Xilinx F2Q08 (Qtr End 09/30/07) Earnings Call Transcript

Xilinx, Inc. (XLNX)

F2Q08 (Qtr End 09/30/07) Earnings Call

October 18, 2007 5:00 PM ET

Executives

Maria Quillard - IR

Jon Olson - CFO, SVP of Finance

Wim Roelandts - CEO

Analyst

Jim Snyder - Goldman Sachs

Kate Fehrenbacher - Lehman Brothers

Tristan Gerra - Robert W. Baird

Peter - Citigroup

Danny Kuo - Bear Stearns

Arnab Chanda - Deutsche Bank Securities

John - Prudential Securities

Parag - UBS

Presentation

Operator

Good afternoon. My name is Kara, and I will be your conference facilitator today. I would like to welcome everyone to the Xilinx [Second] Quarter FY '08 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. (Operator Instructions).

Please limit your questions to one, and refrain from multi-part questions to ensure that management has adequate time to speak to everyone. After each participant has asked their question, their line will be muted and they will be placed back into the conference. If time permits, additional questions will be taken.

I would now like to turn the call over to Maria Quillard. Thank you Ms. Quillard, you may begin your conference.

Maria Quillard

Thank you, and good afternoon. With me today are Wim Roelandts, CEO, and Jon Olson, CFO. We will provide a financial and business review of the September quarter, then we'll open the call for questions. I will end the call with a few housekeeping items.

As published in our press release, our business update for the third quarter of fiscal year 2008 will take place in the form of a press release, after the market closes on Wednesday, December 5th. After we update our guidance, we will be in a quiet period until we report the following month.

Let me remind everyone, that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions, based on information that is currently available and that actual results may differ materially.

We refer you to the documents the company files with the SEC, including our 10-Ks, 10-Qs, and 8-Ks. These documents contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This conference call is open to all and is being webcasted live. It can be accessed from our Investor Relations website, www.xilinx.com.

Now let me turn the call over to Jon Olson.

Jon Olson

Thank you, Maria. Revenues in fiscal Q2 were $455 million flat sequentially from the prior quarter. Gross margin at 61.8% was slightly below our guidance and included two one-time items related to our warranty obligation and an impairment charge both which accounted for approximately 1.5 point of gross margin.

Additionally, unforecasted strength from a high volume consumer customer for our CPLD products impacted margins by approximately 20 basis points. Operating income was $94.4 million, or 21.2% above what we expected, as lower gross margin was offset by better than expected expense control.

Operating expenses were roughly flat, sequentially better than our guidance of 2% growth. This was a result of continued overall expense control as well as lower than anticipated stock-based compensation expenses.

We remain focused on achieving an operating margin of 24% by fiscal year-end, and to that extent we are pleased with our continued progress and controlling expenses. Net income increased 6% sequentially to $89.7 million resulting in a profit margin of 20.2% up from 18.9% last quarter, and the highest we've reported in six quarters.

Other income including interest expense was $19 million. This was $3 million more than we had guided due to a higher than expected interest income and foreign currency hedging gains realized during the quarter. Free cash flow during the quarter was a $134 million after $30 million in CapEx, and we paid a dividend of $0.12 per share during the quarter.

We repurchased 6 million shares for $150 million and paid $36 million in dividends. The tax rate for the quarter was 21%, in line with the guidance we provided.

Let me now comment on the balance sheet. Cash balance decreased $23 million during the quarter to $1.9 billion. Factoring in the $1 billion convertible, our net cash position is now approximately $900 million.

Day sales outstanding increased five days to 48 days. This is slightly higher than our corporate target of 45 days, primarily due to an increased shipment profile in the month of September. We expect this figure to decrease in the December quarter.

Combined inventory at Xilinx and distribution decreased by nine days to 92 days, with 69 days of Xilinx and 23 days at distribution. This is the lowest we had anticipated. In fact, this is lower than we had anticipated entering the quarter, and our combined inventories days are now the lowest in nearly four years.

Several factors contributed to the decrease, including improved forecasting accuracy, stable through-put time from the supply-chain and pure mix issues. We are establishing a new target going forward of 90 to 100 days of combined inventory.

In December, we expect to remain within this 90 to 100-day range. I will now turn the call over to Wim to comment on our business and products.

Wim Roelandts

Thank you, Jon and let me first comment on the September quarter. The September quarter was a typical seasonal summer quarter with sales from North America and Europe declining slightly, while Japan and Asia-Pacific revenues grew sequentially.

Total bookings for the quarter totaled 59%. July started out positive. August orders were slightly better than expected, but September term's orders were a little short of expectations. On the other hand, during the month of September, we built a strong beginning backlog. Our beginning backlog provision has not been this healthy since the same period two years ago.

Our large OEM customers again did very well this past quarter. Our top 10 customers' total revenue across each geography were up from the prior quarter. This was not the case last quarter or all of last fiscal year. These large OEM customers are not just communications-driven companies, but they are well-diversified across all our various end markets.

On the new product front. Our new product category grew 6% sequentially, and now that represents 30% of total revenues, up from 22% in the prior year quarter. Group revenue growth for the quarter came from Virtex-5, Spartan-3 and CoolRunner-II. Virtex-4 was virtually flat after growing over 20% in the June-ending quarter.

Mainstream products declined 1%, while base products declined 10%, which is more of a typical pattern that we would expect to see going forward. Total Virtex revenues were flat at 64% of total revenues. Spartan revenues increased 1% to 26% of total revenues, and the CPLDs grew the most, climbing 8% to reach 10% of total revenues.

From a geographic perspective, Asia Pacific was again the strongest region growing 3% quarter-to-quarter, and reaching a record 30% of total sales. This quarter we saw strength coming from multinational companies employing contract manufacturing in Asia, as well as organic growth within Asia.

In terms of end markets, communications was up 1% sequentially, due to unforecasted strength in Wired lines, especially in North America, where both enterprise networking and Wired telecom grew. Wireless, as expected, was down sequentially; although wireless revenues in Japan grew double-digits for the first time in nearly two years.

The consumer and automotive end market was standard, growing 8% quarter-to-quarter, to a record 17% of sales. Our digital consumer and audio, video broadcast, and video and broadcast segments, both showed good strength across geographies. Industrial and other category declined 5% which surprised us. A rebound in industrial, scientific and medical wasn't enough to offset softness in tested measurement and defense in this quarter. The decline in our defense business was attributable to a couple of large customers that had robust orders in the June ended quarter.

These customers are expected to resume ordering again this December quarter, and have already placed a backlog on us. Like the past two December periods, we are expecting good growth from defense.

Lastly, the data processing sector was flattish as we had forecasted.

Now I would like to change the topic to address the issue of market share for a moment. Our cumulative sales of 65 and 90 nanometer accounted for nearly 70% of overall industry revenues of BODs.

The products manufactured on these [notes] are our newest product families. We are also seeing record levels of design win activities for these 90 nanometer and 65 nanometer products. It is a clear result of our ongoing effort to further drive down the cost of our devices through advanced process technologies. Our clear sales in design and leadership indicates with these products bode us well for the future market share gains.

Our internal design win metrics show that Virtex-5 products are winning the vast majority of the high-end socket designs to-date, while our nearest competitor has only one device currently shipping on 65-nanometer at the high-end. We estimate that Virtex-5 has more than a year lead over any competing 65-nanometer products. Let's not forget the high-end [Virtex-5] devices, which represent about two-thirds of the total FPGA market.

Let me now turn to the guidance for the quarter. The December quarter revenues guidance is for sales to be up 2% to 6% sequentially. We are expecting all geographies to be up sequentially with the possible exception of Asia Pacific, which is forecasted to be flattish. From an end-market perspective, we are expecting consumer and automotive to increase, given some specific Digital TV design wins that we will be ramping into volume production, starting in the December quarter.

Industrial other is expected to be up, driven by defense. Communications is the most challenging end-market to forecast. We believe it will be flattish and are most cautious about the wireless infrastructure piece. Data processing is also expected to be flattish.

From a product point of view, we are expecting Virtex-4 to experience solid growth in the December quarter, Virtex-5 to approximately double, and the Spartan-3 family of products to have a very good quarter, given the production ramp of a few key programs. The new product category should be very healthy for this quarter and next.

So, let me now turn it back to Jon for some final remarks.

Jon Olson

Thank you, Wim. Gross margin is expected to be approximately 62% to 63%. Combined operating expenses are expected to be flat. Amortization expense will be approximately $2 million. Other income, including the impact of interest expense is expected to be $12 million. This level of other income and expense is a more typical run rate, as it reflects both lower investment market rates and a modest impact from foreign exchange rate contract. Share count is expected to be approximately 297 million shares. And the tax rate is expected to be 21%. Let me now open the line for questions. Operator, back to you.

Maria Quillard

Operator?

Question-and-Answer Session

Operator

Yes Ma'am. I do apologize. Just one moment. The floor is now open for questions. (Operator Instructions). Your first question comes from Seogju Lee.

Jim Snyder - Goldman Sachs

Hi, thanks. This is [Jim Snyder] for Seogju Lee. Thanks for taking the question. If you guys look into the rest of the fiscal year, what's your expectation about the magnitude of R&D and SG&A reductions we will be able to get, exiting fiscal year, and specifically do you see any upside to your target coming out of the fiscal year?

Jon Olson

So Jim we haven't made any future forecast into next fiscal year yet. I don't think we are really prepared to make a statement on that. I mean, we are committed to sustain our business, add a minimum in the 24% to 26% operating margin region. So obviously, we have to spend some time looking at what we think the forward growth rates are for us next year. And then pay a little attention to what we can do in terms of what that means for spending. So, at this point in time, I don't think I am ready to make a comment on that.

Jim Snyder

Okay. I was just wondering if there is any upside for this fiscal year, exiting?

Jon Olson

So, exiting this fiscal year or within this fiscal year?

Jim Snyder

Within this fiscal year.

Jon Olson

Well, I mean, I think a lot of that is determined by how much growth we are going to get here in the last two quarters of the fiscal year. Our 2% to 6% guidance, we feel pretty good about based on our backlog. Things would continue to stay strong throughout the quarter than that might yield, certainly more upside and therefore more strength.

We have also been focusing on gross margins, cost of sales items quite a bit and so we are hopeful that we can continue to deliver solid results and see if there is anything we can do about making that a little bit stronger, as we go throughout the year but a lot of it is dependent on the overall business environment and I would play that out.

Jim Snyder

Perfect, thanks very much.

Wim Roelandts

Next question please.

Operator

Your next question comes from Tim Luke.

Kate Fehrenbacher - Lehman Brothers

Hi this is Kate for Tim. I just had two quick questions first on the data processing segment, I was just wondering what kind of opportunities do you see there going forward it's been kind of down and flattish for a while now?

Wim Roelandts

Yes, well, indeed the data process even -- this is more than flattish it has being declining over the last period and it really consists of two components one is the storage component, which is more and more based on ASICs or ASSP designs across the industry. So, there is, that used to be a very big segment for us, but I think that whole segment has been moved away from program for logic. The other part of course is computing and there, we see some potential going forward so our devices are more and more used in especially in the high-end servers and probably slide back. So, overall with the whole storage share area being smaller and smaller, I think, we will see some growth that is more commensurate with the rest of the company growth, and we don't expect much further decline anymore. Your second question?

Kate Fehrenbacher - Lehman Brothers

Yeah, I had one more quick follow-up on the comp business in general, I know, you said that wireless, you are the most cautious on the wireless side of things, I was wondering, if you could give anymore color on maybe in the data process -- the enterprise networking versus the kind of Wired line business versus wireless is there any difference?

Wim Roelandts

Well, like we saw, this quarter was that indeed the Wired line business grew, which was a little bit surprising on one side, because we had not planned for it. But on the other side, there is clearly reinvestment starting in the whole infrastructure space with the transmission of video and voice over the Internet, where clearly we are reaching the capacity of limits that the current infrastructure will provide. So, there is a lot of activities going on in building new types of routers, new types of servers, that can handle these increased traffic. And I think we are just at the beginning. So, my expectation is that we'll see reasonable growth in the Wired line business going forward, although, there could be some lumpiness, which is always the case when you start up things.

On the wireless side, there we had a couple of negative quarters now. And it really has to do with the investment of deployment of 3G base stations throughout the world. And our expectation is that we probably see not one may be two more quarters of negative growth, but the feedback we really seek from our customers are quite bullish for next year. So, obviously with all the terms on economic conditions and other factors that can influence that, but our expectation is that the wireless less business, will start growing in one or two more quarters. Next question please.

Operator

Your next question comes from Uche Orji.

Parag - UBS

Hi, this is Parag for Uche. Just wanted to get a clarification on your comments, you said that your mainstream in this business declined quarter-over-quarter is going to remain in the same range as this quarter. So, I was just wondering, if your new product revenue continues to grow at the same rate, and given that your mainstream decline is moderating. Should we expect to see revenue expectation going forward into '08?

Wim Roelandts

Yeah, absolutely, you are talking about the measurement business?

Maria Quillard

The mainstream?

Wim Roelandts

Mainstream, I am sorry.

Jon Olson

They got sort of new products for the mainstream.

Wim Roelandts

Well, you're really talking about two different aspects, the three segments that we identified for is new business stream and base business and business of the older products. Typically, they will continue to decline over the years, these are products that are typically five -- at least five or six years old, plus they're peak in production.

The mainstream business really, is very dependant on the economic conditions. So, I think if these are the products that are in production for our customers, and so, our customers buy these products when they see their business growing or not. So, it's really very little we can do on that, but the new products, however, that is something that we can impact by having good new products and be ahead of our competition.

And so, although this quarter was a little bit on the weak side, but mainly because of V-4, which is kind of in the limit now for between new and mainstream. But my expectation is that for next quarter, the new business will do very well, mainly based on the strength that we see on both V-4, V-5 especially, and then also on Spartan-3.

The mainstream business will depend on the, like I said, on the overall economic conditions. We expect it to grow slightly for the coming quarter, mainly because we expect the business to be growing for the next quarter.

Parag - UBS

Okay. And then I have a follow-up on your backlog. And could you provide, you said that your backlog is the strongest in the last few years. Could you provide some more color as to where that strength is from coming from, I mean which kind of market?

Wim Roelandts

Yes. Our backlog is up in the high-single digits compared with last quarter.

Jon Olson

So, I think from an end-market perspective, as we've talked about where we see the strength in the next quarter, we do think our aspects in defense will be stronger on a sequential basis and the consumer piece. Those are the two places that I think are the two large opportunities, anything in the industrial area, which is where aerospace and defense is in the consumer space.

Parag - UBS

Thank you.

Wim Roelandts

Next question please.

Operator

Your next question comes from Tristan Gerra.

Tristan Gerra - Robert W. Baird

Hi guys. In Virtex-5, whenever you seem to be at an inflection point, is that the beginning of a migration from product tightening to volume, and is that significant increase quarter-on-quarter sustainable beyond the December quarter or in line with what we have seen with previous Virtex ramps?

Wim Roelandts

Yes, well, Virtex-5 is clearly in a stage where we see a lot of activities, some of the first design wins are starting doing the production, but this is still relatively a small number.

Most of this revenue comes from new designs from engineering prototyping and for, from the emulation market, which are the emulation companies are buying very large Virtex devices. So all of the numbers, in units, it not may be very high, but the dollar revenue is of course much higher.

And so, it really is still mainly design win activities that we see happening. And, of course this quarter is extremely strong, part of it because a lot of shipments were already made to the distribution channel that we expect to enter into customers, during this quarter. But also because it is a very strong, very well received product line and fundamentally, there is really no competition for some of the devices, mainly because of the features we have in there. So that's why we see a lot of design activity in that space. Next question, please.

Operator

Your next question comes from Glen Yeung.

Peter - Citigroup

Hi, this is a Peter for Glenn. I actually want to do a touch on, you talked about strength across your top 10 customers, which are large OEMs and it looks like you also worked down channel inventory quite a bit, which I usually think is associated with small medium customers. Should we think that more broadly, is this any indication that more broadly, there is just a bit of strength coming back or did you really work down the inventory earlier in the quarter, and then it was the large OEMs who looked better towards the end? Any color would be helpful. Thanks.

Wim Roelandts

Yeah. Well, the, what was kind of interesting this quarter, is that in all geographies our top 10 customers increased, which is a sign that things are may be picking up, although I am very careful because one quarter doesn't make a trend yet. So, you have to careful of, about that, but indeed, overall there seems to be a little more optimism. Again, it depends very much on the overall economic conditions going forward, and that could dampen this trend in the future.

But overall, yes, the big companies have been kind of sluggish for the last several quarters. So that pick-up is really very encouraging to us, and we see also good design activity in all of our other channels.

Jon Olson

I can add something. I think you were also kind of talking, asking a question around the volume going to distribution. Quite or few of our large customers still are served via our distribution network and are not direct shipped from Xilinx. So even though, we had a lot of, lower days in distribution. That doesn't necessarily indicate that's it's all small customers.

Peter - Citigroup

And could I actually ask a follow-up?

Jon Olson

Sure.

Wim Roelandts

Sure.

Peter - Citigroup

Earlier in the year I think you had a just a better ramp up, that matured yields a little bit more quickly than, maybe was anticipated. I was wondering, if it's too early to start talking about on how next sets of products. Well, how yields are continuing to improve and if you think there is any potential for margin upside out of that or out of the next, I guess, [40]-nanometer?

Wim Roelandts

Well, the 45 nanometer, of course, it's too early to say, there is no products yet introduced in that, and it typically takes several quarters to really see what the trends are in yields, but as far as 65 nanometer is concerned, and I mention that, I think a couple of quarters ago, indeed the yields have been better than we anticipated, and also better not where you have seen over the previous generation of technology. One of the factors we have measured very carefully is what is called the learning curve, so it really is the improvement in yields or in defect rates versus time versus unit shipped. And clearly 65-nanometer learning growth was better than what we have seen for instance a 90-nanometer or 130-nanometer. I think it is due to the fact that there is a lot new technology being used for design for manufacturability, in line inspection. Another technology they really allow you to improve the yield faster.

Also 65-nanometer was a relatively -- technology was relatively new little innovation and as far as equipment or processes were concerned through this pretty much of showing from 90-nanometer. 45-nanometer would be a lot more difficult, because there in order to build 45-nanometer products you will need new steppers -- the immersion steppers, which of course is a brand new technology. And there could be some hiccups when another new technology is deployed in production. So, I expect that 45-nanometer is potentially a little bit more difficult than 65, but 65 in detail very smooth and continues to be moving forward at a faster pace and it will be achieved with the previous generation of technology.

Peter - Citigroup

That's helpful, thank you.

Wim Roelandts

Next question please.

Operator

Your next question comes from Chris Danley.

Unidentified Analyst

Hi, good afternoon. This is (inaudible) for Chris Danley. You've already talked about recent problems with some of the biggest customers especially in the wireless base station market, do you think that this is the odd term problem? Or are you expecting increase in sales from them going forward?

Wim Roelandts

Yes, like I said a little bit earlier in our description with our wireless customers. Our forecast is pretty positive going forward, and you were referring to the announcement by Ericsson, but if you listen to their announcement and that is being I can confirm that their weakness came mainly from software and services and not from the equipment side, which continues to do well. And that of course where we are involved in the forecast from Ericsson continue to be quite positive for the longer-term future. Next question please.

Operator

Your next question comes from Arnab Chanda.

Arnab Chanda - Deutsche Bank Securities

Thank you, question for Wim, is there, do you see, if you look at some of the high volume markets, and you are talking about Digital TV, historically they don't tend to use FPGA as that much of several prototyping, are you seeing a difference in to the CPLD business where it seems like grow is actually picking up? Are you seeing that going to different markets and does that change your growth rates at all? Do have follow-up. Thanks.

Wim Roelandts

Yes, absolutely in the -- always FPGAs were only used for prototyping or for very low volumes in the high volume market, which still is 100,000 of units. But now, we really see, thanks to the cost improvements driven by 90-nanometer and further cost reductions in the 90-nanometer product lines and its Spartan-3 product line. We see more and more acceptance of FPGAs even in the relatively high volume productions, millions of units type of volume production.

So, clearly it is a space where standards are changing where a lot of the panels are changing. So, there is a place where programmers can play a very important role in supporting the newest technology in the newest panels. And because of the cost of program did not reach a level that there can be price comparative with other solutions in that market. So, there a couple of years ago we saw then we had a million units order, in this period we see several million unit orders, and even much higher than that coming in for the life span of that product. Next question please.

Operator

You next question comes from Mark Lipacis.

John - Prudential Securities

Hi. This is John on for Mark. Hey guys, I have a question, for actually inventory levels. It just seems very low compared to historically. It sounds like, and if you dissect that a little bit more, your channel inventories are up pretty much back to normal after a big pop last quarter, but your internal inventories are drastically bad. I’m just kind of wondering, how you really feel about that. And I know you were saying that your targets are around the 90 to 100 days. And in the past year your target has been a little bit higher as well. I'm wondering what you're thinking about your inventory levels at this point?

Jon Olson

So, this is one of the focus areas John that we've had in the company over the last six quarters, is to, really to manage things on the balance sheet a little differently than in the past, and be more focused about that. And inventory is one of our shinier examples of success story of how we've driven it down. Well, it really isn't a correlation between having piles and piles of inventory and meeting customer commitments.

We actually have increasing OFD or first commit to our customers and increasing percentage over the last couple of quarters, and as you know, the last six quarters, well at the same time we are taking inventory down. So, we think we can effectively manage the supply line and meet upside along the way.

So we are not leaving things out at the expense of not being able to [test] by upside, then we carefully plan that upside capability on high running products every quarter as we go -- excuse me, every month as we go through our wafer allocation process. So, this is just blocking and tackling and good strong, a fiscal on operational control.

John - Prudential Securities

Okay, I understand. Thank you very much.

Wim Roelandts

Next question please.

Operator

Your next question comes from [Danny Kuo].

Danny Kuo - Bear Stearns

Yeah, guys. Can you just give us the absolute dollar for your aerospace and defense business in the current quarter, and maybe for this fiscal year '08, should we expect a similar type of growth in that business as compared to last fiscal year?

Wim Roelandts

I am sorry Danny, but we don't give specific numbers for subsets of the businesses. We only give numbers for the four segments that we report on. But we have communicated in the past the rough percentages and aerospace, defense is in the 10% to 12% of our total company's revenue.

Danny Kuo - Bear Stearns

And maybe, another question for Jon. I guess, within your gross margin guidance let me assume a comparable revenue mix in the December quarter. Should we expect that gross margin to come back up to, I guess 63%, which is a high end to your guidance range, without their one-time charges?

Jon Olson

Well, certainly, the one-time charges impacted us this time, and we would have landed more comfortably in the 52 to 63 range without them. Again, we have done some significant things relative to improving our cost forecast, and actually, our cost to actuals, and it's really a matter of how the mix comes in. So, it is possible for the mix to come in a way that gets us to 63%. It's not a stretch to the imagination. On the other hand, it could also be in the low 52% as well, so, a lot of dependencies here to be able to land it within that tide of a range.

Danny Kuo - Bear Stearns

Thanks.

Wim Roelandts

Next question please.

Operator

Your next question comes from Arnab Chanda.

Arnab Chanda - Deutsche Bank Securities

Hi, Jon, just a follow-up on the tax rate, your tax rate seems to have come down, you've talked about having overseas, the things that you are doing in Singapore, et cetera. Is this something that we expect to kind of continuously go down towards maybe your major competitor, which is quite a bit lower still? Or do you think that this is a good number to work on for the foreseeable future? Thank you.

Jon Olson

Our first goal is to be able to manage our actual cash that we paid to various U.S. and foreign governments and in other words to optimize that for the company. So it's really, first a cash thing and then the rates, that's the secondary issue.

We have been certainly doing some things in reviewing our overall structures to see if there are other ways for us to lower the rate. We are not prepared to provide a forecast for next year.

It's certainly on our plate to review and see if there are opportunities for us to go lower. I think you also, if you look at, you compare our rates to most of the other semi-rates, you will find that we are in the mid-range to lower already. So our competitor may be at low out layer, but I am not going to comment on their particular tax structure. But I think, we are already at least competitive or better among the semis. Even though, we will always look for an opportunity to lower it.

Arnab Chanda - Deutsche Bank Securities

Thanks Jon.

Jon Olson

Next question, please.

Operator

You have a follow-up question from the line of Mark Lipacis.

John - Prudential Securities

Hi, this is John again. So, in terms of target levels, are the target, I am sorry, the trench target for this quarter, it was 59% last quarter, correct? So what is it for this quarter?

Wim Roelandts

We expect it to be roughly in the same range, maybe a little lower because we know we have stronger backlog. So, in the high 50s.

John - Prudential Securities

Okay thanks.

Operator

We have another follow-up question from the line of Uche Orji.

Parag - UBS

The question has been answered. Thank you.

Wim Roelandts

Next question?

Operator

You have no further questions.

Maria Quillard

Okay. Well, thank you all for participating today. We have a playback of this call beginning at 5.00 pm Pacific Time, 8.00 pm Eastern. For a copy of our earnings release, please visit our Xilinx IR website. To reiterate, our guidance update for the December quarter will be posted after the market on December 5th. Our next earnings release date for the third quarter of FY08 will be Thursday, January 17th, after the market close. This quarter, we will be participating in the Lehman Global Tech Conference in San Francisco on December 6. This completes our call. Thank you very much for your participation.

Operator

This concludes today's conference call. You may now disconnect.

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