California Micro Devices F3Q08 (Quarter End 12/31/07) Earnings Call Transcript

Jan.24.08 | About: California Micro (CAMD)

California Micro Devices Corporation (CAMD) F3Q08 Earnings Call January 22, 2008 5:00 PM ET

Executives

Robert V. Dickinson – President, Chief Executive Officer & Director

Kevin J. Berry – Chief Financial Officer

Kyle D. Baker – Vice President Marketing

Analysts

Vernon Essi – Needham & Company

David Wong –Wachovia Capital Markets

James Basch – Dialectic Capital

Ramesh Misra – Collins Stewart LLC

[Alan Hicks] – Ansley Capital Management

[Scott Surley] – Esquire Technology

Don [Sinsbond] – Northeast Securities

Operator

Welcome to the California Micro Devices third quarter 2008 earnings call. During today’s presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions) This conference is being recorded today, January 22, 2008. I would now like to turn the conference over to Robert Dickinson, President and CEO. Please go ahead sir.

Robert V. Dickenson

Good afternoon everyone and thanks for joining us today for our review of the third quarter of fiscal 2008 which ended on December 31st. I will begin with a brief overview following which Kevin Berry our Chief Financial Officer will present our financial results and outlook. I’ll then comment on our view on current and future business conditions. Finally, Kyle Baker our Vice President of Marketing will provide a brief update on our market product development efforts. The three of us will be available for questions after our remarks.

I’m very pleased to report that we’re now shipping to four of the top five mobile handset suppliers. Although the amount of revenues from our newest top five customer is modest at this point and we expect a gradual ramp at the outset, this clearly marks a very important milestone for CMD. Other notable recent developments include opening a sales office for Northern Europe in Finland, opening a display controller design center in India, and the introduction of our Praetorian II filter family and our extreme ESD family of low capacitance ESD devices.

Turning to Q3, revenue was below the mid-point of our revised guidance largely due to the lower handset protection demands than expected. As a result of record sales of our low capacitance ESD protection device and protection devices for high brightness LEDs, revenue from the personal computer and digital consumer markets were the highest in the last several years. The impact of the ASNC power outage on Q3 revenue turned out to be relatively modest and as expected most of the shortfall will be recovered in Q4. Both non-GAAP and GAAP earnings per share were above the high end of our revised guidance and operating cash flow was $1.9 million boosting our cash to $51 million. This is particularly significant since the current economic uncertainty is likely to lead to both challenges and opportunities in the year ahead. Bookings were down consistent with lower revenues and seasons patterns, but design wins rebounded driven by record low capacitance ESD design wins, and an increase in top five mobile handset design wins. We also achieved new highs for both design wins and shipments of our industry leading Praetorian filters in Q3. We expect revenue in Q4 to be down although to a lesser extent than typical seasonality, gross margin to improve and to be profitable on a non-GAAP basis. Now let me turn the call over to Kevin.

Kevin J. Berry

Before we begin I need to remind you that all the statements made during this conference call including responses to your questions which are not historical facts are forward-looking statements made in reliance upon the Federal Securities law Safe Harbor. Such forward forward-looking statements are not guarantees of future performance or events rather they are based on our current expectations, estimates, beliefs and assumptions about the future which may prove incorrect and upon our goals and objectives which may change. Often such statements can be identified by the use of words such as will, and can, expects, plan, believe, anticipates, and estimate. Forward-looking statements in this conference call include our expectation for the fourth quarter of fiscal 2008 as to revenue both overall and in specific markets and specific product lines, gross margin and EPS both on a GAAP and non-GAAP basis and as to other selected financial measures, our expectation that we will cover most of the revenue impact of the ASNC power outage during the fourth quarter and our intent to announce our first PicoGuard XS product in the near future.

These forward-looking statements involve a number of risks and uncertainties, including, but not limited to growth in the market for those product using our devices and in our market penetration in customer adoption, whether we are able to reduce product cost as fast as pricing decline, and whether we incur any unexpected manufacturing with issues with our product, or any unexpected issues with PicoGuard XS samples as well as those listed in our press release of earlier today, the notes contained in our forms 10K, 10Q, 8K and other SEC filings, each of these risks and other risks our future actual results can differ materially from those discussed in this call. Forward-looking statements speak only as of today and we undertake no obligations to publicly update or revise these statements whether it is as a result of new information, future events or otherwise.

Now let me turn to our fiscal 2008 Q3 results. We are presenting our results on a GAAP basis and also using non-GAAP measures. Our non-GAAP measures, excludes stock compensation expenses and Arques acquisition costs and use the cash basis tax rate. All under GAAP will include stock compensation and Arques acquisition expenses and determine and use an effective tax rate which differs from the taxes we actually pay. First on a GAAP basis revenue of $15 million was below the mid-point of revised guidance and declined from $17.7 million in Q3 of last year. Gross margins at 32.4% was just below the low end of guidance and declined from 35.8% last year. EPS was $0.01 compared to $0.03 from Q3 of last year, and exceeded the high end of our revised guidance. Decline was due to lower review and gross margin partially offset by lower operating expense. Next, non-GAAP revenue was also $15 million, gross margin at 33% was at the low end our guidance and declined from 36.4% last year.

EPS was $0.04 and above the revised guidance. Operating expenses were $4.7 million, a decrease of 16% over Q3 of last year. The decrease was mainly due to lower debt, outside engineering services and legal expenses. ASPs declined by 9% year-on-year based on a constant mix lower than in recent quarters. Cash and short term investments were $51.2 million at the end of Q3 compared to $49.4 million at the end of Q2. Operating cash flow was about $1.9 million. Net receivables were $5.9 million and DSO were 36 down from 51 in Q2 mainly due to a shift in customer mix as well as more shipments earlier in the quarter. Net inventory was $7 million and turns were 7.0 compared to 9.2 at the end of Q2 due to lower shipments Especially in the latter part of the quarter.

Our actual taxes paid will continue to be at a rate of about 3%. For our non-GAAP guidance we will use the 3% rate. As we look at Q4 we’re presenting our guidance on a GAAP and also using non-GAAP measures. Our non-GAAP measures excludes stock compensations expenses and Arques acquisition costs and use a cash basis tax rate while under GAAP we include stock compensations and Arques acquisition expenses using an effective tax rate of 5%. Non-GAAP revenue is expected to be in a range of $13.5 million to $15 million. Gross margin is expected to improve by 2 to 3% over Q3 and be between 35% and 36%. EPS is expected to be breakeven and a profit of $0.02. Operating expenses are expected to be between $5.3 million and $5.5 million. The increase over Q3 is mostly related to higher R&D and audit expenses. GAAP revenue is expected to be in the range of $13.5 million to $15 million. Gross margin is expected to be between 34.5% and 35.5%. EPS is expected to be between a loss of $0.03 and a loss of $0.01. Diluted shares outstanding are expected to be between $23.4 million and $2.6 million.

Regarding the balance sheet; we expect to have slightly positive operating cash flow and we expect the DSO to return to more normal levels. Inventory turns are expected to be lower. Now let me turn the call back over to Bob.

Robert V. Dickinson

Revenue from the mobile handset market was $9.1 million in Q3 a 15% decrease sequentially and a 30% decline year-on-year. Revenue from top five handset OEMs was down 21% sequentially and down 37% year-on-year. Revenue from other handset OEMs and ODMs decreased 1% sequentially and 11% year-on-year. Revenue from packaged handset protection devises fell by 25% sequentially to $5.1 million dollars representing 57% of our handset protection devise revenue, an increased 44% year-on-year. In Q3 sales of our Praetorian filters reached more than $600,000, a new high. As was the case in Q2, two top five mobile handset suppliers were 10% customers in Q3, with Samsung being our largest customer for the third consecutive quarter.

Revenue from the digital consumer electronics and personal computer markets were $5.9 million in Q3 increase 9% sequentially and 26% year-on-year. Revenues from low capacitance ESD products were $2.6 million, a new high and an increase of 9% sequentially, and 18% year-on-year. Revenues from protection devices for high brightness LEDs which we sell on a wafer basis reached $1 million, more than double the Q1 level. Bookings in Q3 were $14.9 million, down from Q2, consistent with lower revenue and seasonal patterns representing a book-to-build ratio of .99. The turns percentage in Q3 was 39%. We began Q4 with $8.7 million in backlog for the quarter and expect the turns percentage for the quarter to be in the high 30s to low 40s. As I mentioned earlier, overall design wins in Q3 rebounded from the Q2 level. Kyle will provide more details in a moment.

Turning now to Q4, we expect revenues from handset protection products to be down 10% to flat sequentially with sales to top five OEMs down 5% to up 10%. Revenue from products for digital consumer electronics and personal computers is expected to be down 10% to flat sequentially with low capacitance ESD revenue down 10% to flat, and revenue from ESD protection devices for high brightness LEDs up 40%.

As Kevin has indicated, overall revenue should be between $13.5 million and $15 million. We also expect a significant improvement in gross margin in Q4. Before Kyle makes his remarks, I’d like to mention that in addition to his marketing role Kyle is acting as Sales Vice President while we find a Replacement for David Casey who has left the company to pursue other opportunities. Now let me turn the call over to Kyle.

Kyle D. Baker

Total design wins for Q3 were 369 up from 318 in Q2. Handset protection design wins totaled 237 down from 249 in the previous quarter. Design wins for top five OEMs were 187 up 24% from the previous quarter. Design wins for package protection devices represented 75% of the total an all time high. Praetorian design wins totaled 38 for the quarter, an increase of 12% versus last quarter’s numbers and also an all time high. There were also seven design wins for our recently announced low capacitance ESD product form mobile handsets. During the quarter we announced our Praetorian II architecture targeted for EMI filtering applications and wireless handsets. The Praetorian II architecture fills a gap in our filter portfolio, offering better filter performance than lower cost RC solutions at a cost below that of our industry leading Praetorian win filter product. Design wins for the digital consumer electronics and personal computer markets totaled 132 up significantly from last quarter. Low capacitance ESD design wins were 115 also a significant increase from Q2. The increase in design wins for low capacitance ESD protection products was driven by design wins at a top five digital TV OEM. 36 of the low capacitance design wins were for the recently introduced PicoGuard CM1224. In Q3 we sampled and secured the first design wins for CM1231, the first product in the extreme ESD family of low capacitance protection low solutions which was introduced in early January. Product utilizing our new PicoGuard XP architecture and innovative double clamping design that integrate multiple stages of ESD protection into a single devise and provides significantly a better protection for sensitive system IC’s by reducing the clamping voltage in the amount of residual current that passes though the protective IC.

Late in Q3 we sampled the first product developed with our new PicoGuard XF architecture that provides ESD protection for high speed data interfaces where designers require both ESD protection and outstanding signal integrity. PicoGuard Excess is an ideal solution for interfaces such as HTMI 1.3 and display corp. The first PicoGuard SF product will be announced in the near future. During Q3 we secured three new design wins for our serial interface display controller, additionally we have secured another two design wins with a top five handset OEMs since the beginning of January. We began shipping to a second tier handset OEM in Q3 and have begun to ship to our top five handset customers this month. At this point I will turn the call back to over to Bob.

Robert Dickerson

Thanks Kyle, we’ll now open the call to your questions.

Question-and-Answer Session

(Operator Instructions) Our first question comes from the line of Vernon Essi with Needham & Company. Please go ahead.

Vernon Essi – Needham & Company

I wanted to just dive into the gross margin a little bit here in terms of your guidance sequentially you’re looking for a healthy improvement there. I was wondering if you would walk through, you had indicated mix was a big part of that, can you walk through the logic behind that just to give us an understanding there? Because the markets are obviously not very defensible these days, I would think and I was curious how that going to come together.

Robert V. Dickinson

I’ll just give you a high level comment and then let Kevin comment in more detail. Mix is certainly a factor in the improvement but also are the ongoing conversion of our cost reduction efforts into tangible results is also a significant piece of that. So both of them are at play in what we’re projecting here. Kevin you want to add to that?

Kevin J. Berry

That’s really the highlight there. The things that we have talked about including moving more production from six to eight inch wafers, additional low custom assemblies in our subcontractors, things that we had started in Q2 and continue in Q3 will also be more prevalent in Q4. So it’s really a combination of both.

Robert V. Dickinson

I think another key point, some of the things that Kevin was referring to we won’t even enjoy the full benefit of them in Q4 we’ll see additional incremental benefits beyond that. And, I might also mention that our mind set is that when we take a look at our product cost and our margins we’re continually saying, “Okay here are products that are not doing what we want to do from a margin standpoint. What are the opportunities? Let’s brainstorm a little bit and see what opportunities we got to tackle those.” And, [inaudible] we come up with those. It’s an ongoing process it’s not a onetime event.

Vernon Essi – Needham & Company

Are we to assume in terms of your design wins numbers, I know we shouldn’t read much into these, but it is noticeable that your design win numbers are down year-over-year in handset and mobile. Are we to assume that these are more higher volume designs, that are more focused and less fragmented? Is there anything to read into that? Or is that just the way the numbers come together?

Robert V. Dickinson

That’s certainly a very good question I’m pausing a little bit because we don’t really want to get into discussions about the value of the design wins because we consistently said we don’t want people to use trying to use those as a quantitative indicator of future revenue. But let me just say this about design wins in Q3; we think it’s important that there was a pickup in design wins at top five handset suppliers and we think that we’re expecting growths from those customers in future quarters and we think we’re seeing, at least the initial stages of the design win pattern that would support that. The other thing that Kyle commented on which you probably also noted was that we got a significant number of low capacitance ESD design wins from a top five digital TV supplier and the thing I would add to that is if we’re doing business in volume today with one top five digital TV manufacturer and these design wins are actually at a second. So that’s another significant facet.

Vernon Essi – Needham & Company

Just remind us, does that have a higher gross margin content relative to the mobile side for you?

Robert V. Dickinson

Yes, it does.

Vernon Essi – Needham & Company

One final question on the number side, what should we be thinking about your tax rate going forward? I know you had given us some guidance there, but in the next year should we model the same rate all the way through fiscal 2009?

Kevin J. Berry

No I think probably through 2009 would be looking probably closer to the 15% to 20% rate.

Vernon Essi – Needham & Company

Cash or the effective?

Kevin J. Berry

On the effective tax rate, the non-GAAP rate will continue to be around the 3% but on the GAAP basis it will be probably in the 15% to 20%.

Operator

Our next question is from David Wong Wachovia. Please go ahead.

David Wong – Wachovia Capital Markets

If I understand your guidance correctly operating expenses go up quite a bit in the March quarter. Could you run through where those come from and what happens? Is that something that remains high going forward after that?

Kevin J. Berry

Yes David I think in terms of high relatively speaking to the last two quarters, if you look beyond or pass the last two quarters you’ll see that the expenses are similar to what we’re projecting for Q4. So Q4 is up from 4.7 in Q3, up somewhere between 5.3 and 5.5. I would expect that to continue into 09 and beyond in terms of growing from there. Obviously, we can’t get into exactly what those will be yet, it’s something that we’re certainly looking at, don’t know exactly what they will be. In terms of the comparison between Q4 expectations and where we finished in Q3, a big piece of that is in R&D and that is focused on both serial controller and face display controller as well as the protection devices so it’s on both sides. In addition, there’s some additional, because of the time that the audit falls, here’s some additional expenses Q4 on the audit side that you don’t see in the previous two quarters.

Robert V. Dickinson

And it wouldn’t persist.

Kevin J. Berry

Well there would be some again in Q1 because of the timing of the audit, but then beyond that those expenses become reduced going forward for the following two quarters.

Robert V. Dickinson

David, just to add a little bit of color of the R&D side, as you’ve seen we’ve been making a number of announcements with some more to come on the protection side both filters and low cap ESD. We see quite a bit of opportunity to continue to advance the technology in and expand our product portfolio in both those areas and we also have a very vigorous development program in the display controller area as we’ve said before, both with follow on EDMA products and with our initial GSM products.

Operator

Our next question is from James Basch of Dialectic

James Basch – Dialectic Capital

Couple questions, what are the implications of now adding a fourth of the top five mobile handset manufacturers? Can you talk about how you expect that business to ramp? Can you quantify expected revenue levels?

Robert V. Dickinson

The answer is no, we can’t quantify it but I can perhaps give you a useful framework to think about it. Three and four of the top five, and actually it’s moving from three to four is a significant expansion of the market that we’re actually engaged with. And if you recall one of the slides I used at Needham, I don’t know if you looked at that or not, but if you recall that, I showed that the market associated with people that we weren’t doing business with was larger than that associated with the one that we were. So we’ve taken a big step towards opening up that additional opportunity. And obviously, we have to earn our way but we feel pretty good about our ability to get a an increase in share there. So we think it’s a big deal and it’s gonna, not this quarter or next but as we go through the year and next year, it’s gonna make a big difference

James Basch – Dialectic Capital

And my second question is, and I know that this is something that we’ve asked and other investors have asked about before, but stock buyback, is this a situation where you need to have a large investor force your hand? Is there an absolute level that the stock is gonna get to that seems more attractive to you guys, even though I think that almost any accretion model would show that it’s attractive right now given that it seems that you guys are more than out of the woods and business is going in the right direction. Just wondering what the thinking is at this point on why we’re not seeing a stock buyback?

Robert V. Dickinson

I think I address that pretty directly at Needham and then again earlier in my prepared remarks. I think that’s about all we have to say on that subject at the moment.

Operator

(Operator Instructions) Our next question comes from Ramesh Misra, Collins Stewart. Please go ahead.

Ramesh Misra – Collin Stewart LLC

My first question is related to the serial display controller. Can you give us a sense of when you anticipate meaningful acceleration? I know you suggested that there were additional design wins over there, but when should we think of it becoming say 10% or so of your business? Is it potentially in fiscal 09? Or, do you think it will be more of fiscal 10 event?

Robert V. Dickinson

I would say it would be more realistic to think about it in fiscal 10. I’m not saying it’s impossible in 09 but I think it’s more realistic in terms of expectations to think in terms of the following year. The reality is that major customers don’t turn on a switch , they take things a step at a time. The important thing here is that we’ve gotten a concrete start that we can build on and there’s fantastic potential there and we think we’re gonna be able to get a significant piece of it over time.

Ramesh Misra – Collin Stewart LLC

Today your design wins are only on the GSMs side of the equation, right?

Kyle D. Baker

No, the initial product is based on MDI which is a PDMA based technology.

Ramesh Misra – Collin Stewart LLC

Did you suggest Kyle, earlier that you anticipate having an offering for the GSM?

Kyle D. Baker

Yeah, absolutely. The GSM based standard is called [NIPPI] and the [NIPPI] standard has been in development for three years now. Hopefully, it’s threatening to be done shortly, but we’ve all been waiting for that for a little bit of time. It’s expected that initial handset with a [NIPPI] base display controller would start to become available the second half of calendar 2009. And we’ve discussed previously we are developing display controller products based on [NIPPI] standard and we’ll have products available for that.

Ramesh Misra – Collin Stewart LLC

In regards to your new customer, again a similar question over there, what do you anticipate the ramp per file over there to look like? And, when could they contribute more meaningfully to your revenues, say somewhere between 5 to 10%?

Robert V. Dickinson

You know Ramesh, I have to confess that I answered your second question first, for some reason my head was still wrapped around the new customer questions. So in terms of display controller there is a reasonable chance that we could hit 10% in fiscal 09. In terms of new customers that would probably be more realistic to think in terms of fiscal 10.

Ramesh Misra – Collin Stewart LLC

And they are only looking at the protection devices, both from a design win standpoint and what you’re supplying right now?

Robert V. Dickinson

That’s what our current business is. I wouldn’t necessary assume that there aren’t conversation going on that are broader than that.

Ramesh Misra – Collin Stewart LLC

Can you quantify the impact the power outage, if you’re reluctant on a specific dollar level, would it be possible to provide some type of range of how much that impact was?

Robert V. Dickinson

Well in our revised guidance we basically said it would be between $500,000 and $1 million and it was actually somewhat below the $500,000 and I don’t want to get more specific but it was a bit below that. It was actually better than we had optimistically hoped for at the time.

Ramesh Misra – Collin Stewart LLC

I had a slight clarification, in regards to the high brightness LED protection part, is this a part that you got from Arques? Or is this a separate product?

Robert V. Dickinson

No this is a separate product. We actually have sold product of this type for many years, probably 6 years. But, it’s been something that’s been increasing recently and now has become clearly significant.

Kevin Barry

For clarification, it’s an ESD protection product for high brightness LEDs, it not an LED driver.

Ramesh Misra – Collin Stewart LLC

Not a driver, right. Okay. Any commentary in regards to the driver portion of the business?

Robert V. Dickinson

I think I would just reiterate what we’ve said recently, in that we’ve focused our efforts on a few major customers and based on the feedback we get from them we’re in the process of evaluating the viability of that business for us and expect to reach some kind of conclusion by the end of this quarter, so by the end of March.

Operator

Next question is from [Alan Hicks] with Ansley Capital Management

[Alan Hicks] – Ansley Capital Management

On the second digital TV customer, how soon can you expect revenues from them?

Robert V. Dickinson

There’s a possibility we’d see some revenue this quarter, probably more substantial next quarter.

[Alan Hicks] – Ansley Capital Management

So it should contribute meaningfully this year?

Robert V. Dickinson

Yes, that’s certainly our expectation.

[Alan Hicks] – Ansley Capital Management

I think that area has been growing pretty steadily for you in the last couple years do you expect that to accelerate or continue about the same rate?

Robert V. Dickinson

I expect to see some growth next fiscal year, fiscal 09. Based on some of the new products that we’re about to introduce in the PicoGuard XF architecture, we think they open up a significant opportunity in fiscal 10. So we expect to see growth this year, but if we’re successful with the new products we could see acceleration in fiscal 10.

[Alan Hicks] – Ansley Capital Management

In the PC and material legacy area, that’s been holding up pretty well, are you coming with a new product in the PC area particularly in displays that’s gonna keep that growing?

Robert V. Dickinson

Well the legacy and mature products that we have in that area are principally protection devices. And as you know, we’re selling some parts to protect printer ports and so the legacy and mature portion has, as you say, held up pretty well. We had actually expected it to be pretty negligible at this point, and it’s certainly north of $1 million a quarter. The new products that we’re coming within PCs are for protection. We were selling current products for USB 2.0 protection. We’ll have new products that targets things like display ports which we think is gonna have quite a bit of success in the PC and PC display area. So, that would be where our focus is at this point.

[Alan Hicks] – Ansley Capital Management

So even if the mature products decline you can have overall growth in the PC area?

Robert V. Dickinson

Yes, and that’s actually what we’re seeing, even though we’re still getting meaningful revenues from those products they are declining and as I noted we’re seeing year-on-year growth overall.

[Alan Hicks] – Ansley Capital Management

On the serial display product, I’m guessing that was just a negligible amount this last quarter?

Robert V. Dickinson

Yeah. It was less than $100,000.

[Alan Hicks] – Ansley Capital Management

That should be more significant this next quarter?

Robert V. Dickinson

It will be a little more significant and then we expect a pretty nice ramp as we go through fiscal 09.

[Alan Hicks] – Ansley Capital Management

And you did say you expect about roughly 10% of revenue next year?

Robert V. Dickinson

We said it could be as much as 10% of revenue, yes.

Operator

Next question is from [Scott Surley] from Esquire Technology. Please go ahead.

[Scott Surley] – Esquire Technology

Just a clarification on your commentary for the display controller wins being 10% of revenue, do you mean it reaching 10% of revenue in any given quarter? Or, you talking about fiscal 09 year in aggregate?

Robert V. Dickinson

I’m actually talking about for the year.

[Scott Surley] – Esquire Technology

Samsung was the top customer again this quarter?

Robert V. Dickinson

Right.

[Scott Surley] – Esquire Technology

Could you just provide some commentary in terms of the design traction with Motorola, it’s been in decline for a couple of quarters now, but it sounded like you guys were doing okay on the design win front and waiting for Motorola to ramp new products into production. Kyle maybe if you could, to the extent possible, talk a little bit about how things are for those next generation Motorola phones, what your dollar content looks like there? Is it going be more meaningful is some of these products starting to finally start to get into production?

Kyle D. Baker

Scott, as you know, it’s not our policy to talk about specific customers and generally our comments with respect to design wins have been focused on top five OEMs and overall design wins. We typically do not give specific color that’s relevant to a particular customer, so unfortunately we’re not going to be able to provide much detail on that front.

[Scott Surley] – Esquire Technology

Okay, fair enough. Kevin, I apologize if I miss this earlier, the sequential increase that you’re looking for in the gross margin front, did you provide a longer term target over the next several quarters? And, what revenue level you might need to achieve, high 30s on the gross margin front over the next several quarters?

Kevin J. Berry

Well, at Needham Conference in January we did talk about what that range would be in terms to get to the mid to high 30s, meaning in the 35 to 37% range in the interim time and up to the 38% range in the longer term. So we’re really looking at maybe, in terms of getting to the higher 30s Scott, this is really something that is really a couple of years out. I think mid to upper 30s is something we expect that we could do in the next 12 months. In terms of revenue levels in order to get to that higher number we certainly need to be north of $20 million and probably as we get to the 40% range we need to be in the mid 20s on a quarterly basis.

[Scott Surley] – Esquire Technology

Last item, Bob you mentioned that computer was stronger than expected. Did you give a sequential outlook for the computer printer portion business into March?

Robert V. Dickinson

Yes, I did. Let me just go back and recap that. For the total area we expect it to be somewhere between down 10% to flat and low cap the same down 10% to flat and the high brightness LED ESD protection up 40%.

Operator

Next question is from Don [Sinsbond] of Northeast Securities. Please go ahead.

Don [Sinsbond] – Northeast Securities

In the serial control area how many competitors are there for the existing products that you have out there?

Kyle D. Baker

For the MDDI products which is our initial product there are about five guys who are currently in the market in addition to CMD.

Don [Sinsbond] – Northeast Securities

And, what is their position in this handset market vis-à-vis yours?

Kyle D. Baker

Well, they have traditionally been display electronics providers. So, their core business has been [inaudible] com driver solutions for display modules.

Robert V. Dickinson

And, in some cases display modules.

Kyle D. Baker

And, in some cases display modules.

Don [Sinsbond] – Northeast Securities

In terms of the GSM product, you sound confident that as soon as they get the standards out that you’ll be as ready as anyone to have products in the market place for that market.

Kyle D. Baker

Our initial product introduction should be in line with the first phase of products. Their likelier are going to be some people that are going to be out earlier because they’ve taken some risk in designing the products prior to the specifications becoming finalized. And, that phenomena itself is probably a little concerning to some customers because it is very important to maintain a high degree of compatibility between the display modules and the processors themselves. But, we think our plans for our product introductions are in line for the volume ramp of the MIPPI based display modules.

Robert V. Dickinson

I think, Kyle correct me if I’m wrong on this, but in the CDMA area because QUALCOMM plays such a dominant role the processors with native host support for MIPPI were actually out there early. And, in the GSM market it appears that it’s going to be the other way the native support for MIPPI and the processors is actually going to lag.

Kyle D. Baker

That’s absolutely true, Bob. The client side or display receivers based upon MIPPI will likely be available in advance of mobile CPUs with integrated hosts. That’s largely because of the risk and timing involved in the development of a CPU versus a client and the fact that many of the CPU companies are in fact waiting for the specification to become finalized before permitting integrating.

Don [Sinsbond] – Northeast Securities

And, your competitive position that market could be as strong as it is in the MIPPI market?

Robert V. Dickinson

It could be. I think the other side of that is it doesn’t have to be because the GSM market obviously is a much larger market. So, if you say, “Does it represent as large an opportunity?” I think clearly if not a larger one.

Don [Sinsbond] – Northeast Securities

And, you anticipate the same competitors in that market? Or, new competitors?

Kyle D. Baker

The same competitors and perhaps a few additional.

Don [Sinsbond] – Northeast Securities

On your new top tier customer, did you have more than one design win there?

Robert V. Dickinson

Yes, we do.

Don [Sinsbond] – Northeast Securities

Have there been more design wins coming?

Robert V. Dickinson

We anticipate that.

Don [Sinsbond] – Northeast Securities

How many platforms are you designed into there?

Robert V. Dickinson

I don’t know if it is totally clear but, it is more than one. We know that much.

Operator

At this time I will turn the conference back over to management for any closing remarks.

Robert V. Dickinson

I’d just like to thank all of you for being with us today. We will look forward to talking with you in roughly three months time after the end of fiscal Q4. Thank you very much for joining us today.

Operator

Ladies and gentlemen this concludes the California Micro Devices third quarter 2008 earnings call. We would like to thank you for your participation, have a pleasant day. You may now disconnect.

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