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Cirrus Logic Inc. (NASDAQ:CRUS)

F2Q08 (Qtr End 9/29/07) Earnings Call

October 24, 2007 5:00 pm ET

Executives

Jason Rhode - President & CEO

Thurman Case - CFO

Analysts

Heidi Poon - Thomas Weisel Partner

Rick Schafer - CIBC

Vernon Essi - Needham and Company

Jay Srivatsa - Roth Capital Partners

Tayyib Shah - Longbow Research

Operator

Ladies and gentlemen, thank you very much for standing by. Welcome to the Cirrus Logic Second Quarter Fiscal Year 2008 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will be conducting a question-and-answer session. Instructions for queuing up will be provided at that time. As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the conference call over to Thurman Case, Chief Financial Officer. Case, you may now begin.

Thurman Case

Thank you and good afternoon. Joining me on today's call is Jason Rhode, Cirrus Logic's President and Chief Executive Officer. Before we begin, I would like to remind you that during the course of this conference call we will make projections and other forward-looking statements regarding, among other things, our estimates for our third quarter fiscal year 2008 revenues, gross margin levels, operating expenses, amortization of acquired intangibles and share based compensation expense, as well as our estimates and assumptions regarding our future revenue growth and profitability.

These statements are predictions that are subject to risks and uncertainties that may cause actual results to differ materially from our projections. By providing this information, we undertake no obligation to update or revise any projections or forward-looking statements, whether as a result of new developments or otherwise.

Please refer to our press release issued today, which is available on our website at www.cirrus.com. Our latest Form 10-K for the fiscal year ending March 31st, 2007, as well as our other filings made with the Securities and Exchange Commission for additional discussions of risk factors that could cause actual results to differ materially from our current expectations.

I also want to mention before we proceed that all financial numbers are prepared and thus noted in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial information provided in today's call to the most directly comparable GAAP information is included in our financial statements and on our website in the investor section.

Non-GAAP financial information is not meant as a substitute for GAAP results, but is included for informational and comparative purposes. We use certain non-GAAP financial information internally to evaluate and/or manage our operations which we believe is useful to our investors. As a note the non-GAAP financial information we use may differ from that used by other companies. These non-GAAP measures should be consider in addition to and not a substitute for the results prepared in accordance with GAAP.

Moving now to the actual financial results, net revenue in the September quarter was $47 million compared with $41.1 million in the June quarter and $48.2 million in the September quarter one year ago. Audio products contributed $28.1 million in revenue and industrial products provided $18.9 million in revenue this quarter. Historical revenue breakdowns are available on our website through these product categories. We had [new] OEM customers representing more than 10% of revenue while one distributor Avnet represented 25% of our revenue during the quarter. Gross margin for the September quarter decreased to 57% from 59.2% in the June quarter and 58.5% in September quarter a year ago.

This gross margin was lower than our previous guidance of 58% to 60% due largely to growth of new products. We will maintain our focus on reducing manufacturing costs in our new products such as portable, and we are actively driving improvements as we continue to ramp more products in to full production.

Total GAAP operating expenses were $30.3 million in the September quarter and our GAAP net loss in the second fiscal quarter was approximately 300,000. On a non-GAAP basis, our net income was $6.2 million and earnings were $0.07 per share, based on 89.9 million diluted shares. We arrived at our non-GAAP net income by making the following adjustments to our GAAP statement of operations. We excluded a $3.7 million impairment charge related to our investment in Magnum Semiconductor. We excluded a $1.8 million charge associated with the in process R&D related to our acquisition of Apex. We excluded 555,000 in share based compensation expense. We excluded approximately 300,000 of amortization of inquired intangibles, and finally we excluded a 175,000 in legal fees related to current activities associated with the included stock options review.

Interest income for the second fiscal quarter was $3.2 million, down slightly from $3.5 million in the previous quarter, primarily due to the impact of our $42 million cash acquisition of Apex. Including the 89 employees that we added from the Apex acquisition, employee headcount was 545 at the end of the quarter, compared to 460 at the end of June quarter.

Turning now to the balance sheet, total cash and marketable securities at the end of September was $245 million, down $33 million from $278 million, at the end of the June quarter. This reflects the $42 million in cash utilized from the acquisition of Apex, which closed on July 24th. Our total cash per diluted share was $2.75 at the end of the September quarter. Excluding the Apex acquisition, Cirrus generated approximately $9 million in cash.

I would like to add that we continue to consider appropriate opportunities to evaluate and improve our capital structure.

We ended the September quarter with $23.8 million in net receivables, compared with $19.4 million at the end of the June quarter.

Avnet inventory for the September was $19.5 million, up 11% or $1.9 million from $17.5 million at the end of the June quarter. The increase was in line with our expectations to meet seasonal demands, and also includes the addition of Apex’s inventory.

Our capital expenditures were $1.1 million in the September quarter, compared with $3.5 million in the June quarter, when we acquired certain Class D technology assets and intellectual property from TriPath Technology.

Depreciation and amortization expenses in the September quarter increased to $2.3 million, from $1.7 million in the June quarter, and that includes the approximate $300,000 in amortization of acquired intangibles.

And now I would like to turn the call over to Jason to discuss our business operations and guidance for the upcoming December quarter

Jason Rhode

Thank you, Thurman. We made great progress in Q2 towards our goal of rebuilding the foundations of Cirrus Logic, and positioning ourselves to achieve our long-term growth and profitability goals. We’ve recently added to outstanding leaders to the team, which I will discuss in a moment.

Closed on the acquisition of Apex Microtechnology, which we expect to strengthen our future EPS and diversify our industrial business.

We saw revenues from new products more than double versus Q1 driven by products in several of our target markets and multiple new Tier One customers.

On the product front we released several new products to full production status, and four new first revision products were send to our foundry partners.

Additionally, we launched our new clocking product line which is now sampling and gathering interest from key customers. In order to achieve our next level of growth and profitability we will continue to focus on improving our engineering execution, plus re-manage our expenses and re-vitalize our sales approach as we strive to become the first choice in analog and digital signal processing components for our customers.

I am pleased to report that we’ve added two dynamic and proven business leaders to our management team. Yesterday we announced that Scott Anderson former President and CEO of Freescale Semiconductor has joined us as Senior Vice-President and General Manager of the mixed-signal audio division. Scott will immediately take on the challenge to drive aggressive growth in mixed-signal audio. Capitalizing on our already established momentum in portable products and leveraging his automotive background to expand our automotive entertainment growth opportunities.

We wanted someone who could provide inspiring leadership for the division, carry forward our corporate vision, mission and values and most importantly deliver bottom line results.

In addition to his exceptional result driven background Scott is regarded throughout the industry as an outstanding guy to work with and we are excited to have him on our team.

Also in August we added Tim Turk to the executive team as our new Vice-President in the worldwide sales. Tim brings a wealth of experience from his tenure in this role at Cyprus Semiconductor. I am extremely pleased with the progress Tim has made towards re-vitalizing our sales tools and programs, while establishing a world class sales organization.

Tim is driving accountability into his team and establishing a sales culture and structure that will ensure that we will be systematically successful. Both Scott and Tim are seasoned semiconductor industry veterans and solid additions to our team. I look forward to working with them during what I believe are exciting times for Cirrus Logic.

I would like now to provide a brief update on our products beginning with the Industrial Products category. These products include integrated circuit designs for variety of utility metering, high power, precision measurements and energy exploration and communications applications, as well as our line of ARM Processors.

Revenues from Industrial Products in the September quarter came in at $18.9 million, compared to $18.6 million in the June quarter.

The integration of Apex Microtechnology continues to go very well. Our high level of due diligence prior to the acquisition is paying off, as all of our expectations for Apex are proving to be right on target in terms of people, products, and financial results.

We are integrating the Apex precision power branded products with Cirrus's global sales network, which will drive new revenue opportunities for the Apex products with its expanded reach and broader level support. Longer term the combination of our industrial measurement technologies and Apex will produce product that expand in a higher volume markets.

This is an outstanding acquisition, as it expands our expertise, provides us entry into new markets and customers, and adds top line revenue growth, while maintaining strong margins.

We've also made significant progress penetrating key global utility meter accounts, with a strong new product road map, driving longer term revenue opportunities, as digital meters continue to replace their mechanical predecessors.

We believe our core industrial business has now stabilized and remains a valuable part of our long-term growth, while providing strong gross margins.

Let me turn now to our audio products. Components in this category include data converters, Class D amplification products, audio processors and interface circuits, products that are used in a wide variety of consumer, professional, and automotive applications.

This product category contributed $28.1 million of our September quarter revenue, compared to $22.5 million in the June quarter. Revenue from audio products was up in this past quarter primarily due to revenue from new products, and new customer designs.

In the portable audio market, which includes applications such as media players and navigation devices, we have achieved significant year-over-year growth, as multiple Tier 1 customers began volume production during the September quarter. We have increased our revenue from virtually nothing last year and we are projecting $11 million for the fiscal year. This represents good progress from the prior year and leaves tremendous opportunity to grow in an expanding market.

This is a market that values product differentiation in the areas of feature integration, superior audio quality, design innovation and extended battery life, and our initial success has opened the door for future generations of new portable products from Cirrus Logic.

In Q2 we entered volume production with new products and several automotive applications. In this market we provide IC solutions for car audio amplifiers, head units and telematics application. This has been an investment area for the company for sometime and will continue to be a key target market for us going forward.

Automotive customers value stable suppliers, world class quality, and reliability, and innovative partners to make their product successful. We have great relationships with key customers in this market and the addition of Scott Anderson into the team will strengthen this advantages going forward.

Variety of products, our investment strategy of combining stable long-term growth opportunities such as automotive with our other exciting market opportunities in portable and DTV has a solid position for long-term growth.

Now, let me review our guidance for the third quarter of fiscal year 2008. Our overall expectations are as follows. Revenue is expected to range between $47 million and $51 million. Gross margin is expected to be in the 56% to 59% range. Operating expenses are expected to range between $26 million and $28 million including the approximately $1.8 million in share-based compensation and amortization of acquire intangibles.

In closing, we made great progress in Q2 towards our goal of rebuilding the foundation of Cirrus Logic and positioned ourselves well to achieve our long-term growth and profitability goals. With the addition of Scott Anderson and Tim Turk, we have strengthened the senior management team. We closed on the acquisition of Apex Microtechnology, which we expect to strengthen our future earnings per share and diversify our industrial business. Revenue from new products more than doubled versus Q1, which indicates that our plans are sound and the future for Cirrus Logic is very bright.

There is of course much work that remains to be done but we have addressed many long standing fundamental issues in Q2 and this is making us a much better company. I am confident we are on the right track to reestablish Cirrus logic as the first choice in analog and digital signal processing components. We are now ready to take your questions

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). Our first question comes from Heidi Poon, Thomas Weisel Partners. Please go ahead ma'am.

Heidi Poon - Thomas Weisel Partner

Hi, thanks for taking my question. I just wanted to get a little more color on your product refresh especially, the legacy products, that was giving you problem last quarter. Earlier you commented that you think the core businesses are now stabilizing, so are you just suggesting that maybe the seismic product has stabilized and maybe parametering has grown enough to offset that?

Jason Rhode

Yeah. I was intending to pretty much state that, rather even then imply it. Our core industrial business across the board, we think we have stabilized and we think we have got some good growth opportunities going forward.

Heidi Poon - Thomas Weisel Partner

So can you give little more color on the seismic demand picture for next [year], for next few quarters?

Jason Rhode

Well, as we say as near as I can tell it that appears to have bottomed out at this point now and should be fairly stable going forward. It's a volatile market and we have got a variety of customers in there. Some of them are doing -- appear to be doing very well, others lack a little bit of visibility and to what they are doing but as we have said we've got pretty good confidence that it seems to have stabilized.

Heidi Poon - Thomas Weisel Partner

Okay, secondly can you discuss your backlog coverage at this point in particular with the higher mix of these consumer products? How do you think your seasonality will look like especially go into Q1?

Jason Rhode

It sounded like two questions, let me answer it that way. Backlog coverage wise we haven't seen really any drop in visibility relative to the current quarter's backlog. It supports the forecast that we've put out just now very nicely and as far as further quarters out we don't really put any significant -- any specific guidelines out beyond the current quarter. But that said we believe we are pretty well positioned going forward so.

Heidi Poon - Thomas Weisel Partner

Okay can you talk a little bit more about maybe any traction in DTV you've discussed it before maybe incremental opportunities there but seems like you haven't really mentioned anything solely in that area?

Thurman Case

Yeah we are shipping quite a few of our standard catalogs, mixed-signal audio parts DACs and ADCs into that market but it turns to be pretty competitive space and the pricing of these type of products means that it ends up -- there will not be any huge revenue contributions as far. We have introduced some new parts the CS4525 a while back that is a higher dollar part and that is starting to get a little bit of traction there. We are shipping that now in some models of DTV although I will say that the portable media player docking station market has actually turned out to be even a little more significant for that particular part. We have some real good opportunities for our DSP product lines going forward in the DTV space and that's something where we are looking for some growth next year coming out of that product line.

Heidi Poon - Thomas Weisel Partner

Okay. Great. Thanks.

Thurman Case

Right.

Operator

Thank you, Ma'am. The next question comes from the line of Rick Schafer with CIBC. Please go ahead with your question.

Rick Schafer - CIBC

Hi. Thanks guys. I got a couple of questions. I guess the first one is, I understand margins took a little dip this quarter. Sounds like as portables are ramping, can you give us an idea how big portables are now as a percentage of sales for you guys? And as part of that answer, I am just curious are portables the main portion of your audio business that are below corporate average? And then just finally on margins, why the big range of guidance for gross margin in the December quarter?

Jason Rhode

Well, I guess I'll take them in the reverse order, the range is just, we've got a lot of things in play, we are working on some improvements. We are coming from an era where we are shipping a pretty big percentage of fairly older products. And those are product lines where you've got exactly well established margins. And you know exactly what you are looking at. And we are working a lot of new angles on the new products, and we certainly don’t expect to dip out of the upper 50s, as we go forward. But we do have a very good probability or very good potential to grow those portable product lines in particular.

That's something where I certainly expect that the long range model for that product line should be supportive of the overall corporate margin targets. But it is something that as we brought out brand new products and ramp them into initial production, that something is lower than in the corporate average. So, it's bit of a good news, bad news situation. Yes, the margins took overall dip, but they took a dip, because we are delivering a meaningful new amount of product line growth in that area for the first time long time. And that's something that we are really excited to say.

Rick Schafer - CIBC

And so is that certainly the main area of audio that’s or that’s below corporate average and how big can that business be for you guys either? How big is it now or how big it could be next year?

Jason Rhode

Well, as I said we're projecting roughly $11 million for the fiscal year. That’s out of a market, depending on which estimates you look at, and exactly how you want to segment the market. We believe that's side of the served market is about $175 million. So, at least a lot of room to grow, and has been just a great ways of feedback from our customers in that space.

It's a good segment to serve, because the customers do value the technical differentiation that we bring to bear there. We believe we've got a sound quality advantage and a size advantage due to the integration of [off-chip] components that we have done. And so, any business like that where it tends to be a real road map driven business, that first wave of products seek it out.

You have some initial success and it opens the doors to a much broader range of discussions with the key customers in the market segment. Opens up the doors for discussions of a lot of derivative type products, and you know if you have that initial first success, that we've had, we take that as a very good harbinger of things to come so.

Rick Schafer - CIBC

Okay. And just to be clear $11 million that you quoted that's for fiscal '08 correct?

Jason Rhode

Right.

Rick Schafer - CIBC

And then again, I am just curious is there any other areas we should watch within audio that where margins need to improve, or are improving as we look forward?

Jason Rhode

That’s the primary area, of course, we watch, you got to watch every product line all time. That’s the biggest new thing that’s growing most quickly.

Rick Schafer - CIBC

Okay. And then its sounds like we should be thinking of audio as out growing the industrial business next year, pretty materially?

Jason Rhode

Yeah.

Rick Schafer - CIBC

Okay.

Jason Rhode

Yes, which is good, because we are starting, at this point, if you look at the number we are starting from a bigger base as well and just to put a fine point on it, even just the progress we have made going from Q1 in the 22 range, Q2 in the 28 range. And we are just excited to see that, because it really is on the strength of new stuff happening. This not just, okay we had a bunch of old designs and the September quarter is stronger, really there are lot of new products that we are shipping at this point.

Rick Schafer - CIBC

Right. Is there anyway you put it, like a timetable or any kind of rough idea of when you will sort of get those audio margins up more in line with corporate averages, I mean are we talking like a two year plan or is it a 12 months plan or is it, just any kind of idea?

Jason Rhode

Probably, maybe a different way to looking at it would be, as we grow that business at the rate that we aspire to do, we would like to keep margins in the upper 50s.

Rick Schafer - CIBC

Okay. And then just one last question, just follow-on to an early one, could you guys give us the turns number or book-to-bill number or anything like for the overall business?

Jason Rhode

Yeah. It's on the order of about four turns.

Rick Schafer - CIBC

Okay. Thanks a lot.

Operator

Thank you, sir. The next question comes from the line of Vernon Essi with Needham and Company. Please go ahead with your question

Vernon Essi - Needham and Company

Thank you. I was wondering if you could discuss the OpEx side of the business going forward and sort of how that’s coming along in your targets overtime, post Apex. I was just wondering, if you can give us an idea of what your longer term targets are going to be at the exit of '09, fiscal ‘09?

Jason Rhode

I am sorry, target OpEx at the end of ’09?

Vernon Essi - Needham and Company

Yes

Jason Rhode

We've got a lot of room, we have invested in our business pretty heavily, certainly we are running a level of OpEx currently that is higher than one would imagine that one would see looking around the industry. We don't look to grow the OpEx in any specific -- in any significant way going forward. We are managing that very closely. We are looking at, of course every opportunity we can think of to try to keep that in check and do the job of managing that. We think we've got a fairly good amount of growth [styled] in coming forward for the remainder of the year, for FY09 in particular so, certainly as a percentage of revenue, that should be going down over the -- as we go forward.

Vernon Essi - Needham and Company

Okay and do you think just to go back to sort of when you had these off margins that you were probably in the low maybe 10% to 15% range. When do you think you are going to get back into that spot again? Will it take up three or four quarters or is this going to be more near-term or even beyond that time range? I know you want to give long-term guidance but it just seems that you should be able to get there sooner rather than later?

Jason Rhode

Yeah that's exactly my -- that's exactly my feeling that we should be able to get there within the next quarter or so and we need to make meaningful progress towards our long-term goal, which is really more than 20% range. We need to be able to make meaningful progress towards that over the next -- in the next year or so.

Vernon Essi - Needham and Company

Okay. And then just, can you just give some color on the actuals of the end markets themselves and specifically in digital television obviously a very strong market right now? Do you have any -- I may have repeated this question but any color that you have going into the turn of the year and how this seasonality might look out of that side of the business relative to the rest?

Thurman Case

As I said it's not a huge revenue driver for us at the moment. We've got some opportunities coming in there with some of the higher ASP parts in the next 12 months or so. It's done a good business for us this year. We are shipping a lot of products, but it does tend to be the lower cost audio D/A Converters and D/A Converters. So it's not at the moment a prime driver for our revenues in FY '08, but we do think there is some significant opportunities there going forward.

Vernon Essi - Needham and Company

And just to be clear you are still shipping a nominal amount of Class-D into that market.

Then certainly all the other pieces are A/D and what not are doing much stronger than Class-C and the television, correct?

Jason Rhode

Right. We are shipping now, we are now shipping our Class-C product and DTVs but not in -- that's not the book or revenue by any stretch. There is significant growth opportunity there.

Vernon Essi - Needham and Company

Okay, all right. Thank you.

Jason Rhode

You bet.

Operator

Thank you. Next question comes from the line of Jay Srivatsa with Roth Capital Partners. Please go ahead with your question sir.

Jay Srivatsa - Roth Capital Partners

Thanks for taking my question. In term of the Apex could you tell us what the contribution was in the September quarter?

Jason Rhode

Yes, we are not -- we have that broken it out. I will say its exactly in line with our expectations, they are running into four to five a quarter range before the acquisition that's ballpark as same the pace there on, although, we only got a couple of months worth of the business in Q2.

Jay Srivatsa - Roth Capital Partners

So, why was industrial flat if you had at least few $2 million to $3 million contribution from that I mean that means its organically your industrial business was sequentially lower could you speak to that?

Jason Rhode

Now that's exactly how that amount shakes out. At that point though this is the point which we feel like it's stabilized, we don't any see further decline at this point in the traditional Cirrus business.

Jay Srivatsa - Roth Capital Partners

Okay. With the audio business becoming a more important part of your overall mix, how much of seasonality do you really expect in the March quarter to impact the revenues I you can speak the specific numbers, but do you expect a more significant impact than past quarters?

Thurman Case

No, this is -- as I say we have not got specific guidance out, but you know it's a good sideway for me to talk about something, it's just kind of a fundamental change. I think anybody that has been tracking us for the past few years, has kind of grown accustomed to watching the same set of old products ride up and down the seasonality curve year-on-year, and the reality is that at this point we have got multiple new products and we are targeting existing growth markets and we are making progress there, and so it's a very significant difference. To be watching the seasonality right on top of the declining set of old products versus watching the seasonality right on top of an increase instead of new products and new design win. So whereas the seasonality, normally would have us down in our fiscal Q4 significantly that's substantially tempered relative to the normal case, in this case because we have got we are expecting new things to be coming out.

Jay Srivatsa - Roth Capital Partners

Pretty good, in terms of OpEx, if I take out the one time charges that you had this quarter it looks like, if I take the middle of the guidance since you have given, it's looks like it's about a couple of million more in this December quarter, could you speak to that where is that coming from?

Jason Rhode

Yeah, I don't think we will be anywhere near the couple of million more in the December quarter. We are managing that very closely and we'll keep that in control.

Jay Srivatsa - Roth Capital Partners

Okay, and then last question, in terms of the guidance you have given us pretty wide range here in terms of the December quarter, is it coming from industrial or audio or both, or how should we think about it?

Jason Rhode

Well the growth is again coming primarily from audio. We have also got an extra month versus the Apex stuff in there which is versus the prior quarter, which is nice to have, and their product line is doing very, very well. And I think we've really yet to even to see the benefit that we are going to get out of having our broader salesmen work in there. So that’s got some additional opportunities going forward. But, things are shaping up very nicely for the current quarter.

Jay Srivatsa - Roth Capital Partners:

Okay. Thank you very much.

Operator

Thank you, sir. (Operator Instructions) Our next question comes from Tayyib Shah with Longbow Research. Please go ahead with your question. Pardon me Tayyib Shah?

He must have stepped away. Our next question from the line of (inaudible) with [Kein Capital Management]. Please go ahead with your question

Unidentified Analyst

Yeah, how are you doing?

Jason Rhode

Hi, we are good.

Unidentified Analyst

I guess my first question is kind of a little bit I guess bigger picture, If you look at, if you go back in 2004 and you look at evaluation or the prices of this company, would have been anywhere from $8 a share down to close to $3 a share back to $9 and here we are today $7.5 or $6.5, you got a balance sheet that is rock solid with $2.75 in dent cash it’s a difficult business. It’s difficult to be public in this business, because you can’t really forecast, you can't help people with forecasting, because it would kind of be giving away competitive secrets

Jason Rhode

Yeah, good point.

Unidentified Analyst

It’s a difficult business to model, because you really from that standpoint. Because you can't disclose a great widget, that’s going to go into the next consumer electronics that could really be a major revenue driver so it’s really frustrating

Jason Rhode

Yeah but I mean all that, I guess what you are saying is frustrating for you. Our job is to manage the business, we are going to come out with fantastic new products. We are going to build up a sales team that absolutely capitalizes on that and make sure we've got the structure in place where we are systematically successful at driving those new products into the new design lines and generating profit. And that I guess sounds simple, but there really were some pretty fundamental things that we had to address as a company to put that stuff alright back on the right track.

And we are knocking that out, and that’s going to drive our revenue and drive our operating profit growth going forward. And sort of all the other assets stuff are going to take care of itself from our perspective. I definitely appreciate the fact that it's up to track that from the else perspective

Unidentified Analyst

Well, but my question is really what is from a revenue growth standpoint, as you look out over the next two years, I am trying to ask this, that would be implied, what is the kind of a game changing plan, could you go buy another company in order to get the ball rolling. Due you have, I mean you kind of being there a while, you got a new changing of the guards. What is kind of game changers in terms of revenue growth? I mean if the audio and the home entertainment market is big chunk of sales. And it's been very slow, I am just trying to understand, in order from I think people have to believe that growth is coming and?

Jason Rhode

Right. Well, Okay, so I don’t know again as I'll say this pretty broadly at this point. Exactly how good we can get from here remains to be seen, but I can tell you that with some of the fundamental issues we have addressed, we will for sure be the much better company going forward. As a supplier and as an investment I expect.

The game changer for us that is a 100% in our control, as our own execution. And we've historically not done as good of job as we could, we have addressed a lot of that and the result has been a steady stream in new products. Now we got a good leader, we got a new leader for our sales team. This is absolutely utilizing that effort.

I really can even begin to highlight the significance or the impact that we can have there. The fair amount of slowing, I will get to your bigger picture question. So, there is a fair amount that's under our own control. Now as far as acquisitions are concerned, we'd love to find more stuff like Apex that'll be super. But the reality is it's hard to find things that workout quite that well. And we've had a history many years ago requiring some stuff that didn’t worked out as well as it could have. And that's something that the current management team is well aware of and absolutely committed to not make mistakes on that front.

So, we evaluate opportunities the way it comes in. We have mapped up our own strategy for our existing product lines. We are going to drive that and absolutely make certain that our existing product lines and the new investments that we are making now are going to be successful. We find opportunities to supplement that by making acquisitions like for example what Apex is done for the industrial product line then we'll do that when the opportunity becomes available, but it's not something you can really force.

Unidentified Analyst

Are there I guess there has been a note from someone on the [cell] side of business that it talked some about, some potential for you are taking some share from a competitor or?

Jason Rhode

Yes that's what we are trying do very broadly. That's as to the name of the game and now we are coming out with new products so there's actually a good chance of doing that. When you are peddling the same old stuff over and over again it makes it a little difficult to get market share, but now we have picked some real key target markets, we are coming out with lots of new products, and we will absolutely take share off a bit.

Unidentified Analyst

Just one last question I'll jump off, when you look at the growth of the new products that has happened we get, as you mentioned, you have pretty good growth and from new customers, can you take a market light to digital TV market. You guys get $182 million in revenues next year, last year. What is some of the sizes of these new markets, now is the analog market or digital television market, I mean is it $200 million, $300 million, or $400 million or $1 billion market, I mean, can you tell us for a million in those types of terms, when the business has been a little soft from a revenues standpoint. Obviously its part of the story here is to get some new products into market that can grow. And that sure and you got and you seem excited about the new design wins and they may not show up next week, they may begin to show up in '08, they may begin to show in '09. But what are some of the markets sizes of some of these new design wins. Is the market for?

Jason Rhode

[Taken] -- there I am are losing track of all of your questions really. The markets are having relative to the audio converter kind of stuff and the some of the more analog type functions that we serve amplifiers and what not. It's on the order of $50 million opportunity for DTV. There is some additional processor opportunity in there that we believe we can capitalize on. But you got to recognize that in DTV, DTV in my view is a little more of an opportunistic market for us. We are not the big square chip in the center of the board. We are not the DLP guy. And it's going to be a heavy wave of integrations similar to what was in DVD player. And in DVD player particular actually, the only thing worse to winning rather than losing was winning from my perspective.

It's tough to build a big -- it's tough to build a profitable business around the video base business in the long run from our position. So we'll be opportunistic, we'll capitalize on the opportunities in the DTV market as they become available and as we get out new products that we can sell there. And there is absolutely some growth to be had in that space. But it is going to be an area where we have to be fairly mindful of integration.

Portable is a bigger market for the type of products that we serve. We have got pretty significant traction there and that's going to be something that portends a picture of the currently -- kind of growth that we can really obtain.

We've got really a good product line that has positioned us well coming into the next year to really do something that we are proud of.

Unidentified Analyst

Thank you

Jason Rhode

All right. You bet.

Operator

Thank you, sir. The next question comes from again from the line of Tayyib Shah with Longbow Research. Tayyib please go ahead with your question.

Tayyib Shah - Longbow Research

Hi guys can you hear me?

Thurman Case

Hi how is it going Tayyib

Tayyib Shah - Longbow Research

Hi guys, sorry about that. I am sorry if you've covered this before I jumped on the call late. How do you expect the ramp of new audio products to go in the next few quarters? Should we expect to continue to see quarter-over-quarter growth in the next couple of quarters but modest revenue in fact on the back of currently shipping sockets and then some new design wins leading to revenue in the second half of 08 or is it going to be a different timing?

Jason Rhode

As, we didn't exactly -- I don't think we exactly covered that. Our expectations for the current quarter Q3, the overall revenue we put out is based on an additional modest increase in the array of products, which is again very good given the timing here. We haven't speculated exactly about Q4 so we'll not go there but we absolute have new design wins that are in the pipe and it's a different business the way you guys have been tracking for the last few years. Because it's tracking seasonality on top of a growing wave of new product introductions and growing revenue designs, rather than a shrinking one and it's just a fundamentally different game we are playing.

Tayyib Shah - Longbow Research

And then maybe if you can just light some insight into what the design win cycle looks in that business. The designs which are going to be shipping next year already decided or do you still have to execute in that space just leverage your product's superior architecture and you still have to win more designs for next year?

Jason Rhode

Yes it's little of both. It's pretty amazing that the variety of timing and development cycles that customers in the market have and that they are all yet, and that even given that they are all still fairly competitive with one another. We have everything, we can introduce a new product, and customers design it and they go to production two quarters later. Some folks are just ultra conservative, as in Japan market for example, tends to be, you are doing meaningful design end work in the February through April timeframe, that turns into revenue the following January.

So, it just varies a lot. We have got a lot of what we believe is next year's plan, we've got a lot of design wins that we will be contributing to that. They are already under our belt. But we certainly expect to be able to move the needle for FY '09, we certainly expect to still to be able to have a significant positive impact on that at this point as well.

But it does raise a good point that's kind of important to be mindful, which is just that, within a particular quarter even certainly within a quarter, and may be within in two quarters, for a propriety heavily analog based semiconductor company there is not a lot of positive action one can take to increase or lower the business. It's really more than an element of forecasting at that point. Alright so, and that's something that we are working on tightening up as well and that's something that Tim Turk is really bringing to bear and driving through the sales team.

It's something that’s sounds pretty fundamental, but that really represents a big improvement for us. We have got process now of driving accountability for the revenue numbers in to each territory. We have signed up with the new a CRM tools, so we can really actively manage the design win [funnel], which is a big difference going forward. And all of that stuff is going to be pretty significant going forward. It's going to be a big improvement.

Tayyib Shah - Longbow Research

You just said that in the Japanese market there is probably a one year lag between the new [win the designs] and when you actually ship for revenue, is that kind of same for the US market as well? And if so, when do you think you will know if you are going to get substantial business for the US market for next year?

Jason Rhode

The US varies again that’s everything from fairly short cycles to a year. The industrial market can be even longer, automotive can be very surprisingly long. Although, I think they are pressured to bring more, current entertainment electronics into the market is shortening up the design cycle on that side some.

Automotive is something we are in particular existed about. Just segment into that from the design wins cycle. As the amount of entertainment options pushes down into the product offering in automotive, that actually offers some growth opportunities that are maybe a little more near-term then what people would expect.

Tayyib Shah - Longbow Research

My question was specifically about the portable audio space?

Jason Rhode

Oh, I see.

Tayyib Shah - Longbow Research

Do you already have the design wins for the US market for next year or do you still have to work on it and get those designs for next year?

Jason Rhode

It varies. We’ve got additional designs wins that we believe will be significant for our portable product line across the board. We’ve got other stuff that we are continuing to work on. But the only things that is definitely something that we are counting on is that the portable product line is going to continue to grow.

Tayyib Shah - Longbow Research

Thank you

Operator

Thank you, sir. Gentlemen, this concludes our question-and-answer session. Please go ahead with your concluding statements.

Jason Rhode

Yes. I think we had one more caller. Thanks for your questions. We appreciate your interest in Cirrus Logic. I am excited about our prospects and our strategy to drive growth. I appreciate your interest in the company.

Operator

Thank you, ladies and gentlemen, this thus concludes the Cirrus Logic second quarter fiscal year 2008 conference call. Thank you for participating. You may now disconnect. Have a great day.

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