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Skyworks Solutions., Inc (NASDAQ:SWKS)

F4Q07 (Qtr End 09/30/07) Earnings Call

November 1, 2007, 05:00 p.m. ET

Executives

Mr. David J. Aldrich - Chief Executive. Officer, Pres

Mr. Donald W. Palette - Chief Financial Officer and VP

Mr. Liam K. Griffin - Sr. VP of Sales and Marketing

Mr. Thomas Schiller – Investor Relations

Analysts

Cody Acree - Stifel Nicolaus

Amit Kapur - Piper Jaffray

Mike Burton - ThinkEquity Partners

Jeroen Bos - UBS Equity Research

Ed Snyder - Charter Equity Research

Jeff Kvaal - Lehman Brothers

George Tai-Won - CIBC World Markets

Aaron Husock - Morgan Stanley

Brian Modoff - Deutsche Bank

James Faucette - Pacific Crest Securities

Operator

Good afternoon and welcome to the Skyworks Solutions’ Fiscal Fourth Quarter 2007 earnings conference call. At this time I would turn you over to Tom Schiller - Investor Relations for Skyworks. Mr. Schiller, please go ahead.

Tom Schiller

Good afternoon everyone and welcome to the Skyworks Solutions’ Fiscal Fourth Quarter and Year-End earnings conference call. With me today are Dave Aldrich, our President and Chief Executive. Officer, Don Palette, our Chief Financial Officer, and Liam Griffin, our Senior Vice President of Sales and Marketing.

Dave will begin today’s call with a business overview followed by Don’s financial review and outlook. We will then open the lines for your questions.

Please note that our comments today will include statements related to our future results. They are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially and adversely from those projected, as a result of certain risks and uncertainties including but not limited to those noted in our earnings release and those detailed from time to time in our SEC filings.

I would also like to remind everyone that results and guidance we will discuss today are from non-GAAP income statements consistent with the format we have used in the past. Please refer to our press release within the Investor Relations section of our company’s website for a complete reconciliation to GAAP.

I will now turn over the call over to Dave for his comments for the fourth quarter in fiscal year 2007.

Dave Aldrich

Thanks Tom and welcome everyone. Today we announce our fourth fiscal quarter and 2007 year-end results, and I am very pleased to report that Skyworks team delivered strong year-over-year and strong sequential profit improvements. Our performance this quarter and throughout the year helps to demonstrate our progress since exiting the baseband business a year ago. At that time, you may recall, we outlined a four-prong strategy. First, to intensify our focus on areas of competitive strength and differentiation, and this is squarely in the analog and in the RF domain. Second, to diversify our business into non-handset linear applications that have high gross margins and have annuity-like revenue streams. Third, capitalize on content growth in 3G multimode applications, supporting all key OEMs. Fourth, to generate sustained higher financial returns.

Our results reflect progress along each of these fronts. Skyworks today is a stronger, a more competitive and profitable company. We have increased research and development investment in highly-focused areas, while simultaneously partnering with the leading chipset providers. Now this is something we were frankly unable to accomplish when we were competing with the very same companies in the baseband arena just one year ago. And by increasing our internal manufacturing capacity, in addition to developing external second sources for foundry and for assembly services, we are well positioned today to economically capture the increased demand for our linear products and our front-end solutions. In short, the Skyworks team remains committed to delivering profitable growth.

Okay, now let me take you a moment to specifically address some fourth fiscal quarter and year-end highlights. First for the quarter, we increased our revenue by 9% sequentially, we have expanded our gross margin into the mid-39% range with diluted record EPS at $0.14, and this is $0.01 ahead of consensus, and we generated a record $30 million from cash flow operations.

Now at a higher level during the quarter, we continue to gain momentum with our linear products business by, during the year, introducing over 100 new analog products, as we continue to round up our catalog. We strengthened our position with existing handset customers as well as securing important new ones. With our latest high, average selling prices are high, ASP multimode front-end modules and radio solutions. We captured several reference designs with the industry’s top baseband providers, which will translate into meaning revenue for fiscal year 2008.

Most recently in the intellectual property front, we have acquired Freescale Semiconductors’ proprietary GaAs power amplifier and front-end module design and related intellectual property. We have purchased 16 fundamental HBT and RF MEMs patents developed by Rockwell Science Center. At the same time, we divested some non-strategic bulk order pads. In the case of Freescale, I would also like to add that we can now count them among our growing list of reference design partners, a core part of our strategy.

Finally, during the year, we have also expanded our capacity in both our domestic gallium arsenide fabs, both of them PF HBT, and implemented a hybrid manufacturing model with multiple external foundries, with the goal of capturing additional share.

Now at Skyworks, we have developed an operating model which allows us to maintain high internal capacity utilization, by creating second sources for high fixed cost services. Services like foundry and assembly. Successful implementation of this approach provides us with a great deal of supply chain flexibility. It lowers our capital investment and it provides us with the ability to meet outside demand. We’re convinced that this approach will improve our gross margin and help us lower our capital spendings.

Okay, now I would like to further elaborate a bit on a few specific accomplishments during the quarter and our two product areas. First, linear products. We have ramped up the volume production through remote meter reading solutions for utility and industrial applications. When you consider that there are an estimated two and a half billion households and businesses worldwide that still require manual gas, water, power meter readings, there is clear demand for an economic RF solution that could provide these real-time logistics. We’re ramping some of those into production now.

We have now reached the high volume production levels with multiple, high performance receivers in support of several top-tier base station LEFs. These receivers are providing more RF content, more dollars to Skyworks, and at the same time they are lowering our customers’ building material costs, and by reducing the size of the overall base station. A win-win. We have sampled our first both filter plus power amplifier module in a wireless LAN access point manufacturer. This is now augmenting our existing volume b/g and n wireless front-end module business. We continue to be very encouraged by the growth prospects of this business, our linear products business, which now represents nearly one fourth of our revenues. In our participation in an addressable market that is nearly four times, four times the size of the wireless cellular handset industry.

Okay now turning to our handset business. The transformation from voice-centric phone to 2G phone, voice-only, to multimedia EDGE, WEDGE, Wide LAN and CDMA platforms continues to accelerate and it continues to gain momentum. With this trend, the complexity in the front-end module increases as each new operating frequency band requires additional amplifiers; additional filtering and switching and control. This is now expanding our ASPs by as much as threefold from the 2G design. At the same time, there is a narrowing of the competitive landscape, given the requisite degree of technical and manufacturing breadth, particularly when compared to the less challenging 2G power amplifier market.

A special note during the quarter: we began multimode front-end modules shipments to get another Tier 1 listed OEM, and we are absolutely delighted to be entrusted with business spanning all of the industry-leading manufacturers today. At the same time and not to be underestimated, Research In Motion (RIM) and MediaTek in China are quickly becoming two of our fastest growing customers, given RIM’s strong growth among enterprise users, and MediaTek’s success in delivering low-cost platforms for emerging markets. Given that the number of suppliers today who possess the breadth and technology and the available capacity to address these needs is decreasing, we believe Skyworks is uniquely positioned to capture share for front-end content that will grow from roughly $1 to $2 in 2G and CDMA and GSM cellphones to nearly $6 in 3X and multimode handsets. This is an incremental opportunity that our company measures in the billions of dollars over time.

Okay so in summary, the Skyworks team continues to focus on building an increasingly diversified business, with stable earnings growth driven by defensible competitive advantages in linear products and in handset RF end markets. With our strong market position and our dedication to operational fundamentals, we believe we can outgrow our addressable markets. We believe we will further expand our gross margins and operating margins.

Okay now, I would like to turn this over to Don for his review.

Don Palette

Thank you, Dave. Before I provide my overview of our results, I would like to say that as Skyworks’ new Chief Financial Officer, I am excited about the company’s financial outlook. Skyworks is very well positioned, as Dave has underscored. One of my areas of focus would be to ensure there are growth opportunities to deliver earnings leverage and maximize our return on investment. Based on our product pipeline, I believe we have a business model capable of delivering higher returns. Specifically, at a $250 million quarterly run rate, I see the path to generating operating margins approaching 20%. At the same time, we will continue to strengthen our balance sheet.

Now for my comments for the quarter just completed. Revenues for the fourth fiscal quarter was at $190.5 million, up 9% sequentially and at the higher end of our guidance range. Gross profit for the quarter was $75.1 million or 39.4% of revenue, a 65 basis points sequential expansion.

Our continuous improvement in gross margin reflects the following: delivering on yield improvement initiatives, higher equipment efficiency and factory utilization, and enhanced product mix, as multimode FEMs and linear products become an increasing part of our business.

Operating expenses were $52.4 million, of which R&D expenses total $31.8 million and SG&A costs were $20.6 million.

Our operating income for the quarter was $22.7 million, generating a return of 12%. Net other income for the quarter was $388,000 while taxes were at $128,000, which did exclude a non-cash tax benefit of $3.5 million reported in our GAAP results.

Net income totalled $23 million, up 36% sequentially and 120% on a year-over-year basis. Earnings per share was a record $0.14, one penny ahead of consensus estimates, and reflecting a 2x improvement over the $0.07 reported this time last year.

Now turning to the balance sheet. We exit the quarter with cash and cash equivalents, as well as short-term investments, of $254 million, which is up $90 million from the prior quarter. More specifically, we generated a record $30 million in cash flow from operations, recorded $10 million in depreciation, and invested $12 million in capital expenditures primarily on fab and assembly and test capacity.

Now to our business outlook for the first fiscal quarter. Given strong order visibility and the ramp of our newest analog and front-end module designs, we once again anticipate top line growth approaching 10 percent on a sequential basis. Assuming revenue of $207 million, we would suggest modeling a gross margin of between 39.5 and 40.0 percent, and operating expenses of $54 to $55 million, yielding a 13% operating margin.

For the line, we are forecasting interest expense of $200,000 and a cash tax rate of 3% or $800,000 which translates into a $0.15 to $0.17 earnings per share, based on a 162 shares outstanding.

As a reminder, we currently have NOLs in tax credits on our balance sheet, which will shield approximately $250 million in earnings and taxes. For financial modeling purposes, you should assume a cash tax rate of 3% for your 2008 and 2009 model years as we continue to use our NOLs.

That concludes our prepared comments, and Operator, please open the lines for the question and answer session.

Question-and-Answer Session

Operator

Due to time constraints, we ask that you have one question and one follow-up.

We will go first to Cody Acree with Stifel Nicolaus.

Cody Acree - Stifel Nicolaus.

Congratulations guys on a great quarter. Don, welcome.

Don Palette

Thank you.

Cody Acree - Stifel Nicolaus.

Don, just one brief clarity. Did you give a share count guidance? I was brushing through there?

Don Palette

Yes, 162 million.

Cody Acree - Stifel Nicolaus.

162, okay great thanks. You mentioned a ramp of leading Tier 1 OEMs this last quarter. Can you give any quantification of contribution, material, non-material, meaningful expectations for Q4, and expectations of maybe that OEM ramp through 2008?

Liam Griffin

Great question, we appreciate that. Now as you know, we have been diligently working with each of the top five OEMs over the last year and even now and in ’08. We have made a tremendous progress along the way, specifically, around WCDMA and EDGE, as we move into the multimode arena. But there are some specific accounts that we cannot get into the details on here, as you know. But again, we look forward to grow among the top five. We are pleased that we have been able to secure each one of these with a highly sophisticated multimode design, and we expect a report on future gains as we move through the year.

Cody Acree - Stifel Nicolaus

Then lastly, if I may, could you go through just a view of inventory health. OEM versus what is happening in the distribution channel?

Dave Aldrich

Cody, I do not see any significant inventory overhang issues. It you mean of the end products or the components that we make, it seems to be quite stable. From my perspective, there is some tightening of supply of some components out there that we have been able to secure multiple sources. It is not going to be an issue for us, but there is some tightening of the supply chain but we do not see an inventory overhang impacting the business.

Operator

We go next to Amit Kapur with Piper Jaffray.

Amit Kapur - Piper Jaffray

Given your recent announcement of the conversion from 4 inch to 6 inch, can you walk through some of the potential gross margin impacts of that transition, and how are you working to maybe minimize some of those impacts?

Dave Aldrich

Sure Amit, I will take that one. If you look at our business model, when we talked about it in the prepared comments, we have done a lot of work over the last couple of years to provide copy examples for our critical processes, PHEMP and HBT being two of them. So we now have partners who are able to build, not only surge demand, but a significant amount of our demand. We are doing that in assembly and tests as well. As a result, we do not have to do a bricks and mortar expansion. We have already acquired most of the equipment over the years that are capable of doing 6 inch. We are in the process of cutting that equipment over, qualifying new processes, and buying some new gear. But since this is not a bricks and mortar play for us, it will fit pretty comfortably in the capital expenditure profile we have had for the last several quarters. So it is going to be a different model for us. We have already increased capacity. We are leveraging that now and beginning to fill the capacity we have throughout 2007 in our boundaries. We are exercising and working closely with those second tiers. It is different. You should think of it as being a similar capex quarter over quarter number that you have seen from us in the last few quarters.

Amit Kapur - Piper Jaffray

Okay, great, that is helpful. Maybe as my follow-up, could you update us on the transition that you are seeing from PA modules to front-end modules, and give a sense on how you see the WCDMA front-end module end market trends in the coming quarters?

Liam Griffin

Yes, we are seeing a pretty aggressive acceleration, specifically at the higher end, EDGE and WCDMA and so as integrated FEMs, adding either a switch or a filter, in some cases, both. So we are seeing the adoption occurring quite rapidly. We are also seeing the trend toward multiple PAs in phones happening now. We are seeing European phones with band 1 and band 8, and WCDMA made it with an EDGE device that may have a nine 9 trough switch. We are seeing US phones with a band 2, bands 5 and an EDGE device. So all of that is materializing and we feel pretty good about it. As you know, Skyworks is uniquely positioned to have normally the GaAs/HBT technology for our PAs, but also have strength in TM switching and assembly testing. So we are bringing that all together and it is definitely a trend that is going to play well for us.

Operator

We go next to Mike Burton with ThinkEquity Partners.

Mike Burton - ThinkEquity Partners

Hey, thanks guys, great quarter. How many 10% customers did you have in the quarter and for the year?

Don Palette

As for the quarter, we have three, Sony Ericsson, Samsung, and Motorola.

Mike Burton - ThinkEquity Partners

And then also for the year as well?

Don Palette

Yes.

Mike Burton - ThinkEquity Partners

Okay, thanks. Can you break down the percentage of sales that you are currently selling to radios, perhaps as a bundle with the PA, and then maybe just the radio portion of those revenues?

Don Palette

Our revenue for standalone transceivers and handsets is in the mid single digits. Right, none of those are sold at standard standalone price, so they are all bundled.

Operator

We go next to Jeroen Bos with UBS Equity Research.

Jeroen Bos - UBS Equity Research

Yes, thank you. A quick question, one of your customers at MediaTek this morning made some comments about shortages in the power amplifier side. Maybe you can comment what you are seeing there, and if this is related to, maybe, better than expected ramp with your new large OEM?

Liam Griffin

Yes, great question. As we noted in the prepared comments, MediaTek is a very important customer for Skyworks. If you are following that company, tremendous year over year gain, and their businesses is largely driven by gains in emerging markets with SoC Solutions and GPRS. We are alongside MediaTek in a significant number of the platforms here. We gained market share. Quite frankly, the shortages that you are speaking about right are creating opportunities for Skyworks. Our supply chain has done quite well on delivering these products. We have been a welcomed partner with MediaTek and we do not see any problem in our food chain at all in supporting them.

Dave Aldrich

Let me be more specific. The shortages that they referred to are not to Skyworks. It is creating an opportunity. We are picking up shares as result of those shortages.

Jeroen Bos - UBS Equity Research

Okay, great, and maybe you will follow up, maybe I missed that. Can you comment on what the linear growth revenue was sequentially? And if you see any negative impact on slowdown with the infrastructure side of the revenue?

Dave Aldrich

The linear products have been hanging in there at about a fourth of our revenue. So, that did not prove material at all in this quarter. We did see some softening of the infrastructure business as an account. However, we were offsetting that with some strength in some of our more diversified catalogue business, some wireless end products, and some of the broad-based standard products mix that we talked about. Yes, we did see some softness, we offset it, and it remained roughly one fourth of our revenue.

Operator

We will go next to Ed Snyder with Charter Equity Research.

Ed Snyder - Charter Equity Research

Thank you very much and good quarter, guys. Regarding Freescale. So you are picking up Freescale’s business. What exactly are you getting for them? Will the acquisition be diluted or accreted near-term or long-term? What does this do to your share at Motorola or any other vendors? I know they sold to RIM and Sagem also. So does the share play and expect maybe a little better pricing because of it?

Dave Aldrich

Sure, thanks Ed. As you are probably are aware, Freescale has elected to get out of the power amplifier business and to focus on their core strength. So, as a result, we have acquired their intellectual property. We have acquired their patents. We have acquired the rights of their designs and reference design. Frankly, we are really quite pleased to be able to add Freescale to our list of baseband partners going forward, something that we are very interested to continue to expand and something that we really could not do when they competed with us in the power amplifier and front-end.

By the way, Ed, I do not know if you caught the fact that we also acquired about 16 pretty fundamental RF LANs and HBT patents from Rockwell while at the same time divesting a few of the bulk order pads. We did not acquire any assets. We did not acquire people. To answer the question “Will it be accreted?” In the very short term in the next couple of quarters, it is an insignificant amount of revenue. However, as we move beyond the next couple of quarters as these new reference designs go into production, and as we begin to frankly take some of that terrific IP and apply it to our base business, we think this will be quite accretive. The next couple of quarters are insignificant, but quite accretive to revenue and profit as we move over out in time.

Ed Snyder - Charter Equity Research

How does it work in Motorola now? I know Freescale is applying some of the FEMs and PAs to Motorola’s phones. Would they continue to build the legacy products and you will just take over all the new stuff, or how does it work?

Dave Aldrich

At Motorola, I cannot divulge too much of the specifics. But suffice to say that for the next couple of quarters, it will not be a significant driver of any revenue at Skyworks. It would be a diluted driver. But now at Motorola, wherein the CDMA RAZR series where in the EDGE, EDGE RAZR 2, where smothered now across all of the wide-band CDMA platforms were across, virtually all of their low-end W series, the ODM channel. So right now, we are in their top, their mid, their low end, and as we move throughout our way, we will have the vast majority of Motorola share.

Operator

We will go next to Jeff Kvaal of Lehman Brothers.

Jeff Kvaal - Lehman Brothers

Yes, thanks very much. Obviously, this is returning to the theme of component tightness in the industry for a minute. Do you feel like the overall component tightness is not necessarily yours, or someone else is contributing to restraining unit volumes for you in the fourth quarter?

Dave Aldrich

I do not think so. If we look at our visibility, we see that the visibility is quite strong right now. The market looks very strong from where we sit, from an overall unit volume in our share as our prepared comments had described. So I would say that while there are component shortages, I have not seen direct evidence that any of customers can not build phones because they cannot somehow acquire those components. Liam, want to add to that?

Liam Griffin

Oh, I agree, I agree with that and I think our supply changes well. It is pretty sophisticated in managing the sourcing side of the equation and they are working to insure that the demand can be realized.

Jeff Kvaal - Lehman Brothers

Okay. In general, I think of the seasonality in the fourth quarter. It has been up up approximately 10% in an environment where the market is healthy and you guys clearly are gaining some market share. One might think that there will an opportunity for you folks to outperform, maybe not in the December quarter but perhaps seasonally would be even less down in March as well. Does that piece make sense?

Dave Aldrich

We have, as when I made a comment that we have a strong visibility, that means we are largely hooked to this guidance, and we are very comfortable with the guidance and I agree with assessment that the December should be a seasonal high quarter.

Operator

We are going next to George Tai-Won of CIBC World Markets

George Tai-Won - CIBC World Markets

Thanks for taking my questions. Don, could you follow-up on your comment about reaching 20% operating margin at the $250 million run rate level? How do you get there? What type of gross margin and opex are you expecting?

Don Palette

I sure will. We are very much focused, as I said in our comments. We see a path from our new business models standpoint at $250 million to generate operating margins close to 20%. It is really focused on in two areas, and that is in gross margin and the leveraging of our operating expenses from a gross margin standpoint. Given our diversified product mix and are demonstrated operational focus. And I really think you can see that if you look at the margin improvement that we have pegged into this model over the last several quarters. It is really a result of driving product yields, equipment efficiencies and we really focused on material costs. We have done an excellent job of being focused and executing in that area. We believe we can generate margins at the revenue level in the low 40s. Then when you look at our operating expense base, there is not a lot of incremental cost that we have to add to generate that revenue. So we expect some leverage and we would expect that number to be something below 25%. So you can do the math and you could see that we would start approaching that 20% return.

George Tai-Won - CIBC World Markets

Can you give us an idea of the timing you are looking out over this to reach this type of numbers?

Dave Aldrich

We do not provide guidance outlook for any more than a quarter. However, I must say that again we believe that the unifying growth of the overall industry is going to be strong. We believe that multimode, where we are quite well positioned even relative to 2G. But higher dollar content is going to become a disproportionate percentage of the market, and linear products is growing. So, we do not provide guidance for more than a quarter, but this is not a number we just pulled out of the air either.

Operator:

We will go next to Aaron Husock with Morgan Stanley.

Aaron Husock - Morgan Stanley

Great, thanks for taking my questions. I guess I am just following up on the opex side. R&D was a little bit higher than what I was expecting in the September quarter. Can you confirm what drove that sequential increase, and whether the same factors would drive it up again and/or down in December?

Don Palette

In our fourth physical quarter, it really was just the timing of some of the investments we are making on projects. We had some higher material costs associated with specific projects and just some timing associated with mass and some other variable expenses in R&D. We have been making some capital investments, they are really focused on improving our order development cycle and some of that depreciation started to hit in the fourth quarter. So that is really what was driving the increases.

Aaron Husock - Morgan Stanley

Okay, the R&D dollars, did they go up again in December? Or do you see a little bit of a decline? Will some of those mass costs fall off maybe?

Don Palette

I think it is going to be relatively flat based on the program profile that we are seeing right now.

Operator

We are going next to Brian Modoff with Deutsche Bank.

Brian Modoff - Deutsche Bank

Hi, guys, a couple of questions. First, you had other income of $3 million that contributed $0.02 to your bottom line. What was that and is that part of your guidance for the following quarter?

Don Palette

Well as I talked about, we talked a little bit about the approach to take for our tax rate on a go forward basis. And as I mentioned we have NOLs and tax credits on the balance sheet that are adjusted by a valuation allowance, okay. And the accounting rules require that we look at that quarterly; and when you get to a certain level of assurance of profitability, you have to adjust the valuation allowance. We actually did that in the fourth quarter. So some of that was a balance sheet entry; a portion of that actually benefited the tax expense which was about $3.5 million in the fourth quarter. That is on a GAAP basis. Now, we adjusted that on the non-GAAP basis back to our cash tax rate which is 3% so that is what you saw on the fourth quarter.

Dave Aldrich

So Brian, when we provided our guidance and then we delivered the earnings per share this quarter, it was, as I have said, above guidance. We did not take benefit. We backed out that credit. So it is not correct that benefited our pro forma results.

Brian Modoff - Deutsche Bank

So you are saying the other income was in tax adjustment.

Dave Aldrich

Yes, that we backed out for pro forma purposes. And so consistent with our guidance, we backed that out.

Brian Modoff - Deutsche Bank

And then RIM is going to be launching some white band front-end modules that Nokia and the Bose will have next year. That will collapse the number of PAs used in the device from five down to two. Are you prepared with technology that can compete with that one day when they come out with that product?

Dave Aldrich

Yes.

Operator

We will go next to James Faucette with Pacific Crest.

James Faucette - Pacific Crest Securities

Thank you very much. Most of my questions have been answered. Although I am wondering if you could comment a little bit about what level of engagement you have been able to achieve thus far with some of the up and coming baseband providers specifically ST and Infineon and Broadcom?

Liam Griffin

Yes James. We thought we have actually been doing quite well along the baseband front here. Some of the names you mentioned and some others like TI. We are right now working with just about everyone, I would say the top five or six market share players in baseband.

ST was some of the changes that we are seeing in some of our major Tier 1 accounts. It is now becoming a new and emerging focus for us right now.

Infineon, we have been working with for quite some time and have some engagements with them in Korea.

Broadcom, lot of things happening there, and our power amplifier technology gets very well across the whole suite of suppliers that you mentioned.

Another one here that I definitely see as a being a big part of our story 2008 is Texas Instruments. We have been a strong partner with them on a low cost of platforms and a low cost GPRS world. We have several engagements with them in EDGE. Not only power amplifiers but also with our Helios FEM radio solutions and I think you are going to hear more positive comments about TI and the other names that you mentioned as we move through the year.

James Faucette - Pacific Crest Securities

So on a relative basis, would you expect, as those people particularly the STs, Infineons and Broadcoms as they generally take market share over the next few years? At least that is expected. Would you expect your positioning within them to allow you to also take share? Or is it more of a trade-off where your positioning within those suppliers is likely to be not in line with your overall market positioning?

Liam Griffin

Actually, I think these changes that we are alluding to here are very positive thrusts in terms of gaining share. Those names that you mentioned are going to gain share, and I count that right now, we have plenty of head room there. We think they are going to facilitate our ability to really take it to the next level with certain key customers so we are very excited about it. We are engaged with everyone that you mentioned and we think that it is not a trade-off for us. It is an upside.

Operator

We have one follow up question from Ed Snyder with the Charter Equity Research.

Ed Snyder - Charter Equity Research

In terms of your business with the largest OEMs, we can kind of touch them a little there. Are you seeing upside demand from the top tier OEMs? I know you are in the 3G business, that is kind of a recent addition. But has it expanded beyond that until, like, EDGE or 2G business also? Because we are hearing about material weakness won the competitors there and it seems like a number of your competitors are picking up shares there and it also seen in your business.

Dave Aldrich

Yes. And thanks Ed. As you appreciated it, I cannot be terribly specific here so I am going to broaden the question a little bit. We do see increase in demand, believe it or not, even though it consolidated a great deal of share among the top several OEMs and so we absolutely see that. We see it continuing the trend of consolidation of share on the back of the brand strength scale and so on. So as we see our demand profile moving throughout not only this quarter, but throughout 2008. We think that demand will remain healthy and there is a little bit of an interesting spin on that. We talked about MediaTek. We also think that those indigenous and many of the emerging markets are now being serviced by sort of a reference design approach that lowers their overall building materials and time to market. And so we were able to address a large swath of the market by addressing a couple of baseband partnerships.

With respect to second half of the question, Ed, it is typical for us to bundle a solution on the front end domain that includes the multiple bands of wide band CDMA frequency. I think it was an earlier question that was I was maybe trying to get at that

along with EDGE. Because if you look at, let us say a design that may have quad band EDGE with band WAN for year for wide band CDMA, there is a pretty complicated filter bag, a multi-trough switch with maybe a six or nine trough switch. There is a lot of control and logic that goes into that and increasingly what we see is a system that goes from the transceiver drives most of the control logic and the filtering and switching from a front-end module that encompasses quad band EDGE. It would then output to multiple bands or wide band CDMA. So it is more typical than not that with our customers, we sell both the wide band CDMA and EDGE at the same time.

And incidentally, we are selling wide band CDMA and EDGE to all the top OEMs. Though even though it is not always the case that they are bundled, it usually is and we sell both to across the border.

Operator

And we will take a follow up with Aaron Husock with Morgan Stanley.

Aaron Husock – Morgan Stanley

As you think about the December quarter, should we expect that your RF sales and your linear sales to grow at roughly the same rate? Or should there be a disparity, which group would grow faster? And then also on the linear side, I think that you are getting some more Wireless LAN traction alongside Broadcom. When then should we expect a material ramp up in there?

Dave Aldrich

I think with respect to the mix, I think it will be similar in December. You are right, we alluded to a little bit of a mix shift away from, at least for the short term, a little bit of the infrastructure business. Although we got some new products ramping there as well. We talked about that in our prepared comments. They are in the press release. But we do see linear products being up quarter over quarter with a little bit of a different mix. So I do not think it is going to vary much from that three quarter, one quarter frankly in the short term.

Liam Griffin

Right. And with respect to your question relative to Wireless LAN and Broadcom, we are ramping those products right now. We got more than eight different designs in production with Broadcom that is band b/g platforms up to 11n. There are several other wireless band OEMs and ODMs that we are working with us as well.

Operator

It appears there are no further questions at this time. Mr. Aldrich, I would like to turn the conference back over to you for closing remarks.

Dave Aldrich

Thank you very much. This concludes our call today. On behalf of the entire Skyworks team, thank you for participating. We look forward to updating you on our performance next quarter.

Operator

This concludes today’s conference. We do appreciate your participation. You may now disconnect.

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