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Executives

Bill Michalek - Director of IR

Ken Hannah - Sr. VP and CFO

Nabeel Gareeb - President and CEO

Analysts

Gordon Johnson - Lehman Brothers

Jesse Pichel - Piper Jaffray

Brett Hodess - Merrill Lynch

Jeff Osborne - Thomas Weisel Partners

Stephen O'Rourke - Deutsche Bank North America

Stephen Chin - UBS

Paul Leming - Soleil - Princeton Tech

Christopher Blansett - JP Morgan

Krishna Shankar - JMP Securities

Mehdi Hosseini - Friedman Billings Ramsey & Co.

Adam Hinckley - Oppenheimer & Co

Timothy Acuri - Citigroup

Pierre Maccagno - Needham & Company Inc.

Satya Kumar - Credit Suisse North America

Stuart Bush - RBC Capital Markets

Tim Luke - Lehman Brothers

MEMC Electronic Materials, Inc. (WFR) Q4 FY07 Earnings Call January 24, 2008 5:30 PM ET

Operator

Ladies and gentleman thank you for standing by and welcome to the MEMC Fourth Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session given instructions at that time. [Operator Instructions]. And as reminder today's conference is being recorded.

I'll now like to turn the conference over to our host Bill Michalek, please go ahead.

Bill Michalek - Director of Investor Relations

Good afternoon and thank you for joining our fourth quarter earnings conference. Nabeel Gareeb, President and Chief Executive Officer and Ken Hannah, Chief Financial Officer are with me today. Before we begin please note that this call will include forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from management's current expectation. These risks are described in the earnings release published today in our 2006 Form 10-K.

I will now turn the call over Ken Hannah who will present an overview of our financial results.

Ken Hannah - Senior Vice President and Chief Financial Officer

Thanks Bill. MEMC delivered fourth quarter sales growth of 13% over the previous quarter. Driven by higher product volumes. Fourth quarter sales of $535.9 million were also 27% higher than the same quarter last year. Although, we missed our revenue target by less than one days worth of production due to earlier than planned maintenance activity required on our polysilicon equipment in Texas. We were able to offset this in non-GAAP earnings per share contribution with strong sequential margin improvement.

Specifically, gross margin in the quarter was $293.6 million or 54.8% of sales. This represents sequential growth of 23% in gross margin dollars and 430 basis points as a percentage of net sales over the third quarter level. Compared to the 2006 fourth quarter, gross margin increased by 44% in dollar terms and 650 basis points as a percentage of sales.

Our operating expense leverage continues with OpEx falling below 8% of sales for the first time to 7.2% of sales representing a 100 basis point decline versus the prior quarter. Operating income in the fourth quarter was $254.8 million or 47.5% of sales, compared with the third quarter's $200.1 million or 42.3% of sales. This represents just 27% sequential improvement in operating income and a 520 basis point improvement as a percentage of sales. Compared to the fourth quarter of 2006, operating income grew by over 50% or 740 basis points as a percentage of sales.

Total stock-based compensation expense in the fourth quarter was $7.4 million or 1.4% of sales. Using an estimated effective cash tax rate of 15%, non-GAAP net income for fourth quarter of 2007 was $400.4 million, a $1.72 per share. Non-GAAP earnings per share for the fourth quarter includes a $0.75 per share benefit relating to the valuation of the Suntech warrants. Because the value of the Suntech warrants may vary significantly from quarter-to-quarter; the company believes excluding its effect for non-GAAP earnings per share comparisons provides a more transparent view of the company's operating results.

Excluding the Suntech warrants, non-GAAP earnings per share was $0.97 per share for the quarter. This represents earnings per share over the previous quarter on an equivalent basis of 24%. To help with these comparisons we provided a table in the press release following the financial statements. GAAP net income was $376.4 million, a $1.62 per share, using a book tax rate for the quarter of 20.1% and includes an $0.88 per share benefit relating to the Suntech warrants.

Both GAAP and non-GAAP earnings per share figures include a $0.02 share impact relating to stock-based compensation expense. The Company generated operating cash flow of $238.5 million or 44.5% of sales in the fourth quarter. Capital expenditure for the fourth quarter totaled $103.3 million or 19.3% of sales and free cash flow which is operating cash flow minus capital expenditures was a $135.2 million or 25.2% of sales.

Capital expenditures for the year totaled $276.4 million or 14.4% of sales. During the fourth quarter the company also repurchased 1 million shares of MEMC stock under the repurchase program initiated in June of 2007. Despite using $63 million in cash for our buyback program cash and short term investment balances increased by more than $100 million to over $1.3 billion. These strong fourth quarter results represent important milestones for MEMC. Especially with net sales crossing the $2 billion per year run rate and non-GAAP earnings per share approaching the $1.00 per quarter run rate excluding any benefit from the Suntech warrants.

Now turning to business conditions, demand indications from semiconductor application customers for the first quarter are mixed. A demand for solar application customers continues to be strong. Based on customer input, we are targeting first quarter 2008 sales to be approximately $560 million. In addition, we are targeting margins to be approximately flat to slightly up, compared to the exceptional fourth quarter 2007 levels. Operating expenses are targeted to be approximately $42 million a little higher than our $39 million run rate in the fourth quarter as a result of the timing of stock compensation expenses within 2008.

Let me now turn the call over to Nabeel.

Nabeel Gareeb - President and Chief Executive Officer

Thank you Ken. One year ago we discussed our financial performance over the five-year period ending in 2006. A period that we referred to as Phase I of MEMC's renewal. The 20% annual revenue growth and even stronger earnings growth we achieved over that period was impressive.

In January of 2007, we articulated our targets for Phase II of our growth to get revenues to $3 billion to $4 billion in 3 to 5 years and non-GAAP EPS excluding any impact from the warrants and using our cash tax rate in the mid-teens to between $5 and $7 per share. So let's review what we accomplished in the first year of this Phase II plan.

In 2007, MEMC grew sales by 25%, grew non-GAAP EPS, excluding the impact of the warrants by over 60%. In addition, we grew gross and operating margins to record levels, generated strong levels of cash flow, crossed a $1 billion mark in cash and short term investments to $1.3 billion, achieved a return on assets over 30%, began shipping wafers for solar applications and doubled our solar contract backlog.

To support this continued strong growth rates and feed our 300 millimeter and 156 millimeter solar operations, MEMC has been increasing polysilicon capacity. In 2007, we grew polysilicon capacity to over 6000 metric tones from 4400 in the prior year. In 300 millimeter, we expanded capacity and crossed the 350,000 wafers per month mark to meet customer demand. In 156 millimeter wafers, as I mentioned earlier, we finished 2007 having doubled our solar wafer contract backlog to be between $15 billion and $18 billion over the next 10 years. This is up from $7 billion to $9 billion at the end of 2006.

With these additional agreements MEMC now has a diversified group of select industry partners in the solar application space. Anyway you look at it 2007 was a good start to Phase II, so now let's discuss 2008. Borrowing any significant economic issues and assuming a reasonably healthy demand environment, our targets for 2008 are to achieve revenues of approximately $2.4 billion to $2.5 billion and non-GAAP EPS of approximately $4.50 to $4.60. This non-GAAP EPS is based on a cash tax rate of approximately 15% and excludes any changes in warrant valuation. These targets would represent sales growth of 25% to 30% and non-GAAP EPS growth excluding the Suntech warrants of approximately 40%. We continue to target 8000 metric tones of polysilicon capacity by year end.

In summary, we're pleased to continue to demonstrate strong results through good markets and bad. Our 2007 results were good giving a strong start to Phase II of our evolution. The 2000 targets we have laid out today could accelerate that trajectory. Our financial, technological and strategic positioning continues to strengthen and we remain excited about our prospects as we continue through the remainder of this decade and beyond.

With that we'll now take your questions. Operator.

Question And Answer

Operator

[Operator Instructions]. And we have a question from Gordon Johnson, Lehman Brothers. Please go ahead.

Gordon Johnson - Lehman Brothers

Congratulations on a great quarter and good guidance guys.

Nabeel Gareeb - President and Chief Executive Officer

Thanks.

Ken Hannah - Senior Vice President and Chief Financial Officer

I guess my first question, I wanted to discuss the margin. Clearly the margin was ahead of expectation was that due to positive mixture out of may be semi and solar and also solar wafers that you guys are selling?

Nabeel Gareeb - President and Chief Executive Officer

Couldn't be up, the better margins or the margins significant margin improvement was really due to three categories. You can bucket it into three things. The largest contributor was higher volumes, higher volumes allow us to absorb cost etcetera and so that was recounted for over half of the improvement. And then the second contributing factor was basically a better mix, better mix being more 300 millimeter and more 156 millimeter wafers, and then the last was some pricing on spot poly. So those were the three buckets.

Gordon Johnson - Lehman Brothers

Okay. And with regard to that spot poly pricing, can you give us an estimate of where we are at currently?

Nabeel Gareeb - President and Chief Executive Officer

Yes, we don't disclose that but that was a nominal factor in the whole process.

Gordon Johnson - Lehman Brothers

Okay. And then as we look into the semi, I guess, the semiconductor business, can you talk about kind of where inventory level is there, and kind of what the seasonality is currently? Is it in line, worse than expected, better than expected?

Nabeel Gareeb - President and Chief Executive Officer

When I look at the inventory, the inventory levels obviously cleared out last year in the late fall as we had anticipated, and stayed reasonably well cleared out through the early part of this year. There are some rumblings about, perhaps some inventory, build up and some pieces of DRAM which is the softest part of the market, obviously as everyone knows. But other than that, we haven't heard any... obviously we are listening to the customer calls, haven't heard anything significant about inventory build ups, or any significant unit reductions, unit growth continuous to go up. It seems to be more about the overcapacity in the memory market, and then some spottish weaknesses in some other areas of logic.

Gordon Johnson - Lehman Brothers

So if you're not seeing any significant inventory built in DRAM?

Nabeel Gareeb - President and Chief Executive Officer

No, there seems to be some spotty inventory pressures more related to pricing, and therefore there maybe some pieces of inventory builds, but not significant that we can see. But obviously, as the earnings season continues to unfold, we'll know more about it.

Gordon Johnson - Lehman Brothers

Okay. And then as you look at your annual contracts, I think were renegotiated in December, can you talk a little bit about kind of the price shifts in those contacts, and kind of what we should think about modeling for those?

Nabeel Gareeb - President and Chief Executive Officer

So basically, near obviously all our... near 80% of our business got renegotiated or reset, if you will, on January 1st as a result of, obviously semiconductor, application customers negotiating as well as a long term solar wafer agreements that reset on January with the lower price. So if you look at all of that, basically pricing was... it basically going to be down in Q1, in the mid to high single-digits as a percent of revenue. And that's been incorporated in our guidance, and yet we are talking about guidance being flat to slightly up on margins.

Gordon Johnson - Lehman Brothers

Okay. And then lastly, I guess on the revenue line, a bit softer than expected this quarter. Can you talk a little bit about kind of what drove that?

Nabeel Gareeb - President and Chief Executive Officer

Yes. On the revenue in Q4, really what the issue with the revenue shortfall from our target as kind of alluded to in statement was that we ended up needing to do maintenance on some pieces of poly equipment in our Pasadena, Texas facility in December, in the last week really of December rather than in January as we had originally anticipated. And you can try to predict these things, but you can't, it's not very scientific. And our expansion that was coming online was really planned to offset that maintenance activity in January, not in December. So instead of growing by 15% sequentially, we grew by 13%, and margins you saw what happened up well over 400 bases points. And so really, it was about a 1 day's impact, even though we did the some of that maintenance in the fourth week.

Gordon Johnson - Lehman Brothers

All right. Thanks a lot, and congrats on a great quarter, guys.

Nabeel Gareeb - President and Chief Executive Officer

Thank you.

Operator

And next we have a question from Jesse Pichel, Piper Jaffray. Please go ahead.

Jesse Pichel - Piper Jaffray

Yes, thanks for the questions. Congratulations on a great quarter. Is the de-bottlenecking of the existing capacity complete, and can you give us anymore color on the expansion?

Nabeel Gareeb - President and Chief Executive Officer

Well, the de-bottlenecking is really an ongoing piece of activity Jesse. You have a particular level of OE or operating effectiveness, and you continue to try to improve that, so we don't give up on that, so I won't say it's complete. The second piece is on the expansion. We talked about the fact that it would come up in late November, early December, and then it would take... we would take about between three and six months to ramp that up. And it's basically proceeding along that timetable.

Operator

[Operator Instructions]. Next we have a question from Brett Hodess, Merrill Lynch. Please go ahead.

Brett Hodess - Merrill Lynch

Hi. Good afternoon. Nabeel, on the semiconductor side beyond the pricing, can you comment a little bit on how you see the volume playing out over the next few quarters. I know you commented the inventories were down, but because of some of the reports that maybe the memory guys are slowing production a bit. Do you see some volume related issues on the semiconductor side?

Nabeel Gareeb - President and Chief Executive Officer

Well. Yes, so Brett, it's a little mixed at best. So, we all know that memory, specifically the DRAM part up not the NAND not the flash part is a little bit on the excess capacity side from the customer standpoint. And so I think some of the folks are trying or talking about basically doing a bit of a shutdown mentalities to where they can bring the market back into balance, so, that may have some sort of an impact on units in aggregate. But, when we look... our units in that specific area, but when we look in the aggregate, we don't see units which is to us basically important, because that translates into square inches of silicon, getting affected that much on a growth rate basis, i.e., we don't see that turning negative or anything catastrophic like that. It might slow the growth a little bit, but we were all expecting that anyway.

Brett Hodess - Merrill Lynch

Can you comment on this, if you started to sell spot solar wafers in the quarter as well and how that's going and what the trends are there?

Nabeel Gareeb - President and Chief Executive Officer

Yes, we did sell a very, very small quantity of spot wafers, we were... because of this maintenance activity we didn't have... we would have liked to be able to sell more, but we weren't able to do as many as we wanted in Q4, and hopefully we'll be able to kind of see what we can do with that in Q1. And the spot was very small quantity of spot wafers we were able to sell again sold for a prices that we thought that we might be able to sell it for.

Operator

And next we have a question from Jeff Osborne, Thomas Weisel Partners. Please go ahead.

Jeff Osborne - Thomas Weisel Partners

Hey great. Congratulations on the results again there. Can you just talk about on the solar wafer side maybe if you are doing those in house yet I know this CapEx was up substantially. Have you brought that in house and then just lastly if you received all of your prepayments from the three or four solar customers that you have for 2008.

Nabeel Gareeb - President and Chief Executive Officer

So Jeff on the in house. No we haven't bought that in house. We had talked about in 2007 that it would be an 18 to 24 month timetable and as we grow we might bring some of that in house and maintain the sub cons we have as well. So that's still looking like a 2009 type activity if you will. The CapEx that you are talking about... again it intends to be very lumpy through the quarters, if you look at it for the year it's under 50% of revs which is what we had guided to. So that's pretty much on track in our minds. Most of that is type 2, 3 millimeter and poly expansions. In terms of the deposits etcetera that are renewed on an annual basis. Yes, we received all the appropriate deposits and that conformations including the latest customers we have added in Q4, yes.

Jeff Osborne - Thomas Weisel Partners

Excellent. Thank you.

Nabeel Gareeb - President and Chief Executive Officer

Thank you.

Operator

And next we have a question from Stephen O'Rourke, Deutsche Bank. Please go ahead.

Stephen O'Rourke - Deutsche Bank North America

Thank you, good evening. Nabeel there's been some kind of discussion and speculation lately, that if enough polysilicon comes online to say allow a lot of unutilized selling module capacity to flood the market with solar PV modules. Sometime may be a year from now, year and half from now. You get a temporary over supply prices drop a lot. You reach a new equilibrium at a lower price that's probably going to challenge a lot of selling module companies. How do think such a dynamic could impact the overall value chain and what kind of an impact could it have for incumbent silicon suppliers like yourselves.

Nabeel Gareeb - President and Chief Executive Officer

Yes I think there is a... there's two aspects to that question Steven there is obviously the one you are talking about which is, yes, it could have... it would have an impact on the... and it closes to the customer first and then the pressure would try to be passed up towards the back of... towards our end of the value chain and that's partly why were to we have gotten into this 10-year fixed price take or pay type of agreement. So basically whether us through those what I would call uncertain times but I think the second part is more important that if and when that sort of an environment occurs again if prices drop then the demand based on the elasticity of this market would rise pretty dramatically and it takes less time to install or actually consume solar module capacity then it does poly and so what would happen basically is you get solar module guys consumer in the poly, jack up the demand... price might fall, jack up the demand poly gets constrained again and your back in the same situation and maybe its 6 months later maybe it's a year late but I think that might be what happens.

Stephen O'Rourke - Deutsche Bank North America

So you feel pretty well insulated if such a eventuality would evolve?

Stephen O'Rourke - Deutsche Bank North America

Its my job to worry about things Steven?

Stephen O'Rourke - Deutsche Bank North America

Sure.

Stephen O'Rourke - Deutsche Bank North America

So I don't feel insulated from anything. Our job is to mitigate risks as much as possible while making sure that we are providing a competitive product. And so that is also partly the reason when you look at the price curves that we have given our strategic partners those price curves. The first thing we did was try to make sure that those price curves will be competitive on a long-term basis even in those scenarios and that's really the goal. And so if we can do that with the end result of that price curve enabling good parity without subsidies at a $40 oil price given where oil and energy prices are today our partnership still be able to do reasonably well.

Stephen O'Rourke - Deutsche Bank North America

Fair enough, that's helpful. And one quick follow up, should something like this evolve, would you expect the spot market to kind of contract with prices kind of gravitating towards contract pricing is that a fair assumption do you think?

Nabeel Gareeb - President and Chief Executive Officer

It's hard to tell what would happen because again you it's the spot prices depends on whose selling the poly first of all... on the spot basis. So if there's poly available to sell on the spot basis then prices if there's excess supply obviously prices would contract but if there isn't poly and its all pre sold and there's only small amount available or people like us decide its not worth selling on the spot market we're just going to stick with our long term arrangements but that may be also what occurs.

Operator

And next we have a question from Stephen Chin, UBS. Please go ahead.

Stephen Chin - UBS

All right. Thank you. Thanks for the 2008 guidance. In terms of that 2008 sales guidance, Nabeel, are you planning to grow both 200 millimeter semi auto wafer sales and also spot polysilicon sales on a year-over-year basis in that guidance?

Nabeel Gareeb - President and Chief Executive Officer

I don't know that 200 millimeter would grow in any significant fashion, 300 certainly would. So the two main engines of growth for '08 over '07 Steven will be 300 millimeter and 156, those should be the two main engines of growth. 200 millimeter we had that artificially soft Q3 because of our poly incident so it might provide some of that upside but it would be nominal.

Stephen Chin - UBS

Fine and then in semiconductor wafers, Nabeel, have you internally modeled semiconductor for wafer price increase any quarter of 2008. Is that an expectation you believe will materialize in 2008?

Nabeel Gareeb - President and Chief Executive Officer

Our targets for 2008 assume nominal margin improvement and does not assume any increased mixed normalized pricing for any semiconductor applications.

Operator

And next we've a question from Paul Leming, Soleil Securities. Please go ahead.

Paul Leming - Soleil - Princeton Tech

Good afternoon and again congratulations on a great quarter. I was wondering if you could give us any granularity on the timing of the ramp of capacity to get to 8000 tons by year end? Are those reactors likely to be turned on late in the year as happened in the '07? Do they all come on at once? Anything you can help us understand the timing of the next incremental capacity?

Nabeel Gareeb - President and Chief Executive Officer

Paul you know we said that it would be second half and that was by design fussy to give me some slack, right. So I would like to maintain that slack and see what transpires if we can do better or do it earlier in the second half, we certainly will if it takes us later in to the second half then that's what we will... that's going to be the reality.

Paul Leming - Soleil - Princeton Tech

Allrighty. Thank you.

Operator

And next we have a question from Chris Blansett, JP Morgan. Please go ahead.

Christopher Blansett - JP Morgan

Hey guys just wanted to get your take on what you talked 300 millimeter demand growth was in '07 and what you expect it to be in '08?

Nabeel Gareeb - President and Chief Executive Officer

300 millimeter demand growth... I think because I'm doing a little bit of guess work what I can tell you is that it grew probably by about 5 percentage points, as a percent of the total squares inches of silicon so for example we were saying that end of '06 was around 30-32 in the low just across the 30% mark perhaps as the percent of total square inches and in the end of '07 was probably in the mid slightly higher 30% range. As a percent of total square inches of silicon. So if you work that backwards you can probably get a pretty good idea of what the absolute square inch growth rate was.

Christopher Blansett - JP Morgan

Are you expecting a similar rate this year or bit of a slow down?

Nabeel Gareeb - President and Chief Executive Officer

Yes, I mean that percent of total square inches is the metrics. So if you look at that mid to slightly upper 30% range it might get close to 40, it might cross 40 but it'll depend on total square inches. So yes I think that, that percentage increase might hold but the total time [ph] may not grow as fast and so you would end up with 300 millimeter having a slightly slower growth this year than last year.

Christopher Blansett - JP Morgan

And one quick one kind of on your inventory levels, there I think lower then I would have thought you could operate your business on but I kind of wonder if you are not understanding to how the increase to the amount poly sales and solar wafer sales are influencing that number?

Nabeel Gareeb - President and Chief Executive Officer

Yes, so this is not... so two things, one is our... the increase from Q3 to Q4 like we talk about the revenues were primarily driven by volume on 300 millimeter and 156 and 200 because 200 was artificially low in Q3 and so it went up as well and then poly was basically flat. The inventory piece there are two things that play into there as we talked about before, one is obviously even on a flat inventory because as our cost go down that inventory evaluation which is valued at lower cost to market as a result of its evaluation, revaluation every quarter goes down on $1 basis even on flat inventory. Second, obviously, we are drawing down any finished goods inventory we had left because there was opportunity to do so. So yes we are at a pretty low level of inventory and if the opportunity arises and we get more upside from our expansion we might decide to put the stock some away if the demand isn't there.

Operator

And next we have a question from Krishna Shankar, JMP Securities. Please go ahead.

Krishna Shankar - JMP Securities

Yes congrats on a good quarter from here also. Nabeel can you give us your best assessment of industry poly capacity at the end of '07 and what you think the growth will be in '08 and '09? Can you sort of give us an update on your industry poly capacity assessment?

Nabeel Gareeb - President and Chief Executive Officer

Krishna unfortunately I don't have those numbers for end of '07. There were some numbers presented at the conference in Shenzhen last... was it last week, yes last week, sorry. And they were talking about 75,000 - 76,000 tons and you know growing and growing faster and faster but its hard to tell what that assessment was, we'll have better numbers I would say probably in about three to four weeks as we will roll all of that up. In terms of '08 and '09 there is a lot of projections there in our investor presentation that we present at conferences and so I think those are based on output number for the end of the decade. They are not so specific for '08 and '09, you can kind of extrapolate this from the numbers. In terms of supply demand balances all I do is I monitor the prices of poly and the number of cause that come in for polysilicon. And that's still used to be a pretty robust environment.

Krishna Shankar - JMP Securities

I see and can you give us some sense for what spot pricing is for this for solar 156 millimeter wafer. What kind of the multiplier again from going from poly to ingot to wafers?

Nabeel Gareeb - President and Chief Executive Officer

Yes I wouldn't feel comfortable doing that because we don't provide spot and poly pricing. So I don't feel comfortable talking about the spot wafer pricing either, but the generic long term rule of some multipliers 2 to 1 on a poly 2 a 156 millimeter rate basis and then again if you start going in to semi wafers then that becomes a 4 to 7 times multiplier

Operator

And next we have a question from Mehdi Hosseini, FBR, please go ahead.

Mehdi Hosseini - Friedman Billings Ramsey & Co.

Yes can you hear me?

Nabeel Gareeb - President and Chief Executive Officer

Yes Mehdi, we can hear you.

Mehdi Hosseini - Friedman Billings Ramsey & Co.

Nabeel, you are talking about the growth coming from 300 millimeter 156 millimeter, help us understand how does improving utilization rate helps you with this shipment growth and to that extent how does the mix or weakness in the semi has impacted your utilization rate and as a size... as a kind of size question payment from Conergy come in yet?

Nabeel Gareeb - President and Chief Executive Officer

Yes. So let me just work backwards because I don't think I understood your first question, but I'll go back to that in the end. On Conergy, yes, they fulfilled, their obligation for the first deposit, basically they have given us what we would call an irrevocable LC or bank guarantee. We can draw on that by the end of March, or by the end of the first quarter, if they don't slop it out for cash etcetera. So they fulfill that first step in the obligation pipeline.

Mehdi Hosseini - Friedman Billings Ramsey & Co.

That's great. So, what I was trying to ask you is you are adding some 300 millimeter capacity, also the demand environment for semi or kind of mix in certain areas. I imagine that has impacted utilization rate of your install capacity in the semi business group, and you also talked about growth coming from 300 and 156 millimeter wafer capacity. So I am trying to reconcile any drop off in utilization rate with unit shipment in 2008. How much of the unit shipment is driven by improving utilization rate versus actual capacity addition?

Nabeel Gareeb - President and Chief Executive Officer

I see. Yes, it will be a little bit of both Mehdi, but primarily it will be this because of capacity addition... capacity growth. Our utilization is... it starts with the 9 on the 300 millimeter front, if you will, and varies all depending on diameter, all the way down to something starting in the 7s. And so we... so that growth from Q3 to Q4 was 300 millimeter and 156, and then again we believe in... both in Q1 and in '08 will be driven by those two main engines.

Operator

Thank you. Next we have a question from Adam Hinckley, Oppenheimer. Please go ahead.

Adam Hinckley - Oppenheimer & Co

Hey guys. Just a quick question Nabeel, about the commentary about 2-to-1 revenue opportunity on the solar wafer side, given where spot prices are and we've heard some lofty projections over the past week close to $400 rage, are you still seeing that two times revenue opportunity in your spot solar wafer cell?

Nabeel Gareeb - President and Chief Executive Officer

Yes, so I don't... so Adam, I don't talk about spot wafer versus spot poly multiplier, the multiplier is on the 2-to-1. I'm referring to based on a long-term poly price versus a long-term wafer price. We don't comment on what the spot pricing might be for poly or for wafers.

Adam Hinckley - Oppenheimer & Co

Okay. And do you expect to spot sales of wafers or solar wafers to increase significantly in 1Q?

Nabeel Gareeb - President and Chief Executive Officer

Certainly for the target and the guidance, that's not the assumption.

Operator

Thank you. Next we have a question from Timothy Acuri, Citigroup. Please go ahead.

Timothy Acuri - Citigroup

Hi. Nabeel, can you review again what your TCS supply situation is and what the industry's TCS supply-demand situation might be? It would see that that is a real gaining factor to a lot of these folks bringing on capacity?

Nabeel Gareeb - President and Chief Executive Officer

Yes, I think... so, our TCS... for those who may not be familiar TCS trichlorosilane is a raw material used in the Siemens polysilicon manufacturing process, and that Siemens polysilicon manufacturing processes is what's used in our Merano facility in Italy, not in our Texas facility in Pasadena.

On the TCS supply, we have suppliers and we feel pretty comfortable with our supply stream, not only now, but for future expansions as well. In terms of the industry that's parts of what as we've been on the road in the last couple or three years, we have talked about, one is obviously is the construction issues, second is raw material and supply stream of issues, third will be the quality of poly that comes out, fourth will be the CapEx per thousand metric tons that spent to go in the ground which will affect obviously the cost and depreciation. So I think all of these nuances will surface as tiny walls when more and more companies get into the poly business and people become more aware of them. So to answer your question, TCS supply, there is a few suppliers in the world and not very many. And yes, that's going to be an interesting aspect as people try to ramp up as well.

Timothy Acuri - Citigroup

Well I guess, Nabeel, just as a quick follow up on that. Do you think you're spot on years ago when you said that it takes two years to add poly capacity, and no one believes you at the time, including me I have to say, but with respect to TCS, can you add TCS capacities faster than two years? Is there some nuance around that or is it the exact same situation?

Nabeel Gareeb - President and Chief Executive Officer

Well Tim, I think it depends... again depends on the when you ask the suppliers, and different suppliers will have different degrees of experience as well as safety precautions, because it is as you all know it's a hazardous material. So some will take a shorter period of time, others will take a longer period of time. We had quotes as long as three years and we've had quotes as short as 18 months. So you have to depend on... you have to rely on the supplier you're working with.

Timothy Acuri - Citigroup

Okay thanks.

Operator

And next we have a question from Pierre Maccagno with Needham. Please go ahead.

Pierre Maccagno - Needham & Company Inc.

Congratulations on the quarter, Nabeel and Ken.

Nabeel Gareeb - President and Chief Executive Officer

Thanks.

Ken Hannah - Senior Vice President and Chief Financial Officer

Thank you.

Pierre Maccagno - Needham & Company Inc.

Could you comment on the overall capacity to utilization for 300 millimeter and 200 millimeter in the semi business?

Nabeel Gareeb - President and Chief Executive Officer

Yes, I think Pierre, 200 millimeter is softer than 300. I think 300 is on the higher end. I don't have all the data collected yet for 300 millimeter, but my guess would be that it's somewhere in the high 80s, low 90s type range, and 200 millimeter will be below that.

Pierre Maccagno - Needham & Company Inc.

Thanks.

Operator

And next we have a question from Satya Kumar of Credit Suisse. Please go ahead.

Satya Kumar - Credit Suisse North America

Yes. Good quarter. Thanks for taking my question. You know there is a lot of your competitions who are ramping capacity for polysilicon today, who are reserving a portion of their output for sale in the spot market. And this is kind of a difficult question, but if you look at all these market environments and the way it looks for the next couple of years, where would you guess polysilicon spot prices might as you look into 2010, if that's will be a three digit number or would you think a two digit number?

Nabeel Gareeb - President and Chief Executive Officer

Yes, Satya. I have no idea. I don't... if I knew what was going to happen in 2010 on spot poly, I would be sitting in Vegas. I won't be... I just can't predict... it's hard to predict, right. I mean what we are trying to do is say look we've got a focused business model, long-term arrangements, focused on wafers, and yes, the poly market will have it's perturbations up downside, whatever it is, and through all of that, our goal is to have a solid business model that can ride through of that in good and in bad times, as we have done through the semiconductor experience, and then spot poly will be opportunistic. If it happens, it's great, it doesn't, it doesn't.

Satya Kumar - Credit Suisse North America

I guess my question is, are you designing your contracts in 2010 in such a way that they are closely going to mirror your expectations of your spot price?

Nabeel Gareeb - President and Chief Executive Officer

I designing my contracts, you mean my long-term contracts?

Satya Kumar - Credit Suisse North America

Yes, exactly.

Nabeel Gareeb - President and Chief Executive Officer

No, my... the long-term arrangements are designed around establishing a multi-decade business model, which is very, very specific to... enabling our customers/ partners to be able to provide solar energy at good parity without subsidies assuming oil as a proxy for energy is at $40 a barrel. So, once you can do that, then energy from the sky is really free, if you will. And if oil is higher which it is today then good parity occurs a lot sooner. And those targets were middle of next decade, but obviously if oil is higher then that occurs a lot sooner, maybe by the end or early part of next decade. So, I think those are how we've modeled the prices. We're trying to make a very long-term business model, not based on short-term spot pricing.

Satya Kumar - Credit Suisse North America

Okay. It sounds like it's sort of a smooth transition, and the question... follow-up question on the TCS for the Merano plant, sounds like you have perhaps some long-term contracts for supply of TCS from your outside vendors. What prevents your suppliers of TCS to actually go downstream into the poly business, given that it appears that TCS is the bigger bottleneck at this time?

Nabeel Gareeb - President and Chief Executive Officer

Yes, I mean there is certainly some suppliers that are contemplating doing that. There is other suppliers that are respectful of not doing that. So, we would certainly have a preference for one over the other as much as we possibly can.

Satya Kumar - Credit Suisse North America

Okay, thanks.

Nabeel Gareeb - President and Chief Executive Officer

Thank you.

Operator

And next we have a question from Stuart Bush, RBC Capital Markets. Please go ahead.

Stuart Bush - RBC Capital Markets

Yes. Hi guys. Good evening. You've talked about the internal hedging strategy that you benefit from being able ship ploy fro semis to solar given market trends in each. So given that the spot poly market is still so strong, can you comment on your considerations on whether you shift poly targeted towards 200 millimeter to the spot market or not?

Nabeel Gareeb - President and Chief Executive Officer

I think it's pretty straight forward. Stuart the goal, if the semi market is doing okay, and even doing strong, you participate in there. In a soft market, what you don't want to do is... at a minimum, you don't want to lose share, because it is a part of our total core business of making wafers. And so that sort of the goal while making sure that we are providing delivery to the long-term arrangements we have on 156 millimeter diameter wafers and growing that as well. So what we do is we go through at the start of each quarter, we say this is how much we are going to allocate to these round wafers, and this is how much we are going to allocate to our square wafers, this is how much poly, and then this is our anticipated poly target and then this is what's left over, and as left over changes if you will through our production during the course of the quarter, and/or the timetable left at the end of the quarter to make wafers out of that poly that's what gets delivered under the spot market. So it's completely opportunistic.

Stuart Bush - RBC Capital Markets

And you guys determine that once a quarter?

Nabeel Gareeb - President and Chief Executive Officer

We basically target it at the start of the quarter, we don't know what its going to be until basically the third month, or really even the second to last week of the quarter, because that's when we know how many wafers we've made? How much poly is actually being produced. How much really is going to available, so we don't really know that. We have some estimates or banding [ph] of it at the start of the quarter, but really don't know what we are going to do with it until the third to fourth week, yes third to fourth week of the third month of the quarter.

Stuart Bush - RBC Capital Markets

Okay. Great thanks.

Operator

[Operator Instructions]. And in fact we have a follow up from Jesse Pichel of Piper Jaffray. I am sorry please go ahead.

Jesse Pichel - Piper Jaffray

Yes I have two questions please. Are you seeing a better pricing environment from your outsourced wafer suppliers for the 156 business as worldwide wafer capacity is increasing?

Nabeel Gareeb - President and Chief Executive Officer

Certainly the objective of manufacturing should be to continue to reduce cost both any in-house manufacturing, as well as any outsource, so that's certainly a goal, and beyond that I am not going to comment.

Jesse Pichel - Piper Jaffray

And can you talk about silane gas pricing or any of the flat panel, or upcoming amorphous solar companies starting to talk about shortages there and would it be worth while for you to reallocate some of that silane you sell to the merchant market to poly production?

Nabeel Gareeb - President and Chief Executive Officer

Yes so that's a continuous tradeoff of on silane gas for those of the people on this call that may not be familiar with silane. We make silane gas as an intermediate product in making polysilicon at our Texas facility and that silane gas also has gone traditionally into basically semiconductor device wafer fabs, flat panel industry, flat panel display of manufactures, and more recently obviously in two amorphous silicon defecation for thin-film solar cell manufacturing.

And yes, so that's been the trade off Jesse, and yes there are issues in the supply of silane on to the merchant market, i.e.. there is not enough out there. I have talked about this for a while that it would occur and the reason it didn't hit the newspaper headlines if you will like in 2007 like poly did 3 years ago was, because flat panel was a low soft last year. But there is an issue with silane gas, so that's not enough to go out there. There is a lot of request for it and it's going to be interesting to see how that evolves here in the next, over the next 12 months.

Jesse Pichel - Piper Jaffray

Is it more profitable for you to sell the gas or sell the poly in today's prices?

Nabeel Gareeb - President and Chief Executive Officer

Just obviously silane gas is an intermediate product. And so you can imagine if you make poly you get a revenue multiplier. You make poly into wafers, you get another revenue multiplier etcetera, so... and the asset intensity declines as you move down that chain. So silane is the most asset intensive that has the lowest multiplier. So the economics have to make sense for us to continue to supply it, and sometimes the economics make sense, and sometimes they don't.

Jesse Pichel - Piper Jaffray

And a housekeeping question for Ken if you would. Ken $349 million of purchase or investments, what was that? And were there any Gintech mark-to-markets gains in the quarter?

Ken Hannah - Senior Vice President and Chief Financial Officer

So the Gintech, Jesse, is basically shown as an investment on our balance sheet. So there is no mark-to-market if you will through the P&L. The reference you made to the change between cash and short-term investments is simply us taking things that were previously classified in marketable securities, and investing them into longer term maturities.

Jesse Pichel - Piper Jaffray

Oh I see okay. Thanks for that clarity.

Operator

Next we have a follow-up from Paul Leming of Soleil Securities. Please go ahead.

Paul Leming - Soleil - Princeton Tech

Blended ASPs in the semiconductor wafer business did in the fourth quarter?

Nabeel Gareeb - President and Chief Executive Officer

Paul I didn't hear the whole question you got you cut off.

Paul Leming - Soleil - Princeton Tech

I was wondering if you could give us the blended ASP for the semiconductor wafer business in the fourth quarter?

Nabeel Gareeb - President and Chief Executive Officer

Yes we don't talk about blended ASP's for just semi, because we look at blended ASPs for all our wafers, and so obviously with the 156 we... that map would be different, but obviously 300 millimeter went up. I am sorry. I just kind try to give it to you backwards. 300 millimeter went up as a driver growth, 200 millimeter went as units as well square inches, because of an artificially low Q3 and 156 went up as well. We do have the mix normalized pricing that we talked about earlier which was you know basically from Q3 to Q4 was low single digit down and Q4 to Q1 guidance we talked about mid to high single digit.

Paul Leming - Soleil - Princeton Tech

Okay thanks very much

Operator

And next we have a follow up from Mehdi Hosseini of FBR. Please go ahead

Mehdi Hosseini - Friedman Billings Ramsey & Co.

Yes its actually Mehdi Hosseini. Nabeel could you help us understand at the end of 2007, what the mix of revenue by semi poly into the spot and solar wafer was? And then how do you see the mix changing going forward especially as you say them more selling the solar wafer into the spot into the polysilicon?

Nabeel Gareeb - President and Chief Executive Officer

Yes Mehdi I don't have that in the 10-K. We'll provide you know hopefully an analogous information to what we did last year or similar information I am sorry to what we did last year in the 10-K, but specifically what I did talk about is that from Q3 to Q4 the increase was primarily driven by volumes on 300, 200 and 156 in and moving forward we anticipate that... poly volumes are basically flattish on moving forward we anticipate the drivers will be the 300 and the 156 diameters. And the spot wafers versus spot poly I don't know that's going to be opportunistic and then we will see how that pans out. I don't have any specific plans for if you will in the targets

Mehdi Hosseini - Friedman Billings Ramsey & Co.

And in the clean surface breeding in the wafer and in house solar wafer you have been saying that yes it's the planning to bring them in at 12 to 24 months timeframe. And we have been hearing this for the past 12 months. So going forward in to 2008 at what point is that actually going to happen when would those assets be load into the road cost. How should we think about margin profile as you begin to start making the wafers... solo wafers in house?

Nabeel Gareeb - President and Chief Executive Officer

Yes I think the time table... we used to say basically 18 to 24 months and basically when we said that probably late '08, early '09 and we have said, hey we are basically thinking more like early '09. We are in midst of site selection which basically means you know you negotiate with governments and this and that all those sorts of things occur. And then when you bring it in obviously it will after the preliminary startup it should help on cost reduction which was part of our plan as part of the plan to actually offset the price reductions that we have provided our long term partners.

Mehdi Hosseini - Friedman Billings Ramsey & Co.

And just one follow up question that is there any bottleneck regarding the lead time for equipment like the stars [ph] or anything used in the wafering?

Nabeel Gareeb - President and Chief Executive Officer

Yes there is long lead times in some of the pieces of equipment but also some of those same pieces of equipment we've got to some degree available on idle and some of are semi factories because of our utilization rates. So, to us if you got a saw and semi aligned that's not being used and it's a wire saw and its capable of cutting 156 millimeter wafers well then you can use it, right?

Mehdi Hosseini - Friedman Billings Ramsey & Co.

That's not going to prevent you from actual doing it in house?

Nabeel Gareeb - President and Chief Executive Officer

Not at this stage I mean based on the lead times we see and the kind of time tables we're talking about and the kind of ramps we're talking about. We don't see any significant issues there yet, but who knows it may crop up.

Mehdi Hosseini - Friedman Billings Ramsey & Co.

Thank you.

Nabeel Gareeb - President and Chief Executive Officer

Thank you.

Operator

And next we have a question from Tim Luke with Lehman Brothers. Please go ahead.

Tim Luke - Lehman Brothers

Thanks Nabeel, couple of quick questions. Just if you can comment what are the milestones going forward now on your payment schedule and I was just wondering if you could clarify again in terms of the one day disruption that you saw that impact the fourth quarter revenue. Can you just clarify what that was again? Thanks.

Nabeel Gareeb - President and Chief Executive Officer

So the fourth quarter piece Tim, the net affect was basically one days worth of production that you saw in that approximately $5 million off the target that we had articulated it wasn't the...

Tim Luke - Lehman Brothers

When did that come... when did you get that disruption?

Nabeel Gareeb - President and Chief Executive Officer

Right, so it wasn't a lets call it a disruption, call it early maintenance really. We had anticipated that semi-annual maintenance would be occurring in the January, February time table and basically because of the shut down in September some of those pieces of equipment weren't running at a 100% operational efficiency. And so you can't really predict this plus, minus in a couple in a weeks and we thought it would happen January, February we had to basically take them down in the 4th late 3rd week, early 4th week of December and do some maintenance on them. And so that really cause the shortage of poly which ripples through the entire pipeline. That's obviously behind us and we did some maintenance on that in December, we did some maintenance on that this week and we'll do some again in probably late this quarter and so the expansion will offset those maintenance activities in this quarter.

On the Conergy piece, as I mentioned earlier in the call, their obligation was to provide the first part of the deposit six months prior to wafer deliveries and they fulfilled that obligation recently. They basically provided us a... basically a bank guarantee which is a really irrevocable LC that we can draw upon before the end of this quarter if they don't swap it out with cash if you will. And then the second obligation becomes... the second payment obligation is really the remainder of that deposit which has to be done a few days prior to wafer deliveries which would be about the third quarter.

Tim Luke - Lehman Brothers

If you could just remind us of a potential or sort of a strategic review any potential to do strategic deals in terms of longer term supply deals going forward from here having obviously completed a roster in the last 12 months?

Nabeel Gareeb - President and Chief Executive Officer

Yes what I said last year still holds true we had said that we have the capacity supply to do another smaller deal the size of Gintech deal so on the $3 billion, $4 billion range and over 10 years and we are working on those.

Tim Luke - Lehman Brothers

Excellent thanks.

Nabeel Gareeb - President and Chief Executive Officer

Thank you.

Operator

And we have a follow up from Krishna Shankar, JMP securities. Please go ahead.

Krishna Shankar - JMP Securities

Yes Nabeel, what's your view point on you know what's the trend for poly demand supply or pricing if we see an acceleration and the deployment of these large scale solar plant using inference like say what first seller [ph] is doing versus solar panel being used by consumers on roof tops. What do you... how do you think that sort of trend in the market effect the demand supply environment for polysilicone.

Nabeel Gareeb - President and Chief Executive Officer

I think... there are two separate things one is obviously, the thin film, the thin film I have always said is a viable alternate technology to crystalline solutions to making cells for PB applications. They have their set of issues obviously half the efficiency, warranty period hasn't been tested if you will. And I am sure it will do alright over time. And then there will be different form fit function factors that will affect that.

Now most of the thin film in the world people that are designing and building those up is based on amorphous silicon deposition techniques, which requires the use of silane gas which somebody talked about earlier and asked the question, and that material is in short supply as well. There is a fewer producers of silane gas in the world than there are poly producers. And so doing thin film through amorphous silicon defecation will not solve the supply problem its just going to go to a different pinch point. And so that's going to be interesting overtime.

And then obviously on this supply demand balance equation, I just look at the spot poly as the number of phone calls we get for poly request. As an indicator of, everybody says there is an over supply coming, there is an over supply coming, I look at the phone calls and I get the inverse impression, as a matter of fact even we get phone calls from people that are supposedly expanding poly and they are calling the bi poly, because perhaps their expansions aren't going on time. So you know, its all interesting data points and you have to take it with a grain of salt.

Krishna Shankar - JMP Securities

Great thank you.

Operator

And we have a follow up from Chris Blansett, JP Morgan. Please go ahead.

Christopher Blansett - JP Morgan

Yes, a couple of quick detail questions on your '08 year guidance, number one is what's the estimates for the book tax rate, for calendar '08?

Nabeel Gareeb - President and Chief Executive Officer

Yes, Chris for the book tax we use the number in the low 20's.

Christopher Blansett - JP Morgan

Okay, and then in general are you assuming the share count is going to be relatively similar to where it is today?

Nabeel Gareeb - President and Chief Executive Officer

Yes, if look at the share repurchase over the last couple of quarters we're pretty much offsetting dilution there.

Christopher Blansett - JP Morgan

Alrightand then when you, Nabeel you have given guidance you said that overall wafer pricing was down, expect to be on mid to high single digits there has been a lot of ugly rumors about semi wafer pricing coming down pretty hard. So just to clear it up could you provide just on a what estimate what semi-wafer trend is in the first quarter?

Nabeel Gareeb - President and Chief Executive Officer

We're looking at it as a basket. So semi-wafer prices would be around that band as well. So, some may be more some may be less depends you got also look at what are our choices you got three knobs just because somebody wants the price down in a very significant fashion doesn't mean a) we have to take it down, b) take that business because there are other alternatives.

Christopher Blansett - JP Morgan

So and the last question where there any 10% customers during the quarter?

Nabeel Gareeb - President and Chief Executive Officer

That will be disclosed in the year in 10-K.

Christopher Blansett - JP Morgan

Alright thank you guys appreciate it.

Nabeel Gareeb - President and Chief Executive Officer

Thank you.

Operator

And next we've a question from Jeff Bencik, Alliance Bernstein [ph]. Please go ahead.

Unidentified Analyst

Hey guys nice quarter.

Nabeel Gareeb - President and Chief Executive Officer

Thank You.

Unidentified Company Representative

Thanks Jeff.

Unidentified Analyst

Just had a couple of questions on your use of cash on and with the pull back shares of some of the wafer makers. Are you more inclined now to make an acquisition in that space or more inclined to build it out yourself?

Nabeel Gareeb - President and Chief Executive Officer

Well again acquisition is always interesting but if you can buy the assets for a couple of 100 million and somebody has valued it a couple of billion, its hard to justify that. So the question is are you trying to buy business or set of assets and given that we're in the business and we've got the sales its hard to justify that sort of evaluation even today. So I think we are going to be little more patient.

Unidentified Analyst

Okay then for other uses of cash 550 million stock buyback but beyond that any plans with it?

Nabeel Gareeb - President and Chief Executive Officer

Today, no we are just building that obviously doing the stock buyback and also building that cash hold because for a patient an opportunities come along it would be nice to have the cash to do something with it.

Unidentified Analyst

Okay and then CapEx plans for '08 is that still 15% of sales?

Nabeel Gareeb - President and Chief Executive Officer

Yes, approximately 15.

Unidentified Analyst

Okay thank you.

Nabeel Gareeb - President and Chief Executive Officer

Thanks.

Operator

And next we have a follow up from, Timothy Acuri, Citigroup. Please go ahead. Timothy your line is open.

Timothy Acuri - Citigroup

It will high sorry. Is there a chance that you may have to renegotiate the Conergy deal given this status of the facility there. And if there... if that did happen what how would that occur what are the mechanics of that how would it impact the P&L going forward if it all?

Nabeel Gareeb - President and Chief Executive Officer

I am sorry Tim when you say renegotiate what do you mean by renegotiate by major terms and conditions?

Timothy Acuri - Citigroup

Yes.

Nabeel Gareeb - President and Chief Executive Officer

We certainly don't I mean first of all they fulfill their first deposit obligation and so they are interested in getting supply. We basically believe we have an agreement that we need them to abide by we don't see any significant terms or conditions being renegotiated and so at least at this time. So I don't see that.

Timothy Acuri - Citigroup

Okay so you don't think that its even something that we should consider as a possibility that you'll have to renegotiate that?

Nabeel Gareeb - President and Chief Executive Officer

Not, that I can see things may change but if I have other alternative why would I provide concessions on any major items that might effect my long-term outlook.

Timothy Acuri - Citigroup

Of course. Okay thanks.

Operator

And next we have a follow up from Satya Kumar, Credit Suisse. Please go ahead.

Satya Kumar - Credit Suisse North America

Hi Nabeel. A quick question on long-term contract market environment. This is the long-term contract if you would have find another contract today would that be terms that are similar or better than the one that you signed with Conergy?

Nabeel Gareeb - President and Chief Executive Officer

Typically long-term contracts will be signed and before actually for audit purposes. I have to make sure that they are signed at what we would do not deem fair market value or market prices or market conditions. And so as those market conditions improve each year those term fees and seeds have to be slightly better each year.

Satya Kumar - Credit Suisse North America

I guess over the last quarter would you say that the long-term contract market conditions have improved?

Nabeel Gareeb - President and Chief Executive Officer

I mean the spot one certainly have the long-term ones we think also have because the people. There is a lot of hype and hoopla about poly will come online at some point but the problem is in the intermediate term people can't seem to line it up so there is an opportunity.

Satya Kumar - Credit Suisse North America

Okay you already mentioned that you might look for being opportunistic in terms of acquisitions. Would you if I look at some of your customers or perhaps tooling customers who might be tooling wafers at this point. The utilization rates are fairly low relative to the amount wafer capacity its premium. Would you consider acquiring perhaps wafering facility down the road to move more down stream. Instead of building your own facility?

Nabeel Gareeb - President and Chief Executive Officer

Yes, somebody just ask that question I think certainly have been an opportunity for us. But again when you look at the dollars and you added up and say okay if the assets if you buy the assets and there are couple of $100 million and but the company's valued a couple of billion its hard to justify that 10 to 1 premium because you just, you are buying assets, you are not necessarily buying a business. And so because we are in the business we've got the long term arrangement. So but its certainly an opportunity we keep going eyes open.

Satya Kumar - Credit Suisse North America

And question for Ken given the pull back in solar spots year-to-date in Q1 would there will be a reversal of some these mark-to-market gains that you had in Q4?

Ken Hannah - Senior Vice President and Chief Financial Officer

Well that will depend on what the stock price is on the last day of the quarter. That's one of the reasons, Satya, that we provide the information with in and with out that number, because it depends on what the valuation is of those warrant on a particular day. And targets obviously don't assume any...

Satya Kumar - Credit Suisse North America

Understood. Thanks.

Ken Hannah - Senior Vice President and Chief Financial Officer

Thanks.

Operator

And next we have a question from Steve Tobb, Tobb Asset Management [ph]. Please go ahead.

Unidentified Analyst

Good work fellows and my question is since you have a lot of cash and since you are producing a lot of cash. Why aren't you paying us all the dividend, we loyal stockholders and if you need money you have plenty of money there in addition to the money you are producing in the future and if worse comes to worse you could always borrow some, but I don't even see that on the horizon. So when are we going to start getting dividends?

Nabeel Gareeb - President and Chief Executive Officer

We certainly discuss that topic Steve both obviously acquisitions, stock buybacks and dividends at the board level at this time the thought process has been, a; we are going to keep building the cash for potential acquisitions, and at the meanwhile buy some stock back, and obviously we'll continue to reconsider it quarterly at the board level.

Unidentified Analyst

Thank you.

Nabeel Gareeb - President and Chief Executive Officer

Thanks.

Operator

And at this time I would like to turn it back over to management for closing remarks. There are no further questions.

Nabeel Gareeb - President and Chief Executive Officer

Thank you all for participating. Good night.

Operator

And ladies and gentleman that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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