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Executives

Doug DeLieto - VP, IR

Bob Bruggeworth - President and CEO

Dean Priddy - CFO

Analysts

Uche Orji - UBS

Edward Snyder - Charter Equity Research

Ittai Kidron - Oppenheimer

Todd Koffman - Raymond James

John Lau - Jefferies & Company

Tore Svanberg - Thomas Weisel Partners

Craig Ellis - Citigroup

Mark McKechnie - AmTech Research

Venk Nathamuni - JPMorgan

Harsh Kumar - Morgan, Keegan & Company

James Faucette - Pacific Crest

Jonathan Goldberg - Deutsche Bank

Aalok Shah - D.A. Davidson

Suji De Silva - Kaufman Brothers

Steve Ferranti - Stephens Inc.

Dan Berkery - O'Connor

RF Micro Devices Inc. (RFMD) F1Q09 (Qtr End 06/28/08) Earnings Call July 29, 2008 5:00 PM ET

Operator

Welcome to the RF Micro Devices first quarter Earnings Call. (Operator Instructions). This conference is being recorded today, Tuesday, July 29 of 2008.

At this time, I would like to turn the conference over to Doug DeLieto, Vice President, Investor Relations. Please go ahead, sir.

Doug DeLieto

Alright, thanks very much. Good afternoon everyone and welcome to our conference call. At about 4 p.m. today we issued our earnings release, if anyone listening did not receive a copy of the release please call Janet Jasmine at the Financial Relations Board at 212-827-3777. Janet will fax copies to you and verify that your name is on our distribution list.

In the meantime, the release is also available on our website rfmd.com and under investor info and on PR Newswire. At this time I want to remind our audience that this call includes forward-looking statements, within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations and contentions and are not historical facts, and typically are identified by use of terms such as may, will, should, could, expect, plan, anticipate, believe, estimate, predict, potential, continue and similar words, although some forward-looking statements are expressed differently.

You should be aware that the forward-looking statements included herein represent management's current judgment and expectations, but our actual results, events and performance could differ materially from those expressed or implied by forward-looking statements. We do not intend to update any of these forward-looking statements or publicly announce the results of any revisions of these forward-looking statements, other than as is required under the federal securities laws.

Our business is subject to numerous risks and uncertainties, including variability in quarterly operating results, the rate of growth and development of wireless markets, risks associated with our planned exit from our wireless systems business, including cellular transceivers and GPS solutions, the risk that restructuring charges maybe greater than originally anticipated and that the cost savings and other benefits from the restructuring may not be achieved, risks associated with the operation of our wafer fabrication facilities, molecular beam epitaxy facility, assembly facility and test and tape and reel facilities, our ability to complete acquisitions and integrate acquired companies, including the risk that we may not realize expected synergies from our business combinations, our ability to attract and retain skilled personnel and develop leaders, variability in production yields, our ability to reduce costs and improve gross margins by implementing innovative technologies, our ability to bring new products to market, our ability to adjust production capacity in a timely fashion in response to changes in demand for our products, dependence on a limited number of customers, and dependence on third parties.

These and other risks and uncertainties, which are described in more detail in our most recent Annual Report on Form 10-K, and other reports and statements filed with the Securities and Exchange Commission, could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.

In today's press release on today's call, we provided both GAAP and non-GAAP financial measures. We provided the supplemental information, to enable investors to perform additional comparisons of operating results, and to analyze financial performance without the impact of certain non-cash expenses, unusual items that may obscure trends in our underlying performance.

During tonight's call, our comments and comparisons to income statement items, will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today, which is available on our corporate website, rfmd.com under the heading investor info.

In fairness to all listeners, we ask that participants please limit themselves to one question and a follow-up, after each person in the queue has received a turn, we'll give the participants an opportunity to ask a second question.

With me today on the line are Bob Bruggeworth, President and CEO; and Dean Priddy, Chief Financial Officer as well as other members of RFMD's management team.

And with that, I'll turn the call over to Bob.

Bob Bruggeworth

Thank you, Doug. Welcome everyone and thank you for joining us. One quarter ago, we announced a strategic restructuring that positioned RFMD, to deliver the largest increase in profitability in our Company's history.

Today, we're pleased to provide you with a very favorable assessment of our demonstrated progress to-date, including market share gains, revenue diversification and cost reductions that put us ahead of the plan we outlined in May.

Our greatly improved fundamentals are the direct result of solid execution by the entire RFMD team. We have turned our focus to our most profitable business, RF components, where we are the recognized leader and where our unique combination of core competencies, provide a clear competitive advantage. We are number one in compound semiconductors and we are number one in cellular front ends.

Over the past year, we have successfully diversified our business into non-handset multi-market products that enjoy significant growth, higher gross margins and longer product lifecycles.

At the same time, we have focused our design activity and our cellular business on higher margin opportunities and share gains at leading key accounts. As a result, we are now position to deliver sustainable long-term growth and profitability, with a business focus that fits squarely within our core competencies.

As our June quarterly results demonstrate, we are realizing the benefits of our sharpened focus on our high growth cellular components and on MPG's high-value RF components business. We are already delivering the expense reductions forecasted for later this calendar year, meaning, we are well on our way to our stated goal of at least 10% operating income, by the December quarter.

During the June quarter, we delivered $240.5 million of revenue, highlighted by cellular front end growth that was substantially better than the market seasonality and extremely strong sequential growth in MPG.

We expanded our gross margin to 33%, reflecting an improvement of 240 basis points over last quarter. We posted operating income of $2.3 million, a net income of $7.9 million, both of which are significant improvements over last quarter.

In our core market of cellular front ends, RFMD was a net market share gainer in the June quarter, with front end sales growing approximately 10% or approximately three times faster than the global handset unit growth rate in the June quarter. By air interface standard, our greatest growth was in 3G, and we expect 3G will continue to be a growth catalyst for RFMD into the future.

RFMD enjoys a distinct advantage in 3G. Given our industry leading 3G product portfolio, our superior gas process technologies, our assembly capabilities, our outstanding customer and channel partner relationships, and our deep systems level expertise.

Before moving to MPG, I'll comment briefly on the overall handset market. For much of this year, the handset market has been the subject of much discussion and debate, regarding the overall demand in growth rates.

As an industry leader in the handset value chain, we can attest to the fact, that certain accounts and certain geographies have at times, experienced softness. And yes, some accounts continue to experience limited pockets of weakness. However, certain geographies, air standards and customers are seeing considerable strength.

RFMD is a highly diversified supplier across geographies, air standards and customers, and we hope you take this into consideration, when you speculate on our future performance. For example, in the June quarter, despite pockets of softness in China, we took share at targeted OEMs and grew our front end business greater than 10%, faster than our peers and approximately three times the global handset unit growth rate.

Looking into the second half of calendar 2008, we see order activity improving, and we continue to model 10% global handset growth in 2008. Also, as I have indicated previously, there are a number of trends working to our advantage. Not only in 3G, but also in GPRS and EDGE, where the adoption of our transmit modules is favorably impacting our dollar content opportunity.

Furthermore, over the next two to three quarters, we expect to be a share gainer at leading handset customers and we believe our enhanced competitive position affords us a degree of flexibility.

Now moving on to MPG, our June quarterly performance highlights, our diversification efforts and speaks volumes about the operational excellence underlying our integration efforts.

As a recap, in early June, we increased our MPG revenue target to the high-end of the range and said sequential growth for MPG would be at least 20%. Today, we're very pleased to report that MPG's June quarterly revenue performance exceeded the 20% sequential revenue target by a very significant margin.

In the process, MPG is diversifying RFMD into a broader set of customers and end markets including cable TV, wireless infrastructure, wireless connectivity and aerospace and defense. MPG supports thousands of customers with a product portfolio that is expanding quickly.

In the June quarter, MPG introduced 27 new products, expanding our product pipeline and supporting our revenue expectations. For the fiscal year, we are on track to introduce over 100 new products.

Given our June quarterly results, and our MPG outlook going forward, we now anticipate, we will easily exceed the MPG revenue target we provided two quarters ago of $250 million in fiscal 2009.We are also comfortable reiterating our expectations for achieving our target financial model for MPG by the end of this fiscal year.

As a recap on our strategic restructuring, we have completed the organizational reduction related to our May 6th announcement, reflecting a workforce reduction of approximately 10%. As I said earlier, we are ahead of plan on our expense reduction, and we are squarely on track to achieve our previous guidance of 10% non-GAAP operating margin by the December quarter.

Finally, as part of our May 6th restructuring announcement, we indicated our intent to sell our GPS business. We engaged with multiple potential buyers, but unfortunately we were unable to reach an agreement with these parties. Going forward, we retain significant intellectual property related to our GPS business, and we are now pursuing licensing opportunities, which could be accretive to our operating results.

So to summarize, RFMD is a more profitable and stronger company with a growth strategy that is squarely focused on the core areas of leadership. We are investing in and growing our most profitable businesses, and we have clear and measurable goals for continued improvements in financial performance, including return on invested capital and operating margin.

Our strategic restructuring is ahead of schedule, and we remain firmly committed to our stated goal of at least 10% operating margin and double-digit return on invested capital by the December quarter. Over the coming quarters, we believe our P&L will demonstrate superior financial leverage driving significantly improved profitability.

With that, I'll turn the call over to Dean for additional detail about our financial results and our outlook.

Dean Priddy

Thanks, Bob, and good afternoon everyone. Just as a reminder, as Doug pointed out earlier in the call, my comments and comparisons to income statement items will be based primarily on non-GAAP results. Today, I'll cover the June financials and September guidance, beginning with our June quarterly results.

Revenue for the June quarter grew 9% sequentially to $240.5 million, well ahead of the mid-point of our guidance and consistent consensus estimates. CPG and MPG both had strong quarters. MPG easily is our revised revenue target of 20% sequential growth. I think it's important to note that all five business units within MPG grew, and we now forecast MPG will exceed FY ‘09 revenue guidance of $250 million.

Our MPG strategy is working and is ahead of schedule. In CPG, RFMD was clearly a share gainer in the June quarter, as our cellular front end business grew 10% sequentially. Our cellular front end growth came from additional content and functionality within the handset, plus crisp execution on customer diversification.

The growth we saw in cellular front ends reflect last quarter's commitment to triple our business at Samsung and double our business at Sony Ericsson. LG's front end business was also a growth driver. Our strategy to sharpen our focus on cellular components is working and is ahead of schedule.

As we guided in May, our transceiver business was down sequentially, now represents well under 10% of total revenue. Sales of POLARIS 2 with Motorola decreased approximately $22 million sequentially and now stand at less than 3% of revenue. This is an important point, as we now believe cellular demand for Motorola has reached an inflection point and no longer represents a headwind to our financial performance.

Gross profit was $79.4 million with gross margin of 33%, an increase of 240 basis points. The margin improvement is largely the result of the strength we saw in MPG and soft synergies related to our diversification strategy.

Operating expenses were $77.1 million compared to operating expenses of $80.9 million last quarter. As Bob mentioned, we are ahead of schedule in our planned expense reductions and on track to achieve 10% operating income by the end of the calendar year.

Operating income was $2.3 million compared to an operating loss of $13.4 million last quarter. An important milestone has been achieved, and we believe RFMD has entered a period of superior financial leverage. In the June quarter, revenue grew approximately $20 million sequentially and operating income improved $15.7 million, representing fall through of over 75%.

In percentages, with a 9% increase in revenue, our operating margin improved approximately 700 basis points. As evidenced by results and guidance, we anticipate continued strong operating leverage as the year progresses.

Other income expense was approximately breakeven and non-GAAP net income for the June quarter was $7.9 million or $0.03 per diluted share based on 293 million diluted shares assuming the, if converted method.

Now, going to the balance sheet. Total cash and short-term investments were $197 million; cash declined quarter-over-quarter as we incurred restructuring costs, saw a temporary increase in China VAT receivables and completed a previously announced small acquisition.

As we guided last quarter, we project our cash balance will show substantial improvement beginning in the September quarter and continuing throughout the fiscal year. Net accounts receivable was $117.2 million, with DSOs dropping to 43.9 days from 47.2 days last quarter.

Inventory declined over $10 million to $180 million resulting in turns of 3.7 and we project inventory turns will continue to improve throughout the year. Net PP&E was $418 million compared to $430 million last quarter. CapEx during the quarter was $18.5 million with depreciation and amortization of $30.2 million. We are on track for approximately $55 million in CapEx for the fiscal year.

Now for the guidance. We project September quarterly revenue to be in the range of $250 million to $260 million, a sequential increase of up to 8%. We anticipate revenue growth in both CPG and MPG.

We expect continued strong leverage in our operating results, as revenue continues to grow, margin improvements take hold, and expenses decline. We currently expect non-GAAP earnings per share of approximately $0.05 using the, if converted method and approximately 293 million shares.

Finally, I would like to comment on taxes and how we intend to report in the future. Historically, our non-GAAP presentation has attempted to model the impact of statutory taxes. Our current view is that using cash taxes reduces tax rate volatility and provides more visibility into the true economic performance of RFMD.

Beginning in the December quarter, we will report our non-GAAP results using cash taxes. For modeling purposes, we anticipate approximately $3.5 million in cash taxes in both the December and March quarters. In fiscal year ‘10, we anticipate a cash tax rate of approximately 15% to 20%.

Thanks. And with that, I'll open the call up to questions.

Question-and-Answer Session

Operator

(Operator Instructions). And our first question is from the line of Uche Orji with UBS. Please go ahead.

Uche Orji - UBS

Thank you very much. My first question is on MPG. Can you talk specifically about what end markets that drove the strength you saw in MPG, and can you give us some updates on what target gross margin will be for this business? I know if you know the revenue, but as the revenue grew, if any change to the model gross margin for the MPG group?

Bob Bruggeworth

Yeah, the MPG business was basically driven across the board. There is about 33 end markets. So, we definitely can't go into each one, but clearly with each product line within the MPG being up sequentially, we saw broad based market growth.

Infrastructure was up, broadband and consumer, our Wireless Connectivity business, Wireless LAN PAs if you will, standard products. So across the board we saw strength in MPG and also we're seeing considerable order strength over the past few weeks. And in MPG, our target gross margin is 50% and our target operating income or operating margin is 20%.

Uche Orji - UBS

Thank you very much for that. You said something during the call about Motorola having reached an inflection point and there's no longer a headwind. Can you add some color to that comments?

Is that because of a seasonal turn in Motorola's business or is it because you are satisfied and now that is no longer significant for you? How does one, can you add some color to that comments just for us to understand what trends there are within Motorola for you?

Dean Priddy

Yeah, with Motorola, especially with the Polaris revenue at Motorola, we were at a level one-time of approximately $80 million per quarter, and that was just a few quarters ago. And we've seen that revenue decline over the past few quarters, and we feel like with the revenue reaching the low millions now, we have reached an inflection point. So, it's no longer going to be swimming upstream so to speak with declining Motorola revenue, at least in CPG.

And once again the Motorola revenue in MPG remains very strong and very segments within Motorola that clearly within CPG, we feel like we reached the bottom and that is no longer going to be a headwind to our financial performance.

Bob Bruggeworth

I'd like to add to that. Clearly, we've got a product cycle going through there along with Motorola's overall volumes, but we are still engaged with Motorola and still have a lot of designing activities for new phones, that are yet to be announced and we're working on with our cellular front ends along with some recently announced products that include Polaris that we announced earlier in the quarter.

So, Motorola is still a good target for us in our front end business, whether that switches, L and As or front end modules, transmit modules or just discreet PAs.

Operator

Thank you. Our next question is from the line of Edward Snyder with Charter Equity Research. Please go ahead.

Edward Snyder - Charter Equity Research

Thanks. Back to Polaris real quick, you said you're down in the low single-digit millions in Motorola, and that's an inflection point. Why that I'm assuming its going to be flat to slightly up, but modestly so. And if that is the case, did I hear you say that transceiver revenue is about 10% of your total for the year; would you suggest that your other customers for transceivers were making up about 7%.

Is that going to increase in this coming quarters? Will transceivers break above 10% in the next say two or three quarters or do you expect flat to down overall for transceivers. And then in terms of the product mix here. You've obviously gained a lot of ground in some of the Korean OEMs. Is your exposure to 3G improving with that share gains or are you looking at more mid-tier small or lower tier phones? Thanks.

Dean Priddy

Ed, I'll take the first part of the question and has to do with transceiver revenue. We said that total transceiver revenue was under 10%, and in fact it trended well under 10% for the quarter. Now, yeah going forward, we do expect transceiver revenue will grow, as we had a press release early in the quarter about multiple handset models using both P2 and P3.

So, we haven't really set any specific guidance in terms of percentage of revenue. It kind of depends on how fast MPG grows and how fast our cellular front end business grows, but we do see revenue growth coming in transceivers.

Bob Bruggeworth

Ed, to your point on the second part, what I will say from Korea standpoint; yes, we saw a significant growth being talked about that. That was in EDGE and 3G, where clearly as we said before, we believe we're the market leaders, and as new air standards come out, we typically have strength there, but, yes, it was across both.

Edward Snyder - Charter Equity Research

So, you expect on absolute level that your transceiver business will increase, and mix depends on everything else going on. Did you give your 10% customers this quarter? Can you give those? Can you provide that?

Dean Priddy

We had a 10% customer in each group.

Edward Snyder - Charter Equity Research

One each?

Dean Priddy

That is correct.

Bob Bruggeworth

Just for their own revenue, Ed. Not for the total company.

Edward Snyder - Charter Equity Research

Yeah. So these 10% customers are by group, but not for consolidated results?

Bob Bruggeworth

That's correct.

Edward Snyder - Charter Equity Research

Okay. And if there were consolidated you have a different breakdown, wouldn't you?

Dean Priddy

We would have one 10% customer.

Edward Snyder - Charter Equity Research

One. Okay. Thanks.

Operator

Thank you. Our next question is from the line of Ittai Kidron with Oppenheimer. Please go ahead.

Ittai Kidron - Oppenheimer

Thank you and congrats on the recruit restructuring move here. Dean, just going through the numbers, quick questions here. First, if you can refresh our minds on how to use that 293 share count number going forward. Does that stay like this as long as the convert is out there and how does that work?

And second, with regards to the non-GAAP to GAAP adjustments, can you give us a more detailed breakdown on each of those, in which category it would fall into your GAAP P&L in order to make the adjustments to non-GAAP?

Dean Priddy

Yes. In terms of the 293 share count, that's approximately the right share count to use going forward, because we do feel we'll be using the if converted method because of increased profitability. If you're referring to our FAS 123 charges, we had roughly 800,000 in operations. We had about $1.6 million in G&A, a little less than a million in sales and marketing, and a little over a million in R&D.

Ittai Kidron - Oppenheimer

Okay. And with regards to the tax rate adjustment that you're doing at the end of the year, would it require you to either record a deferred tax asset or some sort of one-time adjustment on the tax basis or that's not going to be the case?

Dean Priddy

I don't think that will be the case.

Ittai Kidron - Oppenheimer

Okay. Thank you very much.

Dean Priddy

Thank you, Ittai.

Operator

Thank you. Our next question comes from the line of Todd Koffman with Raymond James. Please go ahead.

Todd Koffman - Raymond James

Thanks very much. Just a clarification. You indicated the cellular front end business was up 10% sequentially. Is that business now approximately 65% or 66% of your total revenue?

Dean Priddy

We really aren't disclosing what percentage of our front end business is percent of total revenue.

Bob Bruggeworth

I think what's important is as we diversify our business, it becomes less meaningful to go into really that level of detail in our cellular business and not provide the similar granularity in the over 30 markets that Dean talked about earlier to really be able to draw a complete picture of what's going on with our business today.

Todd Koffman - Raymond James

Maybe, just a follow on then. You cited that that business grew more than 10% and you cited that your MPG business was up, I think more than significantly more than 20%, your total revenue was down, it was up 9, and so outside of P2 is there any other segment category that you could cite is being down?

Bob Bruggeworth

Now, the primary segment that was off was our transceiver business. The reason we wanted to make sure that the investors understood the growth in our cellular front ends is, there has been a lot of discussion out there about how “RFMD is losing share in the end markets” and we wanted to make sure that the investors understood that we were in fact a net share gainer for the quarter.

Todd Koffman - Raymond James

Thank you very much. Good luck.

Bob Bruggeworth

Thank you.

Dean Priddy

Thank you, Todd.

Operator

Thank you. Our next question comes from the line of John Lau with Jefferies & Company. Please go ahead.

John Lau - Jefferies & Company

Great. Thank you, Bob, Dean. There are a lot of concerns and uncertainty out there and I was wondering. The first part of my question is, what has the recent order patterns been in, in the last few weeks, with especially in the cellular space and especially China, if you can answer that first. Thank you.

Bob Bruggeworth

As far as order visibility goes, it's improving across both MPG and CPG. We feel real good about order rates and how bookings are trending for the quarter so far, being that we're about a month into it.

And as far as China goes, in mid July we started to see a shift in our business and actually a gradual uptick and an increase in our demand. So, we're feeling pretty good about the end market dynamics in both Cellular Products Group as well as our Multi-Market Products Group.

John Lau - Jefferies & Company

Okay, great. And Dean, there's a question for you. How much are you booked to the low end of your guidance?

Dean Priddy

Well, John, we're going to break a little bit from history here and say that we're booked for beyond the low end of our revenue guidance. So, that's a very good visibility going into the September quarter.

John Lau - Jefferies & Company

You pleasantly surprised me with that answer. Thank you.

Dean Priddy

Thanks, John.

Operator

Thank you. Our next question is from the line of Tore Svanberg with Thomas Weisel Partners. Please go ahead.

Tore Svanberg - Thomas Weisel Partners

Yes, good afternoon. First of all, on gross margin, seems like you're going to be hitting a 10% operating margin target by the December quarter. So, does that mean it's going to come from lower OpEx or were you actually continuing to see improvements in gross margin between now and then?

Dean Priddy

With the various puts and takes to gross margin, I'd say that the bias is going to be for continued margin improvement throughout the calendar year. We really want to focus investors though to the operating income and operating margin. The gross margins, we do believe, are going to continue to improve, but we think it's going to show up as expanded leverage with our expense reductions on the operating margin line.

Tore Svanberg - Thomas Weisel Partners

My follow-up is on inventory. You've done a great job to manage that. Right now there are around 100 days. Is this a level that you would like to operate at with a new mix or will it go down or up from here on?

Bob Bruggeworth

As far as our inventory goes, we actually have plans in place to improve our inventory turns as part of the key component in approving our return on invested capital, plus historically we have run it actually a little better than this. So, we got plans and actions to improve it throughout the fiscal year.

Tore Svanberg - Thomas Weisel Partners

Great. Thank you and good luck.

Dean Priddy

Thanks.

Bob Bruggeworth

Thanks.

Operator

Thank you. Our next question is from the line of Craig Ellis with Citi. Please go ahead.

Craig Ellis - Citi

Thank you. Dean, with your previous comments being that a lot of leverage would be driven out of operating expense. Can you just go into a little bit more detail on what the specific actions were, from a self-help standpoint in the reported quarter, and then what's incremental here in the calendar third quarter, and what would be left for you do as you get into the calendar fourth quarter?

Dean Priddy

All of the headcount reductions have taken place in our Wireless Systems Group including the future generation transceiver development and anything related to GPS development. So, in effect, everything has been completed as of today or actually previous to today regarding headcount reductions. We've made various accruals for other reductions as well.

Really the only thing that's remaining is some disposition of equipment, which is well underway, and we've got a couple of leases here and there to tidy up and just a little bit of facility type work to do. So, I would say at least 90% or so of the stated goal has been achieved and probably trending closer to 95%. So we are, in effect, done and have identified everything else that remains to be done.

Craig Ellis - Citi

And so, with that, is 75 million still the right amount of savings or have you been able to scrape together any more than that? So, is there a best case on top of 75? And in the last call, you said that 35% corporate gross margins would be possible in the fiscal fourth quarter. Is that still a number that we can look towards?

Dean Priddy

Once again that the commitment was the 75 million and we reiterate that commitment. And more importantly, it's the commitment to the 10% operating income by the December quarter.

You can plot, if you start with the March operating margin, plot your June and then our guidance for September, you can see we're on a linear path to do at least 10% operating income. And in terms of gross margins, once again, I think the important part is the actual operating margin itself.

We said that we expect margins will continue to improve. A lot of that's driven by mix of various products in the soft synergies that we're seeing.

In fact, we've actually been pleasantly surprised with some of the supply chain synergies that we've been seeing. So, a lot of movement in the positive direction. So, I just reiterate that we're on track for achieving our stated financial performance.

Craig Ellis - Citi

Thanks Dean.

Operator

Thank you our next question is from Mark McKechnie with AmTech. Please go ahead.

Mark McKechnie - AmTech

Great, thank you and congrats on the quarter, gentlemen.

Bob Bruggeworth

Thanks Mark.

Mark McKechnie - AmTech

Yeah, so, I've got a couple of questions, and I'll just do them one by one if you don't mind. Its looks like your $0.03 number here for June, you get there by a tax benefit. Are you planning for that same tax benefit or similar tax benefit in September?

Dean Priddy

No.

Mark McKechnie - AmTech

Okay so September what should we think about for the taxes?

Dean Priddy

Something in the 15% to 20% range.

Mark McKechnie - AmTech

Got you. Okay, that's great. And then, second is, your gross margins. When I see that 33% number and I plug in 50 for MPG, it seems like it's a pretty significant uptick in your gross margins for CPG. First I want to make sure I'm understanding that right. Did you see a pretty material up-tick in your gross margins there in CPG?

Dean Priddy

I think some of the comments about the synergies apply to CPG as well, especially as customer diversification kicks in, but clearly I think both groups, the margins were moving in the right direction.

Mark McKechnie - AmTech

Got you, I am assuming your Polaris 2 margins were pretty light relative to your overall, so as that fell off, your mix got better?

Bob Bruggeworth

That is correct, and we also saw a nice improvement in product yields as well which was favorable to margins.

Mark McKechnie - AmTech

And then, when I look at your guidance for September, it implies 6% to 8% sequential growth, and you said both groups you're expecting to grow. Do you expect the same sort of difference in growth rates this time around? The MPG growing 15% to 20% and cellular growing a little slower or do you actually see them both growing around 5% to 8% sequential?

Bob Bruggeworth

I think Mark, right now we expect them both to grow, and I think that's all really the clarity we to want put on it, but clearly both of them continue to take share, and we expect that to continue in the next quarter.

Mark McKechnie - AmTech

Got you. Okay, that's what I was trying to get at, do you plan to take more share in cellular. And it sounds like you do, and is that both from a unit and a content perspective?

Bob Bruggeworth

Yes, and again we also expect to continue to take share in MPG.

Mark McKechnie - AmTech

Great. And then finally the linearity on September, it sounds like your bookings are pretty good. Did things fall off in July, August, and September's going to be big or how do you see the quarter progressing linearly?

Bob Bruggeworth

I think to set this up, as we went through the June quarter it was fairly linear. If you look at the wages everything played out with DSOs and all. Typically we start to see a pickup in late July, a little bit more in August, and a pretty strong September, and that's a typical seasonal quarter for us and that's the way we expect this one to unfold.

Mark McKechnie - AmTech

Great. Okay, and then this will be the final one I promise. Did say in your comments that you saw some different spots of weaknesses and what have you, and you talked about China rolling over and then picking back up here in July. Any other kind of market commentary, customer mix, comments you can make?

Bob Bruggeworth

Yeah. I really don't think its right for us to comment on some of our customers who have yet to even comment. But, the reason we wanted to give some of that was, many people have taken small data points and tried to predict what's going to happen to RFMD.

And what we're trying to make sure the investors understand is that RFMD is a more diversified company and sometimes one data point that's negative, you may be missing data points that are positive.

And we're working hard to diversify within our cellular business, our customer exposure along with diversifying our Multi-Market Products Group as well, and as that becomes a bigger part, sometimes these data points positive or negative, don't give you a true picture of how RFMD is going to perform.

Mark McKechnie - AmTech

Right on it, thanks. Appreciate it, gentlemen.

Bob Bruggeworth

Thank you.

Operator

Thank you. Our next question comes from the line of Venk Nathamuni with JPMorgan. Please go ahead.

Venk Nathamuni - JPMorgan

Hi, good afternoon. This is Venk. Congratulations on a good quarter.

Bob Bruggeworth

Thank you, sir.

Venk Nathamuni - JPMorgan

You're welcome. So you've already talked about pretty good visibility for your September quarter, especially in the CPG business. I was wondering could you comment on the mix within the cellular business between CG and low end.

We have been hearing a lot of anecdotal information about some moderating sentiments in the mid to high-end handset market and I wanted to find out what your visibility is into the mix because, I assume that would have a big impact on your gross margins as well?

Bob Bruggeworth

Yeah, first point that I want to make is that from an order of visibility I commented we're seeing improvement in both MPG and CPG.

Venk Nathamuni - JPMorgan

Right.

Bob Bruggeworth

I have just said that. And as far as mix within the product portfolio, I think what we commented earlier about was significant growth in 3G, and we expect that to continue. That air standard should be up not quite 50% year-over-year, and we expect that to continue.

We're still seeing a large range of volumes in the low-end and the mid-tier, and I think we've got to get to where we define that. EDGE clearly is continuing to grow this year as we expected and it proliferates through the product portfolio.

So, I don't think we're going to be able to help you with again some of these data points that could be negative here or positive here. Overall, we think we're in a pretty strong market. We haven't adjusted our market model.

Last quarter, we talked about 10%. When we were out in investor conferences last quarter, we also spoke about 10%. We sit here today and still talk about 10%. We expect the second half of the year to be significantly bigger than the first half.

Venk Nathamuni - JPMorgan

Okay, great. That's very helpful. And then a couple of bookkeeping questions. One, did you mention what your cash flow from operations was for the quarter?

Dean Priddy

Cash flow from operations was slightly negative, because of the increase in bad receivable and the restructuring charges. We ended at minus $3 million.

Venk Nathamuni - JPMorgan

Okay. And then depreciation expectations for fiscal ‘09?

Dean Priddy

Depreciation and amortization was $30.2 million. Of that depreciation was around $22 million.

Venk Nathamuni - JPMorgan

Yeah, but that is for the quarter, right?

Dean Priddy

Yeah, for the quarter, yes. So if you want to annualize that, that's probably a pretty good number.

Venk Nathamuni - JPMorgan

Okay, great. Thank you very much.

Bob Bruggeworth

Thanks, Venk.

Operator

Thank you. Our next question is from the line of Harsh Kumar with Morgan Keegan. Please go ahead.

Harsh Kumar - Morgan Keegan

Hey guys, Harsh Kumar. First of all, congratulations, great quarter, solid guidance. Clarification on taxes, Dean, the 15% to 20% you talked about, is that tax benefit for September or these are the taxes you expect to pay?

Dean Priddy

They are the tax expense or taxes paid.

Harsh Kumar - Morgan Keegan

Got it. Okay. And next, could we get the breakdown for MPG as a percentage of your total revenues if possible?

Dean Priddy

Once again, we decided not to provide that level of detail except to talk about the relative growth rates.

Harsh Kumar - Morgan Keegan

Okay. That's fair. Another one, your gross margin shot up very nicely. Was that largely in your opinion MPG, or is there a component of factory utilization or improvements made in that regard that's kicking in also?

Bob Bruggeworth

Yeah. We've got quite a few tail winds with gross margin, some of which are just now beginning to really show up such as ramping the Filtronic facility, we've got Beijing assembly ramping in the back half of the year. Clearly, utilization rates are beginning to increase rather substantially. And so from a gross margin standpoint, we feel very, very positive.

Also within MPG, our Shanghai facility continues to do extremely well in terms of low cost manufacturing. So, once again the bias has improved gross margin to be fair, and there is still some ASP erosion out there that you have to factor in and also mix.

Harsh Kumar - Morgan Keegan

Got it, very helpful, last one and I'll jump back in the queue. Dean, you talked about cost cuts, the people part there is done. I think equipment and leases are left. Would you say in your opinion people is a bigger portion of costs versus equipment? How should we think about that? Just any color would be very helpful?

Dean Priddy

Yeah, like I said, we're 90% to 95% of the way there. So the employee part was a much bigger part, even though I will say that some things like software and so forth was also a fairly substantial component as well.

Harsh Kumar - Morgan Keegan

Thank you. Thank you for your help, thanks. Great quarter, guys.

Dean Priddy

Thank you.

Bob Bruggeworth

Thanks Harsh.

Operator

Thank you. Our next question is from the line of James Faucette with Pacific Crest. Please go ahead.

James Faucette - Pacific Crest

Thanks a lot for taking my questions. First question is that, in listening to the handset OEMs and your customer that have already reported, it sounds like consistently guys are looking for their own growth in the second half to support your 10% growth forecast.

But at the same time they've all talked about seeing an increase in pricing pressure in the market right now, even on their new higher end products, and that's going to lead to margin compression for a lot of them in the second half of the year.

And so, my question is, from your perspective, when would you start to see and when you do go into new price negotiations with your customers, and at what point would they start to try to apply, some of that margin pressure to you, and how do you feel right now about your ability to resist that pricing?

Bob Bruggeworth

Well, from our perspective, it seems like a typical year. Everybody always doubts whether or not the Christmas season's going to come, it usually comes. Every year, these handset manufacturers are struggling for margins, and it's just a normal year for us.

And as far as price negotiations go, they go on all the time. It's just a standard part of business, and new models and new products and new product launches are usually where we typically see it.

We are very pleased with this, we're starting to introduce into the market some of our new products with our reduced dye size that we begun sampling. We talked about that throughout the quarter in Asia to again, offload some of the price erosion that we expect and still be able to improve our margins. So, guess what? It's another typical year in the cellular handset market.

James Faucette - Pacific Crest

That's great. And then, back to your comments that you had taken, you believe you had taken a fair amount of share in the second quarter as evidenced by your relative growth rate. Based on what you're seeing in design activity and that kind of thing, should we expect to that level of market share gains to persist, and can that persist for the next few quarters and into next year?

Bob Bruggeworth

I think what is clear is, we're building a solid foundation of new products to be able to aggressively improve our market share. There are still key accounts that we are now beginning to shift our focus to, as we refocus the Company in really driving our front end space. So, we can't promise quarter-in and quarter-out.

We'll be able to demonstrate what we've done, but clearly we believe in the September quarter we can take market share, and as we introduce new products, and focus our resources in places that we haven't played yet, what I am confident in is, the organization wherever we've aimed it, has always brought in the business.

James Faucette - Pacific Crest

So maybe just to refocus a little bit, I know its difficult on a quarter-in quarter-out basis, but from your perspective, you're seeing pretty consistent share gains at least in design wins at key customers?

Bob Bruggeworth

The answer to that is absolutely. We are seeing a lot more design wins. Again, as we try to balance and diversify our current customer mix, and that's as much a function of where you spend your engineering dollars. So, where we've got today opportunities with our channel partners, it's where we focus our engineering dollars to go after that business.

And as we were working in some of our systems businesses, we were focused on some of the high volume players, we have begun to shift over the last few quarters, focused with our channel partners and driving a lot more balanced revenue as evidenced by some of Dean's comments about the accounts where we're starting to win.

James Faucette - Pacific Crest

That's great. Thank you very much.

Bob Bruggeworth

Thank you.

Dean Priddy

Thanks James.

Operator

Thank you. Our next question is from the line of Brian Modoff with Deutsche Bank. Please go ahead. Brian, your line is now open.

Jonathan Goldberg - Deutsche Bank

Hello. Hi. This is Jonathan Goldberg in for Brian. Can you hear me now?

Bob Bruggeworth

Yes, Jonathan. Go ahead.

Jonathan Goldberg - Deutsche Bank

I understand you're not going to break out MPG versus CPG revenue. I just want to be clear, could you help me clear this up, which one grew faster?

Dean Priddy

Well, we said that MPG grew well in excess of 20%. So, clearly MPG, and…

Jonathan Goldberg - Deutsche Bank

Okay.

Bob Bruggeworth

What we can say is based on all the public information we've given you, Jonathan, MPG was at least 25%.

Jonathan Goldberg - Deutsche Bank

Okay. That's helpful. Thank you. Here is another one you may not want to give out. What was your utilization rate?

Dean Priddy

We had a very comfortable utilization rate, where the overhead absorption in our factories is very comfortable level, both in our wafer fabs and our assembly facilities. However, we have considerable amount of capacity for upside business. So, I think this is kind of the sweet spot if you will for margins, but also the ability to capture revenue upside as it potentially materializes.

Jonathan Goldberg - Deutsche Bank

Okay. And then, finally you mentioned in, the front end module business, you gained share. A better way to ask it, could you give us any color on where you gained share geographically by vendor if possible?

Dean Priddy

Well, Jonathan, we said Sony Ericsson doubled and Samsung tripled, and LG grew significantly. So, those are three of the top five, and we also grew with one of the other top five. So, four of the top five we saw growth, and so geographically, I'd say that was pretty dispersed and in terms of air standards across the board.

Jonathan Goldberg - Deutsche Bank

And do you think you are gaining share at the expense of your largest rivals or some of your smaller ones?

Dean Priddy

I don't care to speculate, you guys seem to do enough of that. We're just going to report our results and get on with the business of making money.

Jonathan Goldberg - Deutsche Bank

Alright. Thanks. Thanks guys.

Dean Priddy

Thank you.

Operator

Thank you. Our next question's from the line of Aalok Shah with D.A. Davidson. Please go ahead.

Aalok Shah - D.A. Davidson

Hi guys, congrats. Just a couple of quick questions. Wireless LAN, is there any commentary from you guys on that end of the market right now?

Bob Bruggeworth

From a wireless LAN perspective, we're seeing great growth. We still expect it to be one of our fastest growing product lines throughout the fiscal year as well as into next year, multiple industries, multiple markets.

Aalok Shah - D.A. Davidson

Did that segment of your business grow also in line with the rest of the business? Over 10%? Is that fair to say?

Bob Bruggeworth

Yes.

Aalok Shah - D.A. Davidson

Okay. And then GPS revenue, is there any at this point for you guys?

Bob Bruggeworth

No. We actually haven't had any GPS revenue for years.

Aalok Shah - D.A. Davidson

Okay. And then, Dean, is there a target model that you guys have now in mind that you can share with us?

Dean Priddy

Well, the target models for MPG and CPG; with MPG 50% gross margin, 20% operating income, and CPG 35% margin and 15% operating income, and obviously the total company would be dependent on the relative mix.

Aalok Shah - D.A. Davidson

Okay. So, it is possible then over the next maybe 12 to 18 months to see gross margins probably back in the high 30s percent range, maybe 38% to 40%?

Dean Priddy

I'd really rather direct you to the operating margin line. We've committed to a target there of at least 10% operating income by the December quarter. We've committed to converge the MPG's operating model by the end of the year, and we're making progress in CPG's operating model. So, that's really where the rubber hits the road, the operating margin.

Aalok Shah - D.A. Davidson

Okay. And Bob, I know you guys have a pretty good proxy for this, and I know you've already answered a lot of questions, but give us a sense of what you're seeing from the end market today? Is it really similar to what you saw in the December quarter, where the Disty's were trying to come back and build up some inventory, or is this actual a real demand out of China that you're seeing?

Bob Bruggeworth

Yeah, actually, it's probably the lowest our inventory has been in China in a long time. So, we watch both the inventory, the ins and outs, and let's just say that we're starting to see an uptick in demand.

It's early in the quarter for to us make a comment, but the question was asked recently, what are we seeing. And again, our inventory is the lowest its been in a long time. So, we do believe there is some demand coming back again.

With China, it's anytime, there's still a lot of noise and we'll wait and see how the quarter goes. We're not banking on China to come roaring back to meet any of our numbers.

Aalok Shah - D.A. Davidson

And then, last question. On Samsung, you grew nicely there. Was that particularly in the one particular area interface or was that across different interfaces?

Bob Bruggeworth

Yeah, across.

Aalok Shah - D.A. Davidson

Across. Okay. Great, thank you.

Doug DeLieto

Thank you.

Operator

(Operator Instructions). And our next question is a follow-up question from the line of Mark McKechnie with AmTech. Please go ahead.

Mark McKechnie - AmTech

No, actually, I am good. Thank you, guys. We'll, talk to you later.

Bob Bruggeworth

Thank you, Mark.

Dean Priddy

Thanks Mark.

Operator

Thank you. Our next question's from the line of Suji De Silva with Kaufman Brothers. Please go ahead.

Suji De Silva - Kaufman Brothers

Hi guys. Nice job on the quarter.

Bob Bruggeworth

Thank you.

Suji De Silva - Kaufman Brothers

Part of this is already covered, but can you talk about customer concentration? Who your 10% customers were in the quarter?

Dean Priddy

We did. We said we had one 10% customer in each group, and one for the Company.

Suji De Silva - Kaufman Brothers

Okay, great. Thanks for reviewing that. And then, in MPG that did very well here, can you talk about the sub-segments? Did they all grow relatively equally, Dean or Bob were there any particular ones outstanding in the growth?

Bob Bruggeworth

Yeah, all five of the business units grew. It was fairly balanced, broad-based, excellent performance across the business units.

Suji De Silva - Kaufman Brothers

Great. And then last question, you guys sound like you're comfortable with your utilization. Outside of you guys, in the industry, are you seeing perhaps the Gallium Arsenide capacity is a little bit tighter and is that perhaps one of the factors that you're helping get design wins and share? Thanks.

Dean Priddy

Well, I think there's been a lot of talk about market share, but I think one of the things that needs to be remembered for the entire Gallium Arsenide space is that gas usage is going to increase over the next few years. So RTM is growing, and we're participating nicely in that. So, it's definitely not a zero sum gain, and we have the opportunity to grow as do others.

It's just that some are going to benefit more than others and obviously, we think we fall into that category. But the TAM and the cellular front end space is growing and also the TAM within MPG is expanded considerably, and we're now looking at $8 billion to $10 billion total company TAM for RF components and compound semiconductor related products. So, yeah, the outlook for Gallium Arsenide is extremely good.

Suji De Silva - Kaufman Brothers

And, Dean, do you feel your position in terms of capacity is helping you perhaps win some share relative to….

Dean Priddy

Absolutely. The acquisition of Filtronic which we now call RFMD UK is giving us a lot of flexibility with our customers, really even selling to some of our competitors now. So, it's been a tremendous benefit to have that capacity and to have that capacity reserve. Our customers know they can count on RFMD to deliver when they place an order with us.

Suji De Silva - Kaufman Brothers

Okay. Thanks, guys.

Dean Priddy

Thanks.

Operator

Thank you. Our next question is a follow-up from the line of James Faucette with Pacific Crest. Please go ahead.

James Faucette - Pacific Crest

Thanks. Just one follow-up question to Aalok's question on end-market demand. When you talked about China demand coming back, how much visibility do you have right now in to the end markets versus just a resurgence in demand from customers in that geography?

Bob Bruggeworth

Our comments were geared around the customers who consume our parts, not the consumers who consume the handsets.

James Faucette - Pacific Crest

Great. Thank you.

Bob Bruggeworth

Okay.

James Faucette - Pacific Crest

That's perfect. Thank you very much.

Operator

Thank you. Our next question is also a follow-up from the line of Edward Snyder with Charter Equity Research. Please go ahead.

Edward Snyder - Charter Equity Research

Thanks. Dean, haven't talked about gallium nitrate for a while. The mix was supposed to be getting up there in terms of significance or material to revenue. Has that been pulled into MPG at this point, and is it tracking what your expectations were?

Dean Priddy

Ed, this is a great opportunity for Bob Van Buskirk to go ahead and address your questions about gallium nitrate, because I think he is pretty excited about all the different business segments that he can utilize that technology. It did grow quarter-over-quarter. Its not really, really material yet, but it is getting traction, and I'll let Bob talk about his business.

Bob Van Buskirk

Yeah, thanks, Bob. Ed, I think it's important to note that we're in the final stages of full qualification of that process within RFMD and I have four of the five business unit general managers pounding on our door almost every day with applications for GaN. One of the leading applications will actually be in cable TV.

It has tremendous application there in the line amplifier product line, outstanding performance. And a little known fact about that, which is an interesting twist to it, is we can get the same level of amplification from GaN as we can get from gallium arsenide but use a lot lower current, in other words, a lot less power to get the same level of amplification with the same distortion levels.

So in effect, it starts to look like a Green Technology, if you will, to our customers. It also has tremendous applications for high power broadband, high-power linear applications.

One of the perfect applications for that would be LTE fourth generation cellular, which is actually coming in. It looks like a little faster than some had anticipated. So aerospace and defense, wireless infrastructure, standard products and near-term cable TV broadband applications are really strong.

Edward Snyder - Charter Equity Research

The last time we visited this quite a few quarters ago, there were some initial shipments very small into some military applications. Is it qualified and are you shipping to military now? And it sounds like from your comments with the cable and LTE, that it is or will soon be qualified for commercial and starting to ship there?

Bob Van Buskirk

I think the answers are yes and yes. We are shipping what we would call preproduction of prototype, product into military applications today primarily for ground-based test equipment and some ground-based radar applications, but we're also in the final stages of full commercial as well.

Edward Snyder - Charter Equity Research

And then, if you could remind us, you're out there pretty early with this. Who are your competitors if there are any and what do you think they are in terms of preproduction and qualification that sort of thing?

Bob Van Buskirk

Well, it depends on the flavor of gallium nitride. We're featuring today a gallium nitrite using a silicon carbide substrate. It has tremendous broadband properties, as well as thermal properties, as well as really good linearity. Some others have some different technologies. But from what we can tell, in terms of high performance and broadband performance, it's probably ourselves and Eudyna.

I think the major point is that the market for gallium nitride is just materializing. And even though it has probably taken us a little longer to develop the technology, we haven't really missed on any significant revenue opportunities because those opportunities are just really developing. So, it looks like we're going to be hitting the market at just about the right time as the opportunities develop.

Edward Snyder - Charter Equity Research

I don't want to keep this, but two more issues. Mostly you are knocking out LDMOS here correct, and then also way back when we talked about margins on this product which was supposedly because the ASPs are so high, can you give us whatever your current thinking on that is?

Bob Van Buskirk

LDMOS would be in fact, something that we would look at in the wireless applications but they use a lot of that technology today and in some of the other applications and particular in the cable TV.

But any application where you need high power, you need a good price and performance ratio, broadband. And don't forget this is GaN that's going to be built in RFMD's world-class wafer fabs. So we're talking about some pretty impressive cycle times and unit costs when we're done with all of this,

But, yeah, obviously we're going to try to get into these applications far enough up on the pricing curve so that we're going to extract some above target margins from this. Let's put it that way.

Edward Snyder - Charter Equity Research

And then if I could, just one final question, just for Dean. You touched on Polaris 3. If you had to draw a curve on what you think that's going to peak in revenue, given that you're cutting investment for [transceiver] development for wideband CDMA or anything else. I know it's impossible to tell, but in general, can we expect to may be peak in calendar ‘09 or do you think you'd peak in 2010 or sooner than that?

Dean Priddy

I think we have got a couple of years before we peak and then we're actually going to see tails on the revenue for another three to four years. So that product is going to have a very long-running lifecycle, probably just in the first couple of innings, really.

Edward Snyder - Charter Equity Research

And this obviously could be much larger than Polaris 2, given who you're selling it to and given that you're not investing, the margin on the stuff is going to be particularly good, right?

Dean Priddy

The operating margins are going to be nice. As we said all along, the gross margin on P3 is a bit challenged because of quite a bit of outsource content, but the customers love the product because of its performance and it's easy to use.

Edward Snyder - Charter Equity Research

Thank you.

Dean Priddy

Still being designed in handsets.

Edward Snyder - Charter Equity Research

Excellent. Thanks, Dean.

Dean Priddy

Thanks, Ed.

Operator

Thank you. Our next question is from the line of Steve Ferranti with Stephens Inc. Please go ahead.

Steve Ferranti - Stephens Inc.

Hey guys, thanks for keeping the call open and nice job on the quarter. Just a couple of quick follow ups here. You touched on it previously, but some of the share gains you're seeing, you know any factors that stand out besides available capacity that have enabled those share gains?

Bob Bruggeworth

From the perspective of our product portfolio, when we look at where we're winning, it's really because of our product performance and as we said earlier, we tend to lead in next-generation air standards and we saw a great growth in EDGE along with 3G.

Clearly, our supply chain is one of the reasons, but that's what gives them comfort and design it in. The reason we get their attention is because of the design and architectures that we choose and the performance of our products.

Dean Priddy

I think having the systems level expertise too and really understanding how the parts work in the customer system is something that's beginning to differentiate RFMD.

Steve Ferranti - Stephens Inc.

Got you. And one final one from me. Can you give us any sort of color in CPG in terms of percentage of revenues that are represented by 3G versus EDGE versus 2G?

Dean Priddy

No, I think we've gone to about as much detail in revenue breakout as we would like to in this quarter.

Steve Ferranti - Stephens Inc.

I understand. Thanks, guys.

Dean Priddy

Okay.

Operator

Thank you. Our next question is from the line of Dan Berkery with O'Connor. Please go ahead.

Dan Berkery - O'Connor

Hi, can you guys hear me now?

Bob Bruggeworth

Sure. Yeah, hi Dan.

Dan Berkery - O'Connor

Quick question if you could just, looks like you bought back some stock, if you could clarify or any disclosure on the amount of stock you bought back, rough levels, and then going forward what your thoughts are for share buybacks, convertible bond buybacks, et cetera?

Dean Priddy

Yeah, actually that was the last quarter event. We bought back 30 million shares at an average price roughly $3.33, $3.34 per share. But, we had $150 million share buyback program, of which $100 million has been completed. The share buyback, that's fully reflected in Q1 share calculation.

Dan Berkery - O'Connor

Okay. Do you have your thoughts going forward on continuing to buy back stock, possibly buying back converts?

Dean Priddy

We have a lot of options that we can pursue.

Dan Berkery - O'Connor

Okay. Thank you very much.

Dean Priddy

Okay. Thank you.

Bob Bruggeworth

Thank you.

Operator

Thank you. And at this time, there are no additional questions. I would like to turn it back to management for any closing remarks.

Bob Bruggeworth

Thank you. We hope it's clear from our comments today that we are very confident in our competitive position and in our ability to maintain or grow our share of key accounts. We expect our share gains, revenue diversification and expense reductions will enable us to achieve our financial targets, and we believe our new business model will drive unmatched financial leverage and superior profitability. Thanks again and good night.

Dean Priddy

Thanks.

Operator

Thank you, sir. Ladies and gentlemen, that does conclude the RF Micro Devices first quarter earnings conference call. If you would like to listen to a replay of today's conference, please dial 1800-405-2236 or 303-590-3000 using the access code of 11116474 followed by pound key.

AT&T would like to thank you for your participation. You may now disconnect.

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Source: RF Micro Devices Inc. F1Q09 (Qtr End 06/28/08) Earnings Call Transcript
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