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IXYS Corp. (NASDAQ:IXYS)

F3 Q08 (Qtr End 12/31/07) Earnings Call

February 6, 2008 5:00 pm ET

Executives

Dr. Nathan Zommer - President and CEO

Uzi Sasson - COO and CFO

Analysts

Todd Cooper

Christopher Longiaru

Manoj Nandakani

John Gordon

Operator

Good day, everyone, and welcome to the IXYS Third Quarter Ending December 31, 2007 Earnings Conference Call. Today's conference is being recorded. For opening remarks and introduction, I'd like to turn the call over to the Chief Executive Officer and President, Dr. Nathan Zommer. Please go ahead sir.

Nathan Zommer

Thank you. Good afternoon and welcome to the IXYS Corporation's third quarter earnings conference call from our new Silicon Valley headquarters. I am joined by Uzi Sasson, our COO and CFO. Uzi will lead us through the financial discussion later in the call.

First, to review the formalities, our discussion today contains forward-looking statements, including statements related to potential future revenues and earnings. Any statements in this conference call that are not statements of historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause the result of IXYS to differ materially from those indicated by these forward-looking statements including among others, risks detailed from time-to-time in our SEC reports, including our quarterly report on Form 10-Q for the quarter ended September 30, 2007. IXYS does not undertake any obligation to update forward-looking statements.

In the December 2007 quarter our net income was $2.2 million or $0.07 per share on a diluted basis as compared to a $6000 or $0.00 per share on a diluted basis in the same quarter of the preceding year. Revenues for the third quarter of fiscal 2008 was $73.1 million an increase of 1.2% as compared to $72.3 million in the last year's comparable quarter.

The increase in revenues can be attributed to stronger sales in power semiconductors and modules. However, sequential quarter revenues were affected primarily by weaker integrated circuit buying and shorter working days in holidays. As a percentage of our total revenues from the third quarter fiscal 2008, North America represented 25.8%, Europe 38.3%, Asia, 30.1% and the rest of the world 5.8%.

Our revenues by market segments for the third quarter of fiscal 2008 were as follows. Industrial and commercial 48%, communication infrastructure 13%, medical and electronic 12%, consumer 11% and others 16%.

Although revenues have been relatively flat and holding up invertible of market, we continue to see our product lines into our strong market. However, we are still seeing relative weakness in our ASIC business and our telecommunication ICs. We are investing in no integrated circuit products that are in line with our strategy for the medical, industrial display and power management markets, and are transitioning some of our ASIC business to more application specific standard products. There has been early market acceptance for our display in our HVIC for new lighting applications, which indicate the return to growth in the IC business.

Our revenues based on products groups for the third quarter fiscal 2008 were $79.9% for power semiconductors, 11% for integrated circuits and 9.1% for systems and RF. Importantly our systems sales are reaching record level of growth by unit and revenues. We continue to see strong demand in our core power semiconductor business and we intend to return to record shipping levels to meet the demand.

Margin, gross profit for the quarter was $20.8 million as compared to $22.5 million of the year ago quarter. Gross margin was 28.4% for the quarter, as compared to 31.1% for the prior year quarter. Importantly margins were up sequentially quarter-over-quarter by 2.1%, much of this can be attributed to increased fab utilization and then an increased average in power semiconductors.

To improve our gross margins we are working on; one, focusing our products on high margins applications including industrial telecom and medical; two, the result of our new distributors and building up these relationships to offer multiple products; three, executing our internal policy to meet minimum margin targets and turning down orders that don't meet that level; four, reducing material costs and negotiating lower wafer for application prices and assembling costs; five, investing in integrated circuit R&D to develop higher margins products and new power devices with hope of better price performance; and six, increasing our in-house fab utilization and consolidating assembly and testing operations.

Next, the demand for our products remains on; backlog was a record $110.7 million as compared to $109.9 million in the prior quarter. For the quarter, the book-to-bill ratio was 1.01. We are pleased to see that the backlog held up and even increased reinforcing our current strategy of diversification in product lines, technology and geography.

Net inventory increased by $1.1 million during this quarter over the last. We have made this investment for three reasons: first to expand our distribution business capacity, second to ensure that we could amply supply products to our customers with delivery times and third to sustain our supply with silicon and packaging materials in our outsourced foundries and subcontractors.

At this point inventories mostly raw material end and partially finished products, as our product is usually shipped immediately to the customer once production is finished. Our goal is to reduce inventory by shipping more products on hand in the coming months limiting wafer purchases and shaping cycle times from order to delivery.

Capacity, we are ceasing the opportunity to buy and import equipment to give us greater capacity to make power semiconductors. We are seeing better utilization of current capacity and the existing plant state-of-the-art of IXYS facilities.

Simultaneously we continue our selective CapEx to improve productivity within our sectors. We maintain adjustment going through product technologies that we will rollout in the next quarter. I will now turn the call over to Uzi Sasson to discuss the financial results in more detail.

Uzi Sasson

Thanks Nathan. I would like to review a few of the expenses. CapEX was $4.6 million for the quarter inline with our strategy. The growth was predominately due to equipment purchases to interest capacity particularly at subs and subcontracted.

R&D spending for the quarter was $5.3 million or 7.3% of net sales as compared to $4.9 million or 6.8% of net sales in the prior year of the quarter. We would like to continue spending on R&D somewhere in this range. And we are continuing to design new products throughout the entire organization.

SG&A expenses were $10.7 million or 14.7% of net sales, as compared with $10.3 million or 14.2% of net sales in the prior year quarter. We are making efforts to reduce operating expenses. We are constantly looking at our cost and attempting to scale back well appropriately. We continue to find synergies and shared services among divisions on which we can capitalize.

Turning to the balance sheet. The ratio of current asset to current liability was 4.2. The cash balance was $48.6 million which is $5.6 million decrease from March 31, 2007. Account receivable at 43.9 million was slightly up as compared to the $42.5 million at March 31, 2007.

DSO was about 54 days at December 31, as compared to 52 days at March 31, 2007. Inventory $87.1 million slightly increased from $86 million at March 31, 2007. Inventory turn was 2.4 times during this quarter. Nathan has already explained corporate strategy in relation to this slight inventory increase.

Regarding our guidance on revenue for the quarter ending March 31, 2008, we project revenues to be approximately 3% to 5% higher as compared to the December quarter.

Our core power business lines continue to show resilience in the highly volatile market. We continue to invest in R&D to develop products with aggressive the need of our core customer market. We are building upon our customer and distributor relationship and we are enhancing our sales force.

Additionally, IXYS is positioned to benefit from greater reliance on power management and renewable energy resources and our products directly addresses those markets.

I will now turn the call back to Nathan.

Nathan Zommer

Thanks Uzi. We also like to inform you of new corporate initiatives. We have completed reallocation within Santa Clara County to our new headquarters in Milpitas California. We purchased the building in August 2007, and have seamlessly transitioned our staff and equipment to the new facility.

This facility addresses our expansion needs and could allow us to combine our Northern California operations. We have updated our corporate website allowing our customers, sales force, shareholders and employees worldwide access to all of our products throughout our divisions. This can be found as a product portfolio section at ixys.com.

We joined the Climate Savers Computing Initiative to address the needs for better methods and products to save the energy in computing and several markets. We believe that our power semiconductor is solar based product position us ideally to serve these new market needs.

Lastly, we have integrated our operations, which will improve plant utilization with this overhead and increase our gross margin.

I'll open now the floor for questions.

Question-and-Answer Session

Operator

(Operator Instructions) We will go first to Todd Cooper.

Todd Cooper

Thank you. Nathan: can you talk about the IC weakness a little bit more? Did you see it more with the products coming out of Beverly or the ones in California?

Nathan Zommer

I think it was a combination of both division the Clare Beverly and the Clare Micronix division both businesses showed a still the weakness. However, they've shown a very, I'd say good redesign, design wins and so forth. The California division suffered mainly because of it ASIC concentration.

They have been historically the last six year concentrated where the few customers. So, they have the major ASIC program, that was targeted in the consumer market and that business basically went away as the customer transition to other consumer products. So, that is the main impact.

Todd Cooper

The one of your customers there, I think was also a competitor international rectifier doing business with the Playstation III that on semiconductor took away from them or: do you have any knowledge of that?

Nathan Zommer

Probably that's the case.

Todd Cooper

Okay. And you mentioned about ASSP products: what was that be targeting?

Nathan Zommer

This is targeting a very interesting new segment of the market in the display and lighting, where we have several projects in flexible displays, which are basically product that we develop to a certain technology that addresses few customers.

So, becomes in application specifics on the product because we can serve several customers with that. The outer area is the proliferation of our high voltage integrated circuit product that go to the lighting market both LED, high voltage LED drivers and high intensity discharge lamps for the automotive market. So, these are very encouraging applications specifics on the product.

Todd Cooper

And those products are primarily coming out of your California design team?

Nathan Zommer

Yes. The California team designed it and manufactured it in the Clare pack.

Todd Cooper

Okay. And you gave some pretty broad comments on your foundry and some changes that you are making. Can you be more specific with regards to what's happening in Germany? And: what's happening in Beverly? And: what's happening at your foundry partners?

Nathan Zommer

Yes. We have seen tremendous demand on our internally produced products, which is amazing. And its really proliferates and reinforces our strategy to really -- and the pillars of our success in our proprietary technology and processing house.

The down side to that is, the demand is so high, that we have to expand the walls and literally we loses out, we are finding ways to use within the walls, without moving walls utilizing better the facilities internally. And it applies to the fact; we have both in Germany, U.K. and Clare Beverly.

On top of that, we are addressing the needs to supplement the production in more higher density, better technology in terms of best features sites and that has been with our classical partners like Samsung, which is the number two semiconductor company in the world.

So, we are transitioning to extend our production to larger wafer sizes with them. And also, we are looking at other foundries because of lower cost. So, we have done a little internal investigations on foundries in China. And we are still proceeding with this analysis to see if they offer any advantage.

Todd Cooper

Are you still primarily making your bipolar products in Germany?

Nathan Zommer

That's correct.

Todd Cooper

Okay. And: what percentage of revenues is coming from your alternative energy type customers now?

Nathan Zommer

Well, I think, Todd, we have reflected on this several times that it's embedded in the industrial market and if you look at the statistics industrial market is getting stronger and stronger. And it also falls into the others, because some of our industrial customers do not tell us, if the product goes to the windmill or their solar inverters.

So, they are very few solar inverter customers and in that case they fall in the others area. And I would say that all-in-all it's now I am talking about 7% of our revenues, the alternative energy.

Todd Cooper

But you don't have the detailed information where -- so you can break it out separately?

Nathan Zommer

We have the detailed information up to the point, when we deal with the three giants in this field like GE, Siemens, and ABB. And those are integrated power electronics companies. So, they don't tell us specifically the product goes to the solar invertors or into motor control.

Todd Cooper

Okay. I understand. And you said I think that you're going to continue with your share repurchase program: how much is still left on your current authorization?

Uzi Sasson

I think that's the 216,000 shares are remaining for us to buy back. We bought in the quarter about 1.2 million shares back for approximately $9.5 million.

Todd Cooper

Now, refresh on may be this is the second authorization, you are coming to the end of your -- the second authorization the Board has given you?

Nathan Zommer

Precisely.

Todd Cooper

Okay. Okay, thanks very much.

Nathan Zommer

Thank you.

Uzi Sasson

Thank you, Todd.

Operator

We'll go next to Christopher Longiaru.

Christopher Longiaru

Hi, gentlemen, how are you?

Uzi Sasson

Good.

Nathan Zommer

Thank you, Chris, how are you?

Christopher Longiaru

I am good. A couple of questions first of all, or just a housekeeping stuff: could you breakdown the other income? Just what portion was interest expense? And: what portion was interest income?

Uzi Sasson

I'll give that to you interest income was $499,000. Interest expense was $481,000, and the FX loss was $1.325 all of which end up could be $1.307.

Christopher Longiaru

What was that last part there? What you said the $1.325 was?

Uzi Sasson

FX loss.

Christopher Longiaru

Specifically what else…

Uzi Sasson

It was a loss from currency because of the dollar getting weaker.

Christopher Longiaru

Okay. And the other part of this is, now just to talk about the IC business a little bit more, the way it looks is to the IC backlog strengthen in the quarter?

Uzi Sasson

Yes.

Christopher Longiaru

It did, so, seeing this play out I mean, this is the kind of return to normal levels in early F'09, is it later than that. I mean: how do you see this current plan out going forward?

Uzi Sasson

Well, I like the question, but you call return to normal. We don't accept nothing is a normal. We like to see growth. So, that the point is as I explained we have significant revenues in the IC business that we sold that [checks] to International Rectifier the (inaudible) and follow we have solution as I talked is -- I mentioned before that the IRF was the competitor and more or less apparently loss their business.

So, the division in California was concentrated basically so much on few customers. So, that business went away. So, this was a big chunk of business. So, we are glad to see that we start to see sign in design wins and potential new orders coming on stream that we will stop looking those stuff in the IC business.

Christopher Longiaru

When you say a big chunk of business: about how much would you say?

Nathan Zommer

Well, that confidential, at end one confidential

Christopher Longiaru

Okay.

Nathan Zommer

But needlessly to say it was a big chunk of the Micronix of the division.

Christopher Longiaru

Okay.

Nathan Zommer

So, it was multimillion dollars a year of business.

Christopher Longiaru

All right: so returning to growth in F'09 would not be old question?

Nathan Zommer

No.

Christopher Longiaru

Okay. All right, that's all I have for now. Thanks guys.

Nathan Zommer

Thank you.

Uzi Sasson

Thank you.

Operator

We will go next to [Manoj Nandakani]

Manoj Nandakani

Hi, good afternoon. Can you give some color on your record backlog is spread across different markets and applications?

Nathan Zommer

Well, the backlog that we have is mainly in the industrial and medical electronics market. That's mainly the main composition of this backlog.

Manoj Nandakani

Okay. And: what was your cash flow from operations in the December quarter?

Uzi Sasson

We made approximately $5.3 million cash from operations.

Manoj Nandakani

Okay. Very good. And: do you see similar cash generation in the March quarter? Any comment on that?

Uzi Sasson

I’d like to believe and I do believe that we're going to increase cash from operation. Similarly, I'd like to see growth as Nathan mentioned earlier, we would like to see growth. We are intending to grow here.

Manoj Nandakani

Okay. Very good.

Uzi Sasson

But definitive question is, definitely.

Manoj Nandakani

Okay, all right. Nathan: can you please review what kind of products IXYS has for solar energy and for alternative energy market? I know you have discussed it on an off, but it will be nice if you could briefly review it.

Nathan Zommer

Well, I can tell you that the main product our high power semiconductors, bipolar products. This relates to the input rectification, the switching elements, the Thyristors, and our MOSFET and IGBT business got inverters.

In addition to that we have also success with our diodes that are penetrating the protection of the bypass application for solar panels. As you can imagine if a solar panel doesn't enough light, it becomes low to the other solar panel that has light.

So you have to provide some bypass for production. So, we started to shift a very unique proprietary diode that we developed for one of the key solar manufacturers. So, what you see as a proliferation of the power semiconductors. In addition to that, we are now starting to introduce a controller integrated circuit that is specifically for power management of solar panels.

So this hopefully will catch on and a very nice project that we had that we slowly taking into the market is our solar cells that are addressing the need for charging portable equipment using solar energy. So this is a wholly gale to extend but realize and minimize the impact of disposable batteries on the economy on the pollution and then environment. So, we have hear a very interesting initiative and more you will hear in the coming quarters on this solar battery charging product line.

Manoj Nandakani

Okay. And: is it fair to say that other than that two or three big companies that you mentioned GE, Siemens: are you also selling to smaller or lesser non-companies from Germany or China or the US?

Nathan Zommer

Absolutely, I can imagine that you have an Indian accent, right?

Manoj Nandakani

Yeah.

Nathan Zommer

Well, one, we have a very beautiful success story in India. India has been one of the fastest growing market for us and one of the reason is one of the luminary company Suzlon in India is taking Europe by storm now in wind mills, and it's amazing, everybody talks about India as a center of outsourcing of software.

Here is an example of a world-class Indian company that made the ways in Germany and Europe, Suzlon. So, we supply our power semiconductor Suzlon in the windmill industry. There are few other customers in Europe, Vestas, [Enacorn] and a company in Holland. In addition to that there's a company in Spain a smaller company and of course the big giants don't forget ABB, also a player in that field.

So, we are really fortunate that we have been in this market since 1986 in the windmills specifically and I couldn't be more happy to see Suzlon that we started the business with them early on when they were nobody. Now, everybody in the wind mill industry knows them. So, it's the pleasure.

Manoj Nandakani

Okay. Alright. And I have a few questions on the margins. You think that your growth margins will improve in the current quarter? What are your expectations? Can you quantify in anyway?

Uzi Sasson

I will take that first of all we are working on improving our margin and as Nathan mentioned in the call, we are focusing on products that yield high margin applications industrial, specifically industrial and telecommunication.

We are working on continuous to develop the relationship with all distributors, old distributors and new distributors and making sure that the distributors also have multiple products. We are working on and we do have this internal policy where we don't take all, we turned down orders that don't meet minimum threshold, the minimum margin level.

We always look at material cost, packaging cost, lower cost of wafers. We are investing in R&D and the used higher product margins especially in the IC R&D. And we are working on increase fab utilization and consolidation of assembly and packaging. So, we are planning and we would like to see the margin is going up.

Nathan Zommer

I would to add though to the last statement as he said, our products if we analyze that contributing margins of our products are very high. In the IC business what we are seeing that those margins were diluted because of factory utilization.

So, it's simply what's affected the margin in the past getting lower, is the weakness of the IC business, only because our factory utilization, unabsorbed manufacturing cost. So, as the volume will grow up and also we utilize those factories by consolidating and eliminating duplicity, we naturally will see that momentum upward. Just reinforcing what Uzi said.

Manoj Nandakani

Okay. So, you expect that during calendar 2008, the utilization to remain high?

Nathan Zommer

Yes.

Manoj Nandakani

Okay. And: how is the pricing environment for power semiconductor?

Nathan Zommer

Well, I think we made a comment on that. I think in the press release that average selling price were holding very well. So, and as Uzi said and we could have taken more orders. We could have taken more business, but it was not with the right margins. We didn't take it. So, we are comparative to see that in spite to the talk about economic slowdown in some sectors of the market, our average selling prices was holding up and going up.

Manoj Nandakani

Okay. Very good. Thank you.

Nathan Zommer

Thank you.

Uzi Sasson

Thank you.

Operator

We'll go next to John Gordon.

John Gordon

Nathan and Uzi, good afternoon. I have a couple of quick questions. First on the foreign currency loss: does that relate to the local borrowing that you did in Germany? Or: is that just relate to the translation of revenues and incomes from your German subsidiary?

Uzi Sasson

John, it's relates to both. It's a combination of exactly the two items you just mentioned.

John Gordon

Okay. Because I mean: at least on the pre-tax basis that's about $0.04 a share, if I – when you said: 1.325 I assume you mean: 1.325 million, that's about $0.4a share. So, that's not inconsequential?

Uzi Sasson

That's right. That's actually right.

John Gordon

Given that was the result just for one quarter, I mean: is there any thing that you can do to hedge that?

Uzi Sasson

We are working on it. In fact we bought, we initiated, we bought an option this quarter that is going to be extended for six months and protected not against currency weakness. This is the first time we did at IXYS and we're taking active measures is to make that we reduce the risks from currency fluctuation here.

John Gordon

Okay. Very good thank you and then I haven't heard much while as it relates to the International Rectifier litigation matter and I guess I have two questions. First of all: what is the likely calendar of events over the next three to six months? And secondly: what your ongoing litigation costs are? Is that having any consequence or is it pretty immaterial?

Nathan Zommer

Well, John let me answer the first part and Uzi will answer the second part. We are quite content with the progress on the legal front since like that at least from the body language we get from the legal system, that we are prevailing and there was the hearing on the Appellate Court just the first almost the first or second legal day of the year and according to our legal team in January the hearing went very well in the Appellate Court and we are just waiting for the final ruling. So, in that respect we are doing a quite well and we are content.

John Gordon

Okay. So, that might get finally sort of resolved in the six months or so?

Nathan Zommer

Even though, I'd suspect that in the next three months we might hear something. And we are always over. So, in that respect we are content. It did not -- in any matter change our focus on prevailing. And I am really quite content with inside counseling and outside counseling the guidance they provide just for us on that usually one short list of litigation…

Uzi Sasson

John with regard to the litigation expense, we are trying to keep it very minimum to the best that we can and just to give you an indication in the December quarter, our legal cost all inclusive legal were $102,000.

John Gordon

Okay. So that's...

Uzi Sasson

So, we are, I mean, if there were a significant number, we would have to disclose within the separate line item, but I don't, right now its about $100,000 it was for the December quarter.

John Gordon

Right. Okay. And then just as a general matter, I mean, your senior management staff is it stable and solidify: there have been any recent additions? Or: there have been recent departures? How does it seem on the matter?

Nathan Zommer

John, thanks for the question. We have mentioned consolidation and this is part of actions we have taken forward. We look at the top and we look at bottom and we found out that there are always young tigers in the company want to take more responsibilities. And on the performance division we have taken action you have heard several times the decision about the division in California. The Clare Micronix division there.

John Gordon

Yes.

Nathan Zommer

We basically let go the General Mangers and consolidated the management due to the Clare management. The outstanding seem we had in Massachusetts that can manage and consolidate the Micronix division into the Clare organization. Similarly, we have done the same action here in the headquarters, where we had duplicity of functions. Especially, in the marketing and sales organization and we indeed did consolidation here.

So if anything, I could say is that we are in the stride of less means more and we are just really satisfied with the performance of all the team and how young tigers are stepping out.

John Gordon

Okay. And then finally, Nathan: can you just address the competitive situation? Has there been anything that's happened with respect to your major product line in the last three to six months? Where there is either been a new entrance that's come in or entrance that has left? Or: you have had a new product introduction that really was a major consequence?

Nathan Zommer

Well, I'll answer one-by-one. Indeed what we have seen there was a lot of activities from the M&A front in the power semiconductor field vis-à-vis our R&D. This has created a tremendous upswing for us because a lot of customers like the consistency of our products, consistency of management and consistency of our strategy. And that's created the problem that we have expected demand on our products.

As a matter of fact, I have all my general managers flying in for our Board meeting to address how we can think it on. It's more and more demand in the market from our products because of just that single event.

In addition to that, we have seen, I would say, entry of, so I would say Chinese and Tiwanese companies into the field trying to pick up the slack in the lower power area that [IV] left out open.

We hardly see any competition from those new entry in our space. We still are content to see that the traditional Japanese companies and European companies like AST and Infineon, Fuji, Mitsubishi, Hitachi and Toshiba are there. And they are still and trenched in their long rigid strategy which we are able to kind of come around and introduce new products and blind side them.

I made a comment on new technology that we will be rolling out in the coming quarters and this is indeed new IGBT technology that IXYS is introducing, which is world class and addresses our module products. And this will have a tremendously impact on our gross margin because they offers the better performance over costs, if you compare it to the existing IGBTs their competition are selling.

In addition to that, we also introduced new trench power MOSFET devices for higher power application, which is going directly in competition, where the Vishay and few other companies they try to enter the higher power arena, but we are experts. We've better packages and better technology. So, we like the competition. We like to beat them.

John Gordon

Right, very good. Thanks a lot, Nathan.

Nathan Zommer

Thank you.

Uzi Sasson

Thank you.

Operator

We'll go next to Todd Cooper.

Todd Cooper

Yes, a couple of more if I could your hedging strategy, Uzi: how much do you think that will cut in to the currency lost that you do experience this quarter? What you're thinking it will be in the current quarter?

Uzi Sasson

Current quarter meaning, March 31?

Todd Cooper

Yes.

Uzi Sasson

I expect that the loss would be lower than, what we've experienced in December. Also it really has a function of the dollar getting or not, because we have a specific insurance policy over certain number of transition if you will. So, I believe that the number is going to be lower in the March quarter.

Todd Cooper

Okay. And Nathan when you acquired Clare, there was a lot of talk about the Solid State Relay Technology that you acquired and that product category ramped nicely for you. What's going on with it right now?

Nathan Zommer

Still, it's very strong. We expanded the product to the power Solid State Relays and these quarters are seeing very nice growth and demand.

Todd Cooper

So, that's now one of the areas coming out of Beverly that seeing weakness?

Nathan Zommer

No, we specifically address the telecom side. The Solid State Relays go in to industrial application to security market, last in the telecom. So, we are very much content with that and you will see more and more new product introduced in that area. As one company, large company talked to us in relationship of potential corporations they recognized us, as the one of the world leaders in Solid State Relays and we took the compliment.

Todd Cooper

So, is that your monolithic switching IC that for the weaknesses in the telecom?

Nathan Zommer

It's one of the monolithic ICs. It's basically I'd say the application for the central office at a customer premise. And you can gauge and see what happens in the telecom industry that basically customers like Lucent, (inaudible) have been a little begun shy in their procurement of ICs from us.

Todd Cooper

Okay, okay. Thank you

Nathan Zommer

Thank you.

Operator

(Operator Instructions). We have a follow-up from Christopher Longiaru.

Christopher Longiaru

Hi, guys. I just wanted to ask: what was stock-based comp in the quarter?

Uzi Sasson

About $0.5 Chris.

Christopher Longiaru

That was the only thing, I think, I missed in my discussion. Also what kind of effect is the new facility you think going to have -- just going forward with no changes just the fact that you have a new facility: what effect do you think that's going to have on your cost structure?

Uzi Sasson

Well, I think it will be neutral. So, I would say for quite -- I would say two to three quarters.

Christopher Longiaru

Okay.

Uzi Sasson

The benefit will start to come, I think a year from now. We are really because then when you start to see that the build up of equity that we don't have to pay rents. So then, I think, you will see the impact and for the consolidation.

Christopher Longiaru

Yeah, alright. Thanks guys.

Uzi Sasson

Thank you.

Nathan Zommer

Thank you.

Operator

And no further questions at this time, I'd like to turn the conference back over to Dr. Zommer for any additional and closing remarks.

Nathan Zommer

Thank you. As there are no more questions, and in closing the conference call, we need to remind you that our discussions contain forward-looking statements and that there are number of important factors that could cause our results to differ materially from those indicated by these forward-looking statements, including among others, risks detailed from time-to-time in our SEC reports including our quarterly report on Form 10-Q for the quarter ended September 30, 2007. We do not undertake any obligation to update forward-looking statements.

Thank you all for your time this afternoon. We also want take this opportunity to thank our suppliers, customers, employees and stockholders for the support of IXYS. Thank you.

Uzi Sasson

Thank you.

Operator

And that does concludes today teleconference. We thank you for your participation and wish you wonderful day.

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Source: IXYS Corp F3 Q08 (Qtr End 12/31/07) Earnings Call Transcript
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