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Executives

Paul Coghlan - Chief Financial Officer, Principal Accounting Officer, Vice President of Finance and Secretary

Lothar Maier - Chief Executive Officer and Director

Analysts

Patrick Walsh - Crédit Suisse AG, Research Division

James Covello - Goldman Sachs Group Inc., Research Division

Christopher Caso - Susquehanna Financial Group, LLLP, Research Division

Romit J. Shah - Nomura Securities Co. Ltd., Research Division

Uche X. Orji - UBS Investment Bank, Research Division

Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division

Joe Moore

Ross Seymore - Deutsche Bank AG, Research Division

Christopher J. Muse - Barclays Capital, Research Division

Craig Berger - FBR Capital Markets & Co., Research Division

Sumit Dhanda - ISI Group Inc., Research Division

Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division

Terence R. Whalen - Citigroup Inc, Research Division

Christopher B. Danely - JP Morgan Chase & Co, Research Division

JoAnne Feeney - Longbow Research LLC

Shawn R. Webster - Macquarie Research

Ambrish Srivastava - BMO Capital Markets U.S.

Linear Technology (LLTC) Q4 2012 Earnings Call July 25, 2012 11:30 AM ET

Operator

Good day, everyone, and welcome to the Linear Technology Corporation Fiscal 2012 Fourth Quarter Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I'd like to turn the conference over to Mr. Paul Coghlan. Please go ahead, sir.

Paul Coghlan

Hello. Good morning. This morning, I'm joined by Bob Swanson, our Executive Chairman; and Lothar Maier, our CEO. Welcome to the Linear Technology Conference Call. I will give you a brief overview of our recently completed fourth quarter and fiscal 2012 and then address the current business climate. We will then open up the conference call to questions to be directed at Bob, Lothar or myself.

I trust you've all seen copies of our press release, which was released yesterday afternoon. First, however, I would like to remind you that except for historical information, the matters that we will be describing this morning will be forward-looking statements that are dependent on certain risks and uncertainties, including such factors, among others, as new orders received and shipped during the quarter, the timely introduction of new processes and products and the general conditions in the world economy and financial markets.

In addition to these risks, which we described in our press release issued yesterday, we refer you to the risk factors listed in the company's Form 10-Q for the quarter ended April 1, 2012, particularly management discussion and analysis of financial condition and results of operations. Secondly, SEC Regulation FD regarding selective disclosure influences our interaction with investors. We've opened up this conference call to enable all interested investors to listen in. The press release and this conference call will be our forum to respond to questions regarding our estimated financial performance going forward.

Consequently, should you have any questions regarding our estimates of sales and profits or other financial matters to the upcoming quarter, as well as how they might impact our income statement model and our balance sheet, this is the time we're free to respond to these questions.

As you can tell from our press release, we continued our growth of the previous quarter and believe our business could improve in the upcoming September quarter. Going into the quarter, although cautioning about global economic environment, we forecasted that our business would grow. We were coming off broadly distributed booking strength and we believe that inventories worldwide at customers were relatively tight exiting the March quarter.

The quarter unfolded largely as we expected, although worldwide, macroeconomic concerns were greater at the end of the quarter than when we began the quarter. In summary, we reported revenue results for the quarter at the midpoint of our guidance. Overall, bookings grew over last quarter. There were no significant changes in our end markets, with industrial and computer growing, partially offset by Automotive and Military and Space.

Cancellations were minor. We had a positive book-to-bill ratio for the quarter. Sales increased by 6%. Gross margin improved from 75.1% to 75.4%. We had similar shutdowns in our factories compared with last quarter, therefore not impacting gross margin positively or negatively. Average selling price, at $1.82 versus $1.81 last quarter, was relatively constant. The modest improvement in gross margin percentage was due to absorbing certain fixed costs over a larger sales base, and we still have a good ways to go to run at full capacity.

Operating expenses increased modestly by $2.5 million or 3%, mostly due to increases in labor and profit sharing. As we forecasted, operating income increased by $11.4 million or 8%. Operating income at 45.9% of sales improved from 44.8% last quarter. Below the line, interest income and expense was largely unchanged.

Finally, income taxes increased this quarter. Our quarterly effective tax rate was 26.5% as forecasted, compared with 23.75% last quarter, which had benefited from a nonrecurring discrete tax benefit. The resulting net income of $103,326,000, an improvement of $4.8 million or 5% over last quarter, is due mostly to the increase in sales, with increases in operating income being offset by an increase in the tax rate. Our return on sales of 31.3% was similar to last quarter's 31.5%.

Headcount increased marginally, primarily in the R&D and sales areas as worldwide manufacturing headcount was largely unchanged. In summary, the effect of the items I just listed on the published quarterly results was that revenue was $330 million for the fourth quarter of fiscal year 2012 compared to the previous quarter's revenue of $312.4 million and $358.6 million reported in the fourth quarter of fiscal year 2011.

GAAP diluted earnings per share of $0.44 increased $0.02 from the previous quarter's earnings per share and decreased $0.24 from the $0.68 EPS reported in the fourth quarter of fiscal 2011, which had benefited from higher sales and an uncommonly low quarterly effective tax rate of 9.5%.

GAAP net income was $103.3 million compared with $98.5 million last quarter and $158.2 million reported in the fourth quarter of last year. Earnings per share would be $0.50 on a pro forma basis, which excludes the impact of stock option accounting and the amortization of debt discount, which is the theoretical difference between the company's convertible debt, actual interest and the interest it would potentially have had to pay if it had used straight bank debt.

During the June quarter, the company's cash and short-term investments balance increased by $91.2 million to $1,203,000,000. The company announced that it would again pay a quarterly dividend of $0.25 per share. This cash dividend will be paid on August 29 to stockholders of record on August 17.

The June quarter is also the end of our fiscal year. Fiscal 2012 started in a difficult macroeconomic environment and then improved in the second half of the year. In many ways, it was the inverse of the previous fiscal year, which started off strong and showed signs of weakness as the year progressed. The first half of fiscal '12 was impacted by inventory tightening throughout the customer base as Japan recovered from its natural disaster and supply availability return to the marketplace. Thailand flooding impacted some end markets.

Finally, macroeconomic concerns, particularly in Europe, caused customers to be cautious in their ordering patterns. Underlying product innovation continued, and the March and June quarters appeared to demonstrate a more accurate matching of customer ordering in concert within demand.

Linear's quarterly sequential growth of 6% in both its third and fourth quarters did not offset the slow start to last year. As a result, revenues of $1.27 billion decreased 14.6% or $217.3 million from revenue of $1.48 billion for the previous fiscal year.

Net income of $398.1 million for fiscal year 2012 decreased to $182.7 million or 31.5%, from $580.8 million reported in the previous fiscal year. Fiscal year 2012 results were impacted by a $3.2 million charge related to the acquisition cost of Dust Networks, while the previous fiscal year benefited from a $4.2 million gain related to various legal settlements and also benefited from a lower tax rate of 19.8% compared to 25.7% in fiscal 2012.

Diluted earnings per share for fiscal year 2012 was $1.70, a decrease of 32% or $0.80 per share from the prior fiscal year. However, our cash, cash equivalents and short-term investments increased by $280.5 million after paying dividends of $228.5 million and repurchasing 76.2 million of common stock. Overall, good profitability and cash generation in a down revenue year.

As we turn our focus to fiscal 2013, looking ahead to the September quarter, general economic sluggishness remains in the U.S. and we are particularly cautious about the European market and its sovereign debt issues. Historically, the first quarter is a seasonally weak period in that region, and this could be exasperated by the continuing debt crisis. We are hopeful that strength we've seen in Japan and Asia will continue to offset weakness in Europe and flatness in the U.S.A.

Given the current environment and the level of bookings we have received over the past quarter, we are currently forecasting our revenues to be flat to up 3% over our just-completed fourth fiscal quarter, generally in line with our historical seasonality for summer quarters.

Now I would like to address the quarter's results on a line-by-line basis. Starting with bookings. Bookings grew as anticipated this quarter, growing modestly in each major geographic area. We also had a positive book-to-bill ratio for the quarter. At this time every quarter, we give you a breakdown of our bookings percentages by end markets to give you insight into those markets that drive our business.

Industrial and communications continue to be our largest areas. Industrial was 41% of our bookings, up from 40% last quarter. Our industrial business is very broad based, both geographically and by end products. The communications area at 21% was down from 22% last quarter and down slightly in absolute dollars. Cellphone continues to be a very small part of our business and now lounge to less than 1% of our business.

Automotive continues to be a strong area for us, although dropping from 17% to 16% of our business this quarter. It was also down in absolute dollars. This business has grown rapidly this year for us. By comparison, this time last year, it was 12% of our business versus the 16% presently. By geographic area, it was down the most in Europe, less so in Japan and relatively flat in the U.S.A and rest of Asia. The expansion of existing Linear parts into new car models and also design wins for new parts and new programs, both in gas driven and hybrid and electric vehicles, continue to help us.

Automotive is an area that we have been focusing on given the increasing electronic content in automobiles. Our battery monitoring products for hybrid and electric vehicles are achieving expanding market acceptance. In addition, we continue to distinguish Linear as a high-quality supplier in important international automotive manufacturers.

Computer at 13% improved from 12% last quarter. Within computer, we service opportunities in notebooks, desktops, tablets, servers, storage devices and printing and imaging end products. Consumer, which has been our smallest end market, remained at 3% of bookings. Finally, military, space and harsh environment products were unchanged at 6%. The U.S.A and Europe are the predominant geographic areas for this business.

In summary, this is a good distribution of business by end market for us, whereas, 4 years ago, 16% of our business was in cellphone and high-end consumer-related markets. Now only 3% of our business is in these generally commodity and volatile analogue areas.

Note that we have a good balance of where our bookings are actually created, with 44% of them created in the U.S.A. and 56% internationally, similar to last quarter. Moving from bookings to sales. Net sales increased 5.7% from the prior quarter while decreasing 8% from the similar quarter in the prior year. Sales increased in most major geographic areas, with the U.S.A., Japan and Asia-Pacific being up and Europe down.

In summary, the U.S.A. at 29% of sales, was down 1 point from last quarter, although up modestly in absolute dollars. Europe at 19% of sales was down from 21% last quarter, reflecting the macroeconomic issues in that region and the fact that the March quarter is usually the seasonally strongest for Europe.

Japan at 16% was up from 15% last quarter, and Asia-Pacific at 36% of sales was up 2 percentage points from the prior quarter. The March quarter is historically the lowest quarter for Asia-Pacific due to the Asian New Year holidays and seasonally less consumer business.

From the fiscal year, the percentages were the same as in the just-completed fourth quarter. U.S.A, 29%, Europe, 19%, Japan, 16% and Asia-Pacific, 36%. Moving to gross margin. Gross margin at 75.4% of sales improved from 75.1% in the previous quarter largely due to absorbing fixed cost over a higher sales base. The factories had similar shutdowns this quarter as last quarter. ASP or average selling price increased slightly to $1.82 from $1.81.

R&D. R&D at $59.5 million increased $1.9 million from $57.6 million reported last quarter, while decreasing as a percent of sales to 18.0% from 18.4% last quarter. The dollar increase was mostly due to higher labor and profit sharing costs.

SG&A. Selling, general and administrative expense at $37.8 million increased only $600,000, and decreased to 11.5% of sales versus 11.9% last quarter. Most of the modest increase in dollars was due to increased profit sharing and legal costs.

Operating income. As a result of the above, operating income increased by $11.5 million or 8%, and as a percent of sales, increased to 45.9% from 44.8% last quarter. As we grow sales to our previous highs, we expect operating margin to improve along with sales. This quarter's results still reports strong profitability and clearly put us ahead of our peers in this financial performance measure.

Both interest expense at $6.9 million and the amortization of debt discount at $5.1 million were similar to last quarter. Interest income of $1.1 million was also similar to last quarter.

As a result of all the above, the company's pretax profits were $140.6 million, up $11.4 million from last quarter. Pretax profits are now 42.6% of sales versus 41.4% last quarter, with the increase due primarily to higher sales volume. As we forecasted at this time last quarter, for the June quarter, our quarterly tax rate increased to 26.5% from 23.75% in the prior quarter. The difference pertains to a nonrecurring discrete tax item in the prior quarter.

Looking forward, we expect our quarterly tax rate in the September quarter to increase modestly to 27% as we temporarily, at least, will no longer have the annualized benefit of the expired R&D credit. Should Congress reach an agreement on tax reform, the R&D credit may be positively impacted.

The resulting net income of $103.3 million is an increase of $4.8 million from the previous quarter, due mostly to higher sales volume partially offset by a higher tax rate in the quarter. The resulting return on sales was 31.3%, similar to last quarter's 31.5%. The average shares outstanding, used in the calculation of earnings per share, increased by 475,000 shares. This increase was impacted by shares exercised related to a large grant encompassing many employees that reached its 10-year expiration date. This increase was somewhat offset by 1 million shares that the company bought back in the open market.

GAAP earnings per share was $0.44, which was an increase of $0.02 from the prior quarter. On a pro forma basis, without the impact of stock-based compensation of $15.6 million and noncash interest expense of $5.1 million, diluted earnings per share would have been $0.50 per share compared with $0.49 last quarter and $0.76 in the fourth quarter last year, which had benefited from a significantly lower effective tax rate of 9.5%.

Moving to the balance sheet. Cash and short-term investments increased by $91.2 million. $157.3 million was provided by operations, and $33 million was provided from the exercise of stock options by employees. $58.5 million was paid in cash dividends, $3.6 million was used to purchase fixed assets, $4.6 million was used to repurchase restricted stock and $32.2 million was used to buy back 1 million shares of Linear stock in the open market.

For the 105th consecutive quarter, the company had positive cash flow from operations. Our cash and short-term investment balance is now $1,203.1 million and represents 65% of total assets. Accounts receivable of $153.1 million increased by $8 million from last quarter due entirely to the increase in shipments.

Our days sales and accounts receivable were 42 days, similar to last quarter. Inventory at $79.7 million decreased $200,000 from last quarter. Work in process inventory particularly die bank inventory increased, offset by decreases in raw materials and finished goods. Inventory reserves also increased modestly.

As we have said in the past, we believe investing modestly in die bank inventory will again enable us to better service customers as demand increases. In summary, our quarterly average inventory turns improved to 4.1x, up from 3.9x last quarter. Deferred taxes and other current assets of $67.7 million increased $1.9 million, due primarily to an increase in prepaid taxes.

Property, plant and equipment decreased by $8.6 million. We had additions of 3,613,000, and depreciation of 12,208,000. Most of the additions were for test, assembly and wafer fabrication equipment.

For the fiscal year, we had additions of 35,730,000 we had depreciation of 48,476,000. For fiscal 2013, we expect additions of roughly 25 million and depreciation 50 million. Other noncurrent assets decreased modestly by $1.9 million.

Finally, on the asset side of the balance sheet, our return on assets was 22.4%, similar to last quarter's 22.3% and our current ratio was 8.8:1 versus last quarter’s 9.2:1.

Moving to the liability side of the balance sheet. Accounts payable decreased by $1.1 million, largely due to timing differences on recurring payable items. Accrued income taxes, payroll and other accrued liabilities increased by $17.2 million. The largest items here are our profit sharing accrual, income taxes payable and accrued interest payable on our convertible debt.

Our interest payable accrual decreased as we had semiannual interest payouts this quarter. The profit sharing accrual increased as we added this quarter's charge to the accrual. We paid profit sharing to our employees semiannually, in the fiscal first and third quarters. Consequently, the accrual increases in the second and fourth quarters like it increased this quarter and is reduced in the first and third quarters.

Finally, we increased our income tax payable accrual for the taxes on the increased taxable profitability in the quarter. Deferred income on shipments to distribution was down modestly from last quarter by $800,000, since we shipped slightly less to our U.S. distributors than what they shipped out to their end customers.

Our accounting on shipments to U.S. distribution is conservative. We do not record a sale nor income in our results of operations until the distributor ships the product out to its end customer. We continue to closely control our inventory at distribution to properly position the inventory relative to potential demand.

Our senior convertible notes increased by $5.1 million. This increase reflects the noncash amortization of debt discount charged to the income statement. The company reclassed $38.2 million of noncurrent deferred tax assets to partially offset deferred tax liabilities at the beginning of the quarter in order to conform to current fiscal year presentation. After this reclassification, deferred tax and other long-term liabilities of $138.4 million increased $10.9 million, due largely to deferred taxes on the unremitted earnings of our foreign manufacturing plants.

Changes in stockholder equity accounts were primarily a result of the usual quarterly transactions for net income, dividends paid and employee stock activity. The company announced that we'll again pay a quarterly dividend of $0.25 per share. The company believes that paying a dividend is an important way to return value to shareholders. The company began paying a dividend in 1992 and has increased it every year since and currently pays approximately a 3% yield.

Looking forward. I would like to close out our introductory comments by revisiting our guidance. Many positive facts came out of our June quarter that would favorably impact our upcoming September quarter. First of all, we grew sales in the June quarter and also had a positive book-to-bill ratio. Cancellations were minor and our sense is that inventory is at appropriate level at our customers given the current level of business. Our largest end market industrial grew bookings in the quarter. Automotive, another key end market to us, although pausing a bit last quarter, has grown significantly year-over-year.

Relative to our own inventory, we kept it flat during the quarter. The integration of our acquisition of Dust Networks continues to go well. Some large customers are more seriously considering wireless sensor networks for implementation about a year out.

Finally, as forecasted, we improved operating income as a percent of sales. On the more cautious side, this time last quarter, in our guidance, we alluded to modest improvements in the macroeconomic environment. Whereas now, we do not believe the macroeconomic environment is improving.

Europe, in particular, is showing more concern over Greece and Spain with possible contagion to other Europe countries, even Germany. The U.S.A. is still unable to reduce unemployment, and taxation and other economic issues seem dependent on the outcome of the presidential election.

Another current concern is other tech companies, although not in our predominant end markets, have reported disappointing forward guidance. Finally, we are forecasting for summer quarter, which historically has been the slowest quarter for us. Weighing all these inputs, with particular emphasis on those factors within our own control, we believe we have the opportunity for modest growth. Our major end markets, industrial and automotive, are the most robust analog end markets, having had the highest end market compound annual growth rate over the last 3 calendar years.

Consequently, given the current environment and the level of bookings we have received over the past quarter, we're currently forecasting our revenues to be flat to up 3% over our just-completed fourth quarter, generally in line with our historical seasonality for summer quarters. We continue to believe that we are very well product-ed and end-market positioned to execute our strategy. We are strong in the areas we want to be, industrial, communications infrastructure, networking and automotive and believe we are in an innovation-driven environment. Our strategy is differentiated from our other analog competitors. We dominate in different end markets, we are more reliable supplier with consistently lower lead times, and our technology and support is valued as evidenced by our higher operating margins.

I would now like to open up the conference call to questions to be addressed to either Bob, Lothar or myself.

Question-and-Answer Session

Operator

[Operator Instructions] We'll go first to John Pitzer with Crédit Suisse.

Patrick Walsh - Crédit Suisse AG, Research Division

This is Patrick Walsh calling in for John Pitzer. I guess my first question would be on the gross margin line. I would have expected a little bit more leverage there given that the revenues were up 6% sequentially, and especially given that you guys have mixed away from the consumer markets over time. I'm just wondering if you could just kind of talk about how we should think about gross margin going forward.

Paul Coghlan

Well, first of all, as to why you may have expected higher gross margin, I'm not sure, but we did continue to have shutdowns in the factories in the last quarter, and we did control the amount of inventory we've built. So although we did grow gross margin, it didn't grow as much as I guess you wished it would have. Going forward, we expect that gross margin can continue to improve. And once we get closer to fuller capacity, can reach levels of gross margin as a percent of sales that we've attained in the past.

Patrick Walsh - Crédit Suisse AG, Research Division

I guess as a follow up to that, could you give us the level of utilization for the quarter? And kind of how we should think about that going forward?

Paul Coghlan

As we've said in the past, the factories are sized from a capital equipment standpoint to support sales of over $400 million. So from the equipment standpoint, we're about at 80% utilization. We're staffed up presently to support about $380 million. So if we discontinue doing shutdowns, we could very quickly get back to $380 million.

Operator

We'll go next to Jim Covello with Goldman Sachs.

James Covello - Goldman Sachs Group Inc., Research Division

First question would be on the networking business. You've commented that the bookings were up in all areas so that would obviously include networking. And that's the one area in semis where we've seen some discrepancy with some companies having good results like yourself and other companies not as much. What product cycles or particular areas within networking allowed you to do well when some of the other companies who sold different products in that market may not have?

Paul Coghlan

It was up slightly, and I honestly can't tell you because there is no one customer that kind of dramatically ticked up. It's basically the suite of networking customers we have just were up slightly. I don't think there's any big trend at all there.

James Covello - Goldman Sachs Group Inc., Research Division

Okay. I appreciate that. And if I could ask as my follow up, relative to bookings trends, understanding that the bookings again were up in every segment. Was there any changes we went through the quarter or even in the month of July about how strong the bookings were?

Paul Coghlan

Well, we told you industrial bookings were up. We told you computer bookings were up. We told you automotive was down slightly, military is down slightly. And we don't really gather this end market data by month, Jim. We do it at the end of the quarter, so -- because we do it mainly for this call. I don't -- but thinking back to July, most of which is finished now, I don't know that there's been different distribution of our bookings.

Operator

We'll go next to Chris Caso with Susquehanna Financial Group.

Christopher Caso - Susquehanna Financial Group, LLLP, Research Division

I just wondered if you could expand a little bit on your comments in Europe and recognize that it's challenging to figure out what's going on with Europe now given the normal summer seasonality. Is your sense that what you're seeing is perhaps worse than normal summer seasonality, I guess that makes sense given the macro environment. And then at what point will you have more visibility on what's going on in Europe, I guess that's in the month of September?

Paul Coghlan

Yes. I mean we do think these macro events have impacted Europe. You read in the paper that car sales within Europe were down quite a bit, although export sales are still strong for Europe, export car sales. This -- there's overall malaise. As you read 2 days ago, Wall Street is warning a little bit more about Germany than they had in the past. So I think we'll know more by the end of the quarter, but our expectations are that there will be 2 forces of headwind in Europe: One, the summer, which is generally a headwind due to the vacations; and two, just the general macroeconomic malaise.

Christopher Caso - Susquehanna Financial Group, LLLP, Research Division

Okay. And just as a follow up to that. If you could spend a little bit on the commentary on the automotive market, we have been getting some mixed signals there. Was the implication that the bookings on that were a little bit weaker as you go in the quarter? And I guess maybe that depends upon the geography of those order bookings?

Paul Coghlan

Yes, Chris. I think your intuition is accurate. Relative to automotive bookings, the 2 largest areas for us are Europe and Japan. And Europe automotive bookings were down the most as you might expect given the macro comments we just had. Japan was down slightly, the U.S.A. and the rest of Asia, primarily Korea, were relatively flat. And by the way, this time last year, automotive bookings were also down a bit compared to the previous quarter. So I'm not sure if there's some seasonality in there relative to the June quarter as auto products pick up later in the calendar year, getting ready for new product introductions. But we'll see how it plays out in the September quarter.

Christopher Caso - Susquehanna Financial Group, LLLP, Research Division

Okay. And then just one final one. With respect to your acquisition of Dust Networks and typically, you guys have not done a lot of acquisitions in the past. Is that something in the environment now that that's something you're more open to, perhaps looking to grow the business a little bit more with acquisitions?

Paul Coghlan

No. You're correct. We haven't done a lot of acquisitions in the past, and I think you should look at Dust as being kind of a unique opportunity that fit in with our strategy, so I wouldn't anticipate a lot of these going forward.

Operator

We'll go next to Romit Shah with Nomura.

Romit J. Shah - Nomura Securities Co. Ltd., Research Division

Paul, a question for you. You've talked a lot about some of the general economic weakness that's out there and North America being sluggish and you guys are cautious in Europe. And I'm sure you'd agree that Asia is not probably as strong as it used to be. I'm a little surprised that your orders are holding up very well. I think you mentioned positive book-to-bill and your outlook for Q3 is basically seasonal, maybe a point below. So is it -- from your perspective, is there a particular reason why bookings are holding up so well? Or do you think it's just kind of a timing issue?

Paul Coghlan

Well, I think that 2 things may be helping our bookings. One, I think, underlying all of this macro stuff, there is a fair bit of innovation going on in several key end markets for us. The industrial end market has got energy efficiency, wireless opportunities that really were not prevalent there before. Also the industrial market, some of the consumer products that are selling well needed infrastructure to support them, which infrastructure funnel to the industrial markets. Automotive has its own layer of innovation going on with really the conversion of the car from a mechanical to almost an -- to an electrical product. So that helps. And then, I think -- so you have that underlying innovation. And then what you have, I believe, is that, I think inventories were relatively tight at a lot of customers, so that customers were kind of building to what demand they had and demand they had was coming from some innovation. Like for example, the economies have been poor in Europe, they've been flattish in the U.S., and Asia is still relatively robust, China, but down from its peaks. Yet, every month, automotive sales are better than the previous month. So I mean, I think underlying all of this macro stuff, there's still some reasonably decent demand. And I think that reasonably decent demand, fed by innovation, has helped us to improve our bookings. Now we're improving in like little steps quarter-to-quarter, not big steps, but we're certainly been improving each quarter, and that's why we felt -- just looking in my closing comments, I said looking at what we see internally and putting maybe more weight on that than a lot of the external factors, we think we can grow very modestly in the September quarter similarly to what we've done historically.

Lothar Maier

I think we're in the right place.

Paul Coghlan

Did that help?

Romit J. Shah - Nomura Securities Co. Ltd., Research Division

Yes, that's helpful. And then just a quick question on the guidance. You said sales will be flat up 3%. Should we assume that earnings would be up by similar percentage?

Paul Coghlan

Yes, I think earnings can track what's going on in sales. Yes, I think so.

Operator

We'll go next to Uche Orji with UBS.

Uche X. Orji - UBS Investment Bank, Research Division

Can I just ask you about how you can quantify for us the kind of inventory? And I have a question because back in the March quarter, the general commentary why inventories were lean and somehow, the quarter of the guidance is coming in a little bit weaker. So are we seeing further inventories talking in the channel, any quantification of that would be helpful just for us to understand what's going on there.

Paul Coghlan

Well, I think the guidance for the September quarter being down from the guidance for the June quarter is historically what you would have expected from us. So we're going into the summer quarter, and then in the summer quarter, Europe in particular, slows down quite a bit. So I still think, in our inventory, we told you didn't grow. So -- I think we still feel there's much difference in the inventory in the channel from the end of March to the end of June. So it's just that the summer is typically a slower quarter than the June quarter.

Uche X. Orji - UBS Investment Bank, Research Division

I see, that's helpful. Just in terms of what's going on within China. And the reason I ask this question is you commented about industrial bookings being strong. Any commentary as to what's going on within China by end markets? And I asked this question because if you look at the PMI data coming out of China, both the HSBC and its Kaufman [ph] data, they all kind of were heading down. So any commentary as to what is going on within China that's got industrial and by end markets. I just will have first to understand what's going on there.

Paul Coghlan

Our business in China has really not focused at all into sort of the consumer type of applications in China. Our business is primarily focused in 2 areas like the communications and the industrial market. And it's our belief that China is, even though it's not going to grow as fast as it has historically, but it is going still to continue to grow. And our belief is that China will continue to invest in infrastructure. So even though things slow down maybe a little bit in China. I think the markets that we are targeting to in China are going to continue to grow.

Lothar Maier

And I think as China addresses the fact that its economy is slowing down a little bit, what I've read recently is they have eased a bit the bank lending. And so they would be lending to smaller or predominantly pure Chinese companies that would be building new products, and maybe that would help things like industrial and other markets where they're trying to grow internally their capabilities and have less of an impact on big contract manufacturers. So maybe that...

Uche X. Orji - UBS Investment Bank, Research Division

It's helpful. Just one last question on service. Any commentary as to what's happening within the server business for you? And I asked this also because Intel did have some strong summer sequential bookings obviously as we saw some demand for the new Romley products. But there's also some other elements of the market that seems to suggest that the server market may be a little bit more mixed especially as regards to Greenfield data centers. So any commentary as to what you're seeing there with regards to Linear's business and any outlook would be helpful. That's my last question.

Lothar Maier

We don't particularly break out servers and look at it specifically, but I would say, there is some opportunities for us and we're seeing some gains into things like Solid State Drives, which are being adopted both for PCs, as well as there's compelling reasons to use them in server applications. And so if I to just put any kind of color commentary on it, I would say, we're seeing a little bit of pickup because of the fact that we've won some good designs in solid state drives.

Operator

We'll go next to Tore Svanberg with Stifel, Nicolaus.

Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division

A few questions. First of all, one of your competitors publicly has talked about the visibility beyond August being very clotted. They're not seeing much bookings activity beyond August. That's kind of unusual. How do you view sort of visibility beyond the immediate summer months?

Paul Coghlan

Well, we get our bookings in line with our lead times, and our lead times are 4 to 6 weeks. So I don't know if we have any major comment we would make relative to kind of inter-month dramatic changes in expectations. And going into a summer quarter, the month we would expect historically to be the one with the least bookings would always be August. So we expect that as well this summer, but we don't have any more expectations at the moment that August will be unusually worse compared to previous Augusts.

Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division

That's fair. Second question. You're planning on $25 million in CapEx this fiscal year. I'm just wondering if that's sort of just for maintenance or would that actually take your capacity up to above $400 million a quarter?

Lothar Maier

I would classify that mostly for maintenance and for R&D expenditures, less focus on capacity because frankly we don't need it.

Tore Svanberg - Stifel, Nicolaus & Co., Inc., Research Division

Very good. Last question on Dust Networks. Are they contributing meaningfully at all to revenues near term or should we expect that to be sort of more 12 to 18 months out?

Lothar Maier

I'd look at that's as being more of a long-term play.

Operator

We'll go next to Joe Moore with Morgan Stanley.

Joe Moore

I wonder if you could talk about the industrial business a little bit. I think we all tend to think of that as being economically sensitive and sort of capital spending sensitive. And if there's parts of that like medical devices and stuff like that, they're probably less so. So could you just talk about, I don't know, if you could just think about how much of that is sort of very economically cyclically sensitive versus stuff that is within industrial?

Lothar Maier

Well, I think you're right. I think historically, investors always thought of it as very macroeconomic sensitive. I hope you're getting more of a sense that these new consumer products that come out, they need to be manufactured obviously, and that leads to improvements in the manufacturing area. So if you were to bring some form of computer to market, there'd be certain R&D equipment like scopes that will be needed, then you'd need the whole manufacturing process including plastic molding, different test equipment, different assembly line, stuff so that as you come out with these new computer-related products or consumer products that have done very, very well with certain companies that's helped manufacturing, then medical is something that's probably not particularly, as you commented, not particularly general macro economically sensitive. Some other areas tend to be volatile, and so you can have things like test equipment where test equipment being sold maybe lags a little bit the semiconductor industry so that can go up or down. So -- and then there's just more innovation. I think people just have never given any credit to the amount of innovation that can sometimes take place in the industrial word. And we talked to you particularly about energy efficiency being a big deal, going more portable being a big deal, not yet a big deal, but probably a big deal in going more wireless. So it's such a big area with so many different customers, different cross currents as the automotive business has picked up for everybody electronically in the last year, 1.5 years or 2 years, that's fostered more industrial companies that service the automotive industry. So it's just a whole lot of cross currents that go on in there. But probably, Europe community probably appreciates a little less the amount of innovation that's going on there than someone like us sees on a daily basis.

Operator

We'll go next to Ross Seymore with Deutsche Bank.

Ross Seymore - Deutsche Bank AG, Research Division

Just a question on the shutdown side of things. Do you plan to continue shutdowns in the September quarter? And what's the threshold where you would no longer need those shutdowns?

Lothar Maier

We still have plans to do shutdowns in the September quarter. And we've been through business cycles in the past and we've been able to ride through them using shutdowns for a long period of time. But at some point, we do have to come to grips with what's happening in the marketplace. But it's not something that we need to do very quickly.

Ross Seymore - Deutsche Bank AG, Research Division

And just a couple of quick housekeeping follow ups. Paul, what were the terms in the June quarter and what's required for the September quarter?

Paul Coghlan

High 50s for both.

Ross Seymore - Deutsche Bank AG, Research Division

Great. And then, I guess, the last one. Once a year, you usually give us the backlog number. Could we get that?

Paul Coghlan

Ross, I knew you would ask that question.

Ross Seymore - Deutsche Bank AG, Research Division

Once a year.

Paul Coghlan

Ross, I was going to try and trick and limit you to 2 questions and have you hanging out there without asking the question. That's $143 million.

Operator

We'll go next to C.J. Muse with Barclays.

Christopher J. Muse - Barclays Capital, Research Division

I guess first off, I was hoping you could compare and contrast the downtick we're seeing here in macro malaise versus 12 months ago, whether lead times, by end market. We'd love to get your thoughts on where things are similar and where things may be different.

Lothar Maier

Well, that's a tough one. I think 12 months ago, what you had was the Japanese effect of the tsunami, et cetera. It was realized that, that problem will be solved sooner than what was initially anticipated. So part of the reason our first 2, if I can address it in terms of our performance, part of the reason our first quarter of the last fiscal year was down was there was some inventory correction and it had led to people over bordering for fear that they couldn't get products at that had any kind of -- anyway related to the Japanese issues. Then as you moved into December little bit, you had kind of Thailand flooding, which caused some perturbations in ordering patterns particularly in the computer markets, and a bit actually in the industrial market that impacted us. Now, it's kind of more just pure macro stuff that's impacting, we think, our guidance. We told you in the March and June quarter, the macro environment, although it's deteriorated, there weren't other things going on, so it was more easy for us at least believed we were matching our growth in sales with what was going on in the end markets. So to compare macro now to last year, I just -- I think that -- I think we think the macro environment in is Europe is worse. We think that -- we went through quarters, Chris, that we kind of thought Europe was all of us, that Europe was maybe going to solve the problem. And once Germany said they'd step up to the bar, a bit more maybe that would have solved the problem, but it just keeps seeming like this one step forward followed by 2 steps backward. And then the U.S. now, I think, is just -- I think it's just sitting there waiting for the election and see what's going to go on. So U.S. is probably a little bit worse, and Europe probably a lot -- not a lot. I don't want to sound panicky worse, but it's -- to speak poor English is more worse than it was a couple of quarters.

Lothar Maier

I think there's a sense versus a year ago then maybe we're close to the edge of the cliff.

Christopher J. Muse - Barclays Capital, Research Division

Yes, that's helpful. And a quick follow up, can you talk about the expected linearity in the quarter, meaning how back-end loaded will the quarter be in the month of September?

Paul Coghlan

Well, I think it's the typical summer quarter. I mean, September is a key month. For us, it doesn't have to be any more of a key month than it's been in the past. So I don't -- I think -- I don't know. I don't think there's -- I mean, a lot -- the quarter depends on September, to some extent, just like the June quarter dependent on June and the March quarter on March and a little bit more in the summer, but I don't know if all the eggs are in the September basket. I really wouldn't classify it that way.

Lothar Maier

And just in general, our shipments are usually pretty linear. There's never a big hockey stick at the end.

Operator

We'll go next to Craig Berger with FBR Capital Markets.

Craig Berger - FBR Capital Markets & Co., Research Division

Just wanted to ask about the competitive environment. I understand there's not pricing pressure once you win a socket and you're in it. But did want to ask on the competition in terms of those socket bake-offs. Are you seeing other competitors be more aggressive on price in order to win sockets? Who do you see out there that has technology that's challenging you guys?

Lothar Maier

Sure. We've got competitors and it's a competitive marketplace and you've gotten to have compelling products. I think our focus into the automotive and the industrial markets has from a competitive -- competitor standpoint, has actually decreased because there just aren't as many competitors focused on those markets, and there's just not as many competitors who really have the products and the technologies to sell them that market. So price is always important in negotiations with customers, but I would say, there's just less competitors in the area that we are presently focused in. Unfortunately, those happen to be the markets that are also growing the fastest.

Paul Coghlan

I think, Craig, a lot of the bake-offs you allude to, it's been our sense over many years that the biggest bake-offs are in the consumer area, the cell phone area, a little bit of computer area. As Lothar alluded to, some of the areas were in the automotive. For example, it's that functions of your product that the client's perception of your quality and delivery. Some of those kind of push the bake-off-ish-ness, if there's such a word, kind of side a bit.

Craig Berger - FBR Capital Markets & Co., Research Division

Okay. And then just as a follow up, in industrial and automotive, are customers depleting inventory at these levels of shipments or maintaining inventory levels? Have they given you any indication there?

Lothar Maier

We think it's flat. We don't think there's been a changed one way right here.

Operator

Sumit Dhanda with ISI Group.

Sumit Dhanda - ISI Group Inc., Research Division

First question, Paul. Just wanted a clarification on an earlier question on inter-quarter bookings trends. Was your comment about not having that data specific to distribution or you don't have a sense of how bookings shift during the quarter for the overall company either?

Paul Coghlan

Sumit, I thought the question addressed end markets, and I thought the question said, did I see any shift in end market bookings in the July quarter, in the July month? And my response was, we don't gather that here by end market except quarterly. We do it primarily for purposes of talking with you folks, so that we don't gather the data on a monthly basis by how much was automotive, how much was communications. We do gather it geographically, we do gather it by product type, we do gather it by customer, but we don't gather it by end market. So I thought the question was asking me about end market shifts by month within the quarter. But I didn't have the data for it.

Sumit Dhanda - ISI Group Inc., Research Division

Okay. Well, then let me modify my question. I guess it's just overall at a high level, was there any kind of a change in pattern in bookings for the company as the quarter progressed?

Paul Coghlan

No. I mean, the quarter -- each month was a little bit better than the previous month as the quarter progressed. Now that June quarter has 5 weeks in it, so I mean, the June quarter was better than the May quarter, the May quarter was better than the April quarter. I think June quarter on a 4-week, 5-week run rate was pretty close to May. So maybe there wasn't a big change there, but there was no hockey stick nor inverse hockey stick of any magnitude.

Sumit Dhanda - ISI Group Inc., Research Division

Okay. And then the same applies for the month of July thus far on a weekly...

Paul Coghlan

Yes, we're off to a reasonable start, start to support the guidance. If we had problems with, it would have impacted our guidance. So we're off to the start that's relative to the guidance we gave.

Sumit Dhanda - ISI Group Inc., Research Division

Okay. And then just to take that one step further. When you're saying that the macro is worse exiting the quarter but you're assuming relatively flat turns to hit the midpoint of a guidance, how exactly are you baking in the macro weakness exiting the quarter? Is it just you're expecting that to be isolated predominantly to Europe, and Japan and Asia picks up the slack? How do you factor that in?

Paul Coghlan

Well, we're guiding less than we guided last quarter. Last quarter, we guided 4% to 8%. This quarter, we're regarding 1% to 3%. So some of that seasonality, as we've talked to you, and it's in Europe and some of Europe's macroeconomic stuff. And then the U.S. has its own patterns and again, we've guided down a bit from last quarter.

Sumit Dhanda - ISI Group Inc., Research Division

Okay. My last question, Paul, any discernible differences in how OEMs or distributors versus distributor bookings either in the quarter or the last several months?

Paul Coghlan

No.

Operator

We'll go next to Steve Smigie with Raymond James.

Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division

This is first question. It's just that following up our earlier question, I think you said it looks like earnings would probably track revenues for the quarter. I would think with a better revenue level, you playing a little better utilization to gross margin at the open. And typically, you guys are pretty good at showing OpEx improvements as a percentage. So wouldn't earnings be a little bit faster, and that part is -- could you just give commentary on what you think OpEx dollars would be sequentially in September relative to June?

Lothar Maier

Well, I thought that the question was, did I think the guidance is 1% to -- is 0% to 3%. So I thought the question was, did I think my operating income would track however the guidance turned into reality by the end of the quarter? And I said, I thought it would be pretty close. So maybe I don't further understand your question. Maybe you can ask a question.

Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division

I guess just maybe simply give some sense as how you think dollars will be sequentially September relative to June?

Paul Coghlan

I mean, I think our R&D will be up. We said we hired a few people in R&D. I don't think we'll be up dramatically. My guess is SG&A won't change very much in the quarter, but I don't have the exact numbers in front of me.

Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division

Okay. And then just wondering if you could give some sense on the regional basis what you think communications, equipment orders are looking like? So are you seeing stronger pull through, for example, in Asia or North America in these builds? There's been a lot of talk of potentially -- talk about builds to see the back half of this year. I'm just wondering if you're seeing that and is there a particular reason stronger or weaker.

Lothar Maier

That's a tough one. We sell into the communication markets pretty much around the globe. I would say Europe has in the past been pretty slow. And if anything, I'd say maybe there's a bit of a pickup into Europe. Probably that would be the only area that I would say. There's maybe a sense that there's some new builds occurring in China, so there's some opportunity for some growth and maybe we've seen a little bit of growth in that area. But I think probably the biggest one would be the fact that Europe was pretty quiet for us for a number of quarters and we're seeing a little bit of the pick up there.

Jonathan Steven Smigie - Raymond James & Associates, Inc., Research Division

The North America market?

Lothar Maier

I would call it flattish.

Operator

We'll go next to Terence Whalen with Citi.

Terence R. Whalen - Citigroup Inc, Research Division

This one is a higher level architecture question. One of your peers breaks out the percentage of integrated products in terms of their overall portfolio, their overall revenue. Can you comment on what portion of your revenue or what portion of your product portfolio you would consider integrated? I know that that's a subjective standard, but maybe integrating different functional block together on a unified process.

Paul Coghlan

Boy, that's a tough one. I don't think we're really breaking out -- I wouldn't even know how to get you that data. But what I could tell you is that integration means making the products multifunctional and making them more complex. I would say that's a general direction that our products are heading. But the absolute number of single function and integrated products, I have don't have that number.

Lothar Maier

So let me give you another sort of read on that. So our ASP is, as you hear, is $1.82. The average selling price of the $40 plus billion analog market is less than $0.50. It's that way now and has been that way for 30 years. So that kind of gives you an idea about ASP is that much higher than $0.50, that our products in general have a lot of integration.

Terence R. Whalen - Citigroup Inc, Research Division

Okay. That's a helpful framework. And then the following question that I have was on dividend. It seems like we've been hovering near $0.25 a quarter here for the past 8 quarters. How do you think about raising the dividend? And are we limited by domestic free cash flow generation as a current dividend payout of about $60 million per quarter?

Paul Coghlan

Okay. First, we're not limited by current cash flow generation domestically versus internationally. Secondly, of the dividend, when you say it's hovered around $0.25, we generally are almost always increased the dividend once a year and we do that in early January and announce it at the close of the December quarter. And we've increased it $0.01 each of the last several years. So -- and these years have been in kind of difficult economic times as you know. There's been recessions followed by snap backs followed by over inventorying and other issues, followed by macroeconomic worries, followed by election worries. So that the -- it's been a kind of roller coaster up and down. And in that timeframe, whether good years of bad years, we've increased it. So I think we've increased it $0.01 each of the past years. And if that to you seems not enough, we thought it was appropriate in the environments we're in.

Terence R. Whalen - Citigroup Inc, Research Division

Okay, understood, Paul. And then last one, if I could squeeze one in on Dust Networks. It seems like it's such a departure for you guys to have made that acquisition. You're taking a little bit of OpEx hit without revenue here. So obviously, there were compelling reasons for you to make the decision to go ahead and pull the trigger on that acquisition. What are you guys thinking in terms of the served available market for that business over the next several years? And is the motivation really purely just to attack that with Dust products or is it often put along other Linear products as well?

Lothar Maier

The acquisition that we did, we did specifically for the Dust products. We obviously consider there would probably be the potential that there'll be some pull through on our existing product portfolio. This is an emerging market, I think we're going to be first into really pushing into this market. The wireless connectivity and the industrial market is just starting to get rolling. And I'm not sure I could say what server-to-mail market is, but it ain't a big number right now, but we can see it as this machine-to-machine connectivity is moving forward and I think it's going to be growing somewhat geometrically in the future. So it wasn't a big bet for us, but it offered us some technology that we didn't have, and it's a bit of a bet into a market that we think is going to grow. But it was interesting and it will, in the long term, leverage our products and I think it will benefit from the fact that this particular product now has hundreds of Linear sales people behind it as well. So we can push that market and not necessarily have to wait for it to evolve by itself.

Paul Coghlan

And just to supplement Lothar's comments, I think the TAM, as Lothar said, is small. Now for the output. We would expect if you asked us this question a couple of years from now, that TAM will have increase quite significantly. So when we first talked to you about micro modules, it was new and very small, and we said that could reach a very substantial number and has done that, and we would expect the same what happened at Dust overtime.

Operator

We'll go next to Christopher Danely with JPMorgan.

Christopher B. Danely - JP Morgan Chase & Co, Research Division

I just have one quick question. Actually just a follow up on what Terry asked. So you talked about your high level of profitability and I think it's a testament to the business model that over the last 6 quarters, you've been -- you're going through 1, 2 downturns. You've still managed to build, I want to say, pretty much close to $500 million in cash. However, the share count is slightly up. You haven't really done much with the debt. Yes, your dividend goes up with a $0.01 a year, but clearly, your cash building is outstripping that. So I'm just wondering what the plan is to return this cash surplus to shareholders. And also, if you could talk about, is there anything going on with the debt anytime soon?

Paul Coghlan

Sure. The debt is impacted in what we will do with our cash. We have -- the debt is callable in May 2014. So we have roughly $850 million that we would need to come up with between now and May of 2014. We have most of that but have been building to get to that point. So if you look at what the uses of cash in the next couple of years are, we're very committed to the dividend and to raise the dividend each year. We're also committed to paying down the debt. So those are the 2 primary sources of our utilization of cash. And last year, we spent roughly $76 million to buy back some stock to try to keep the share count, the increase in it that relates to stock option activity to try to put somewhat of a damper on the impact of that.

Christopher B. Danely - JP Morgan Chase & Co, Research Division

Is there some sort of net cash level or cash level where you think that, hey, we're fine here and we can start to return a little more to shareholders? Or we'll we just continue to see the cash build up?

Paul Coghlan

Well, its -- that's a difficult question to answer because you look at how you can implement the cash. You can return the cash to shareholders a bit at a time. You can do a big share buyback. We did one of those in 2007. In hindsight, you might now say, that was -- give back the cash to shareholders that we shouldn't have done. Although we think it was the right thing to do still. So what having cash gives you is a lot of flexibility when you have it as to how to employ it. So we don't necessarily want to lock ourselves into a plan to share with you about how we're going to do that quarterly, but just say if you look at our past performance, we've increased the dividend, we bought back shares, we paid off debt and we think we've been a prudent user of cash for the shareholder. So that's what we intend to keep doing going forward.

Operator

We'll go next to JoAnne Feeney with Longbow Research.

JoAnne Feeney - Longbow Research LLC

Just wanted to go back a little bit to an earlier discussion on where we are relative to history. In particular, what some of us may have been looking for here in the second half of the calendar year was a bit of a catch-up after this period of sort of a lull in sales in industrial and auto, et cetera. And I'm wondering what you think about that at this point in time. Do you see that the supply chain can simply become more efficient? Do you see a reset in trends and no catch-up from the first half weakness is required? Or do you see that the catch-up is merely delayed? And so if you could elaborate on that. And last, with respect to industrial, it would be real helpful.

Lothar Maier

Yes. If you pull back time a quarter or so, I think there was a general feeling that the second half of the calendar year was going to be stronger than it looks like it is right now. But I don't think that has anything to do with supply chain issues. It just have to do with just economic concerns that affect all companies.

JoAnne Feeney - Longbow Research LLC

And so you're thinking that maybe it is simply delayed that once this uncertainty gets resolved, you can get a bit more confident, we'll start to see that and kind of inventory retail creating that catch-up growth spurt.

Lothar Maier

Yes. In the past, I'm optimistic with the products in the markets that we are in that if the market does pick up, I think we could benefit significantly from it.

JoAnne Feeney - Longbow Research LLC

Okay. And then on the composition of inventories. I thought it was interesting that your finished goods inventories have fallen and your die bank has gone up. Is that a deliberate strategy? Are you just anticipating a bit more uncertainty in the products you will need to shift, so you want it to be die bank rather than finished goods?

Lothar Maier

Yes. I would say it's in the noise. We typically try to keep more of our inventory and die bank than in finished goods. It just gives us more flexibility. Then we move ground a little bit from quarter-to-quarter. We're working hard not to grow our inventory and so it's a lot less costly from an inventory standpoint to keep it in die bank than in finished goods. So I think it's just us being prudent in how we manage our inventory.

JoAnne Feeney - Longbow Research LLC

And then finally, if I could. In the past, you've given us some hint to your guidance sort of end market by end market, computing industrial, auto, communications. Can you give us any sense of which might be above or below that 0% to 3%? Which is there in the high end, which 2 might get the low for end this quarter?

Lothar Maier

JoAnne, I don't recall giving you a hint in the past relative to quarter performance. What we did say in the past is starting several years ago, we said that we were going to put more emphasis on industrial and automotive at the expense of -- and that those would grow faster than overall growth rate. And that consequently, areas that we -- such as consumer and cell phone would be reduced. And we said that, that was our general strategy. We pretty much executed that strategy and that we're now down to consumer and cellphones only about 4% of our business. And what we hope you picked up concurrent with that is that if you look at the growth of the analog market over the last 3 years, the compound annual growth. The 2 fastest-growing areas in the analog market relatively significantly are industrial and automotive. And that Linear has grown its industrial and automotive at a faster rate even than the overall analog market has grown the 2 fastest-growing areas. So we think we made a good choice as we sit here now. We think there's a lot of technology in those end markets. And so we've kind of told you in the past, giving you either hints or bluntly said, we thought we were going to grow those areas the fastest over time. But it's hard for us to really project how exactly, how any one of those markets will do in an individual quarter.

JoAnne Feeney - Longbow Research LLC

Okay. That message has come through loud and clear. I guess I was wondering perhaps with respect to the seasonal patterns that are common in the September quarter, plus the particular sort of macro or geographical page weakness you're seeing now. It's appropriate to expect that industrial and auto will do better this quarter than say, computing and communications? Give any hint as to that?

Lothar Maier

Well, as you're dragging this hint out of me, word by word, through my teeth with my lips closed. If Europe typically has the most struggle in the summer quarter, and if Europe this year may have even more struggles in the summer quarter, by far, the 2 biggest end markets Europe serves for us are industrial and automotive. So, yes, you're dragging this out of my teeth, you could conclude therefore that well if Europe is going to be the weakest performer for Linear, that if it is any impact, would have it in the automotive and industrial area.

Paul Coghlan

But I think, maybe that's true for a short term. But if you look beyond just the current quarter, we're very optimistic about the automotive market. Even though we went from 17% of our business to 16% last quarter, it's up from 12% a year ago. And our sense is that of all of our end markets, the automotive market has probably the potential to grow fastest than any of our end markets. And quite frankly, we wouldn't be surprised if sometime in the not-too-distant future, that automotive could be pushing 20% of our business.

Operator

We'll go next to Shawn Webster with Macquarie.

Shawn R. Webster - Macquarie Research

As far as I've gone, the December quarter goes, if I look at your history, it's normally a flat or down a little bit. Is there -- and regarding for something approximately seasonal for your September quarter. Is there anything happening in terms of expected channel refill or maybe some new product cycles that might be helping you buck the seasonal trend for December at this point that you can tell?

Lothar Maier

Well, we haven't said anything, Shawn, about December. So we're really just commenting on the September quarter. And given all the macro stuff out there, we're not really commenting on December. So if you look at our historic growth rates, December was normally a quarter that was better than the September quarter. But historically, again looking at Linear performance over time, the best 2 quarters for us are the March quarter, the June quarter. And third would be the December quarter, and fourth, typically has been the September quarter. But in these macroeconomic times, it's hard to make that call. It will be hard enough for us to talk to you this second week in October about it. Let me talk to you next month.

Shawn R. Webster - Macquarie Research

Okay. And then on the pricing, it was up a little bit, but down, I think, for the first time in several years. Is that a mix effect or were there pricing actions that you've been taking, or is there anything to explain the year-over-year decline in pricing?

Paul Coghlan

I didn't understand -- what do you mean year-over-year? Well, last year, it was $1.87 in the fourth quarter, now it's $1.82. I wouldn't read anything into that. I don't -- that's just a mix issue within the quarter.

Shawn R. Webster - Macquarie Research

Okay. And then maybe my final one then is the breakdown by chip type out of our fiscal year for your Q4 between your power management and mixed signal and signal conditioning. Has there been any movement versus last year?

Paul Coghlan

No. Power is generally about 60% of our business and then mixed signal and signal conditioning, which includes high frequency, those 2 are about equal, they're about 20% each.

Shawn R. Webster - Macquarie Research

That was for the fiscal '12 or for Q4?

Paul Coghlan

They probably pertain to both, that was roughly true for Q4.

Operator

We'll go next to Ambrish Srivastava with BMO capital.

Ambrish Srivastava - BMO Capital Markets U.S.

Actually, all my questions have been answered.

Operator

[Operator Instructions] And there appears to be no further questions at this time.

Paul Coghlan

Well, thank you very much for your attention. Thanks for some very good questions. We hope you all have a good day, and we're looking forward to executing our September quarter. Have a nice day. Bye-bye.

Operator

That does conclude today's conference. Thank you for your participation.

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