better or worse versus last quarter? Did you see any large deals or specific pricing pressure around these deals?

Charles Liang

It looks like not a big change. It’s been competing since a long time ago and that’s why we are continuing to grow our higher-value architecture, our software value and kind of lowering our operations cost by extending our opportunities to Asia.

Amelia Harris – Sterne Agee

Okay great, thank you.

Operator

And we do have a follow up from Glenn Hanus with Needham.

Glenn Hanus – Needham & Co.

Hi, yes, I think an important part of your value proposition over the years has been your first-to-market advantage and you tend to drive better margins during that time. Just given that Romley, Sandy Bridge has slipped out a bit, has that impacted your first-to-market advantage at all and sort of given some of the competitors a chance to catch up to you?

Charles Liang

I believe we still have a very good chance in terms of TTM, time to market, because for a (inaudible) it’s a really wonderful, really high –performance but also very complicated. There are lots of technical challenges; for example, how to make the system really power saving and really pushing the performance to maximum; how to really optimize the cooling function including kind of a rather free-air cooling. So there is lots of technology there, so I don’t believe… Sandy Bridge, we have a better opportunity than before.

Glenn Hanus – Needham & Co.

Great, thank you.

Operator

It appears at this time we have no further questions. I would like to turn the call back over to Mr. Liang for any additional or closing comments.

Charles Liang

Thank you for joining us today and we look forward to talking to you again at the end of this quarter. Thank you, everyone. Have a great day.

Operator

Thank you, ladies and gentlemen. This does conclude the Super Micro FQ1 2012 conference call. We do appreciate your participation, you may disconnect at this time. Thank you.

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

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

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

Source: Super Micro Computer's CEO Discusses FQ1 2012 Results - Earnings Conference Call
This Transcript
All Transcripts