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Executives

Jennifer Gianola

Gregory S. Lang - Chief Executive Officer, President and Director

Michael W. Zellner - Chief Financial Officer, Principal Accounting Officer and Vice President of Finance

Analysts

James Schneider - Goldman Sachs Group Inc., Research Division

Harlan Sur - JP Morgan Chase & Co, Research Division

Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division

Srini Pajjuri - CLSA Asia-Pacific Markets, Research Division

Dean Grumlose - Stifel, Nicolaus & Co., Inc., Research Division

William S. Harrison - Wunderlich Securities Inc., Research Division

PMC-Sierra (PMCS) Q3 2012 Earnings Call October 29, 2012 4:30 PM ET

Operator

Welcome to the PMC Third Quarter 2012 Earnings Conference Call. My name is Christine, and I'll be your operator for today's conference. [Operator Instructions] Please note, today's conference is being recorded. I will now turn the call over to Jennifer Gianola, Director of Investor Relations. You may begin.

Jennifer Gianola

Thank you, Christine. Good afternoon, everyone, and thank you for joining the call, and special thank you to those of you who are joining us today in the throes of the storm. We appreciate your time, stay safe.

Today with me are Greg Lang, President and CEO; and Mike Zellner, Vice President and CFO. Greg will begin the call with a discussion of the business and key highlights from the third quarter 2012, and Mike will then discuss the financial results for the third quarter of 2012 and the business outlook for the fourth quarter of 2012.

Please note that our third quarter 2012 earnings press release was disseminated today via BusinessWire, and a copy of the release can be downloaded from our website. Before we begin, I would like to point out that during the course of this conference call, we'll be making forward-looking statements that involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, PMC's limited revenue visibility due to variable customer demand, market segment growth or decline, customer concentration, bookings rate, changes in inventory, supply constraints, foreign exchange rates and volatility in global financial markets and other risk factors that are detailed in the company's Securities and Exchange Commission filings. Actual results may differ materially from the company's projections. For further information about these risks and uncertainties, please read the company's SEC filings, including our Form 10-K and 10-Q.

Note that PMC undertakes no obligation to update any forward-looking statements. Please note that for each of the historical non-GAAP financial measures mentioned on this call, a full reconciliation to the most comparable GAAP financial measures is included in our press release issued today. In addition, a GAAP to non-GAAP reconciliation of financial measures noted in our outlook will be posted on our website under the Financial Reports section of the Investor Relations tab. [Operator Instructions]

Thank you, and I will now turn the call over to Greg Lang.

Gregory S. Lang

Thanks, Jennifer, and thank you for joining us today and welcome to our third quarter earnings call. Our third quarter revenues were $132 million, within the range of our guidance for the quarter. Our non-GAAP EPS was $0.10 a share, $0.01 above the top of our range. We generated over $24 million cash from operations on $132 million of revenue. Non-GAAP net income was $21.4 million, about flat with Q2 despite $6 million less in revenue. Most of this was due to nearly $5 million in reduced OpEx in Q3.

The global economy is weighed on infrastructure sales throughout the year and continues today. ABI Research reports that Q2 was the weakest quarter for wireless equipment sales in nearly 9 years. I'm sure that doesn't surprise anyone here, that's pretty telling about the state of the infrastructure investments.

With this macro uncertainty, we've not seen a normal cycle recovery after a weak Q1. However, there are some potential positive signs for 2013. Wireless carriers in North America and China have placed orders and issued RFQs for new wireless deployments. And it appears that China will start its LTE build-out late in 2013. This would be a welcome change in carrier investment.

Given the macro climate, we continue to focus on the things in our control, building great products, winning key designs that position ourselves for growth and tightly managing our OpEx. With this backdrop, I'll now discuss the results of Q3.

Overall, revenue was down about 4%; storage revenues grew a few percentage points, as expected, while optical and mobile segments declined by double digits. At the top level, the Storage Network segment was 68% of total revenue, up from 62% in Q2; optical revenue came in at 20% of the total, down from 23% last quarter; and mobile revenues came in at 12% of the total, down from 15% last quarter. And for those of you tracking the legacy portion of our revenue, it was 8% of total revenue in Q3.

Now I'll comment by market segment. First, the storage end market segment. Our storage market segment was up 4% versus last quarter due to improvement in our 6-Gb SAS business and resumption of growth in our channel business. During the quarter, we continued to demonstrate our storage leadership with introduction of the industry's first RAID adapter family that takes full advantage of the PCI Express Gen 3 bus bandwidth. PMC announced the Adaptec Series 7 portfolio of products, which set a performance benchmark of 450,000 IOPS and 6.6 gigabytes per second throughput, which is equivalent to approximately 2.5x the performance of the nearest competitive solution. This level of performance is critical to get the most from today's high-performance Flash drives.

In addition, Series 7 is the industry's only single-chip, 16-port PCI Gen 3 RAID Controller, providing unmatched performance and functionality for a broad range of enterprise and cloud computing applications. The full suite of Series 7's controllers became available in October 2012 through PMC's worldwide distributors and storage channel partners.

PMC's 6-Gb SAS product family has delivered leadership over the past several years with the highest performance, highest density and the only encryption solution on the market. As many of you know, the next major transition of SAS technology is the migration of -- from 6-Gb SAS to 12-Gb SAS. We believe this transition will start in the second half of 2013.

During the third quarter, PMC participated in an industry-wide 12-Gb plugfest to test for interoperability. PMC was the only silicon vendor to bring a full SAS chipset, 12-Gb SAS chipset, with functional expanders and controllers, and we're very pleased with the results of the testing conducted with all participating vendors. Anecdotal feedback from the event suggested PMC has pulled well ahead of the competition in terms of maturity of our 12-Gb portfolio. With the strength of our product offering, as well as designs awarded to date, we feel confident we will continue to grow share at the 12-Gb SAS transition.

An update on our recently announced Flash controller, the industry's first 12-Gb SAS Flash controller for the next wave of enterprise-class solid-state drives. Flash-based drives are the only type that can really take advantage of 12-Gb performance as spinning disks are far too slow. And PMC is the only vendor in the industry with an end-to-end solution. PMC's 12-Gb SAS flash manager enables more than 300,000 IOPS in the 2.5-inch SAS SSD, easily more than double the performance of today's 6-Gb SSDs. When paired with the industry's highest performance protocol controller, PMC's 12-Gb SPCve controller, the cloud store server and big data storage manufacturers can deliver a stunning 2.4 million IOPS in an 8-drive enterprise-class Flash subsystem.

Finally, we've secured our first design win with a major SSD vendor for our recently introduced 12-Gb SSD controller.

Now for the optical end market segment. The Optical segment was down 18% in the third quarter versus the second quarter. Capital spending is not materialized in a meaningful way, that we have seen early signs of OTN pickup in long-haul networks. Inventory levels continue to remain at slower than average levels -- excuse me, lower than average levels.

An update to our announcement on the HyPHY flex program. We are now targeting the release to volume production in November 2012, which is one quarter after the samples became available. We believe new products based on this device will help catalyze the OTN switching in metro networks.

Lastly, we announced the META 120 in September at China's leading carrier show, PTX [indiscernible]. This leading-edge product is the industry's first tri-speed carrier Ethernet OTN framer for router and Caesar platforms. The device does 10 x 10 Gb, 3 x 40 Gb and 1 x 100 Gb port configurations. We're pleased to report that we have shipped samples to our top customers.

Now in the mobile market segment. In our mobile segment, revenues were down around 20% versus prior quarter due to decreases across several of our major customers. We attribute this very low level due to the Q2 CapEx spending, as I mentioned earlier. Long-term trends, including LTE as a growth driver, remain intact where Wintegra processor platforms are uniquely positioned. We believe that sales of LTE smartphones have reached critical mass with the release of the iPhone 5, and we'll continue to drive upgrades to backhaul infrastructure. In fact, we're seeing China start to move toward LTE deployment in the second half of 2013 with the largest deployments expected in 2014. We also see a large North America carrier starting to move to their next stage of network build-out with orders placed in early next year.

Our strong position with Wintegra network processors remain with design wins in Q3 that included all major product areas, including fiber and microwave backhaul, as well as LTE base stations and the combination designs with Wintegra and our PON products from multidwelling unit applications. We've now also secured designs with 2 Tier 1 vendors in an emerging industrial market to upgrade and bring intelligence to power grid networks. Such designs leverage the inherent flexibility and programmability -- programmable Wintegra products, which allow them to be used in applications that they were not contemplated for in the original design.

Now for our outlook for Q2 -- Q4 2012. As we look to Q4, the macro headwinds and business uncertainty prevail. We expect Q4 revenues to be flat-to-down 8% from Q3 or $121 million to $131 million. Considering today's backlog, we believe that storage will be roughly flat and mobile will grow double digits, while Optical will be down from Q3. We will continue to manage OpEx tightly.

Our business is focused on transforming networks that connect, move and store big data. And as all of you know, data traffic and data creation continues to grow at a rapid pace. And we believe that the introduction of the iPhone 5, tablets and other LTE devices are yet another catalyst for carriers to upgrade and build out their networks. These trends make us confident on our long-term growth drivers and believe our fundamentals are solid.

So with that, I'll hand it over to Mike for details on the financials and our outlook.

Michael W. Zellner

Thanks, Greg. I'll now discuss our third quarter financial results and comment further on our outlook for the fourth quarter of 2012. Third quarter revenues, up $131.7 million, came in line with our outlook range and sequentially 4% lower than second quarter. Greg provided further details around this by each of our storage, optical and mobile end market segments.

In Q3, we had 2 customers, which each accounted for more than 10% of revenues calculated on a rolling 12-month basis namely, HP and EMC. Non-GAAP gross margins in the third quarter was 70.6%, up 30 basis points from 70.3% in Q2, driven mainly by product mix.

On a non-GAAP basis, operating expenses up $72.4 million were favorable to our outlook range for the quarter and represented a decrease of $4.8 million from Q2. On a sequential basis, the decrease was mainly the result of continued management of expenses and lower employee benefits. This resulted in non-GAAP operating margin of 16% from third quarter compared to 14% in Q2, mainly due to lower expenses that I just described. Non-GAAP net income were $21.4 million or $0.10 per share as compared to $21.3 million or $0.09 per share in the second quarter. The improved operating margin was partially offset by unfavorable foreign exchange fluctuations and lower investment gains on securities compared with Q2. The lower weighted average and number of shares outstanding during the period also contributed to the improved non-GAAP net income per share result.

Q3 GAAP net loss per share was $1.31 versus $0.12 net income per share in Q2. This decrease is mainly due to recognizing $276 million of impairment write-downs of goodwill and intangible assets related to a combination of our 2006 acquisition of Passave Inc. and our 2010 acquisition of Wintegra, Inc., $146 million of this related to the goodwill on Passave. This impairment was the result of weaker projections than previously expected, driven by slower adoption rates of Fiber To The Home technology and markets outside of Asia. $122 million related to goodwill on Wintegra and $7 million of other intangible assets is determined to be impaired as a result of the continuing weak carrier spend.

The primary items reconciling GAAP to non-GAAP net income for Q3 are as follows: $276 million in impairment of goodwill and purchased intangible assets; $11.6 million in amortization of purchased intangible assets; $6.1 million in stock-based compensation expense; $1.8 million in lease exit costs; $1.4 million in termination costs; $1.1 million in acquisition-related costs; $6.3 million of income tax-related adjustments. In addition, there are certain other items as described in our press release issued today.

Turning to the balance sheet. We ended the quarter with $332 million of cash and cash equivalents, short-term investments and investment securities. Our cash position at the end of Q3, net of the $68.3 million face value of our convertible note, was $264 million, a decrease of $8 million from Q2. This decrease resulted primarily from a total of approximately $25 million used to execute repurchases of our stock; $50 million used for capital expenditures, purchase of intellectual property and other investments, partially offset by approximately $25 million of positive operating cash flow similar to Q2; and finally, $7 million generated from employee equity programs.

Our net inventory at the end of Q3 was $27.4 million, approximately $2 million lower than the prior quarter as we continue to tightly manage our inventory levels, particularly in the current environment. Net inventory turns for Q3 are consistent with Q2 at 5.7x. Q3 ending deferred revenue was $2.1 million lower than Q2 at $12.7 million, which relates to inventory at our distributors being worked down mainly for customers in our optical end market segments and remains well managed.

In terms of lead time from our foundry partners, they have remained stable, and we have adequate wafer supply to meet our forecasted demand.

Now a few comments on our stock repurchase programs. Based on our confidence in PMC's long-term prospects, we have continued to execute against our previously announced $315 million stock buyback authorizations. We are pleased to report that shortly after our quarter ended, we completed both our $160 million accelerated stock buyback programs previously announced on May 2 and our $40 million employee equity stock buyback programs for 2012. The total number of shares repurchased under both of these programs is approximately 33.7 million, representing approximately 15% of total shares outstanding as of May 2, 2012. In addition, also after our quarter ended, we retired all of our senior convertible notes that were outstanding as of September 30 for an aggregate faced value of $68.3 million.

Now turning to our outlook for the fourth quarter of 2012. As Greg mentioned, we expect Q4 revenues to be flat to down 8% relative to Q3. This takes into account current levels of demand and our expectation of booking rates through the balance of the quarter. Judged backlog at the end of Q3 was approximately $91 million. This implies turns of approximately 28% from the beginning of the quarter to reach the midpoint of our revenue outlook.

On a non-GAAP basis, we expect our overall gross margin percentage in Q4 to remain in the range of 70% to 71%. Non-GAAP operating expenses in Q4 are expected to be a couple of million lower than Q3 and in the range of $70 million to $71 million with lower tape-out-related costs and continued expense control. We expect non-GAAP net interest income to be between $0.5 million and $1 million, which includes net interest income from our cash position and expected gains from security investing activities.

We expect our non-GAAP tax provision in Q3 to be a recovery of approximately $0.5 million. As a reminder, tax expense can be impacted by a number of variables associated with our ASC 740 liabilities including, but not limited, to a change in foreign income and product mix. Non-GAAP earnings per share is projected to be $0.10 based on the midpoint of our outlook range and assuming a diluted share count of 204 million shares.

So as this will be my last earnings call with PMC, I'll take the opportunity to express my thanks to everyone that I've worked with over the years, including those of you on this call. I especially would like to express my appreciation and respect to the shareholders, directors, executives and staff of PMC. I believe a lot of important groundwork has been completed over the years. The strong foundation has been built that will support the company's growth for years to come.

Gregory S. Lang

Thank you, Mike. And on that note, maybe an update on the CFO search. The search is going very well with a couple of strong candidates nearing the end of the process. It's uncertain it will finish by Mike's last day on November 9, so we'll provide an update on or before that date.

And with that, that concludes our prepared comments. I'd like to open it up to questions.

Question-and-Answer Session

Operator

[Operator Instructions] First question comes from James Schneider from Goldman Sachs.

James Schneider - Goldman Sachs Group Inc., Research Division

I was wondering if you could comment -- clearly, the carrier environment is very weak right now. Can you comment on customer inventory levels, where they are, whether you see them reducing inventory further from current levels? And secondarily, on the outlook, you expect optical will be down quite substantially. How much of that do you think is due to legacy declines?

Gregory S. Lang

As far as inventory levels go, I think that we are in both at a distributor level, as well as an end customer level. We're in good shape. I think the part of the weakness that we saw last quarter was after a very weak Q2 for -- on the mobile side of the business, but I think we're in good shape now with mobile bouncing back nicely in Q4, at least that's our expectation. The optical piece, I believe, is basically the lack of kind of OTN revenue that's ramping up at this stage and offset by some of the legacy -- and with the addition of legacy falloffs. So that's really probably the basis for the optical piece.

James Schneider - Goldman Sachs Group Inc., Research Division

That is helpful. And just as a quick follow-up. Can you talk about the reason for mobile increasing into Q4? Or that -- is that specific design wins? Or is it just basically customer inventory got too low and now they have to replenish. Can you talk about design wins and what that is?

Gregory S. Lang

Yes, I think the real short answer to that is if you look at where we're kind of -- if you do the math around what we're projecting, it basically gets us back to Q2 levels. We're kind of building back out of what appears to be a correction quarter in Q3 with the weakness mentioned on the carrier side. And what was the second question?

James Schneider - Goldman Sachs Group Inc., Research Division

Just in terms of what's driving -- the design wins that's driving the increase in mobile. Or is it just kind of restocking?

Gregory S. Lang

No, it's not major new design wins. I think it's just getting kind of back to normal run rate. And as I mentioned, I think there are some positive signs that are starting to pop up. We are getting some expedites. They are relatively low level, small levels, small quantities. But we are starting to see some expedites, which goes back to your question about inventory. Things are pretty lean. So a combination of that working through some of the weakness in Q2, I think, is going to lead to a good, strong quarter for the mobile part of the business. And I do think that some of that will pull along the metro and optical space as well.

Operator

The next question comes from Harlan Sur from JPMorgan.

Harlan Sur - JP Morgan Chase & Co, Research Division

Greg, the flattish storage environment in the fourth quarter is substantially below normal seasonality. And so within that view, what is your server rate business doing directionally versus your external storage business? Is this all demand related? Or is there some inventory burn? Is there some share loss? Any color here would be great.

Gregory S. Lang

Yes, actually, I don't know that I agree with the first comment, that it's substantially below. I think Q3 tends to be one of our strongest quarters because, for Q4, the equipment -- our equipment customers are actually -- they typically see strong Q4s, but we build up to that in Q3. So Q4 tends to be flattish, maybe up a hair, and that's pretty much what we have right now. So I don't think that there's any news there underneath the outlook of flattish. I think we're pretty much in line with the market. Now I think that we, in the last call, as well as this call, we do see the kind of the macro uncertainties weighing on the server and storage business. And for a lot of 2007, we kind of powered through that so I do see it weighing on it now, and I think that's probably the main storyline there. It's just general macro weaknesses is kind of keeping this business from growing the way we'd like to see it.

Harlan Sur - JP Morgan Chase & Co, Research Division

Great. And then your commentary about the one major North American service provider that's starting to place equipment orders, are you hearing this from your equipment customers directly? And when does this start to materialize into semiconductor orders for PMC?

Gregory S. Lang

Yes, hearing it from equipment customers directly, and it's going to materialize in some of the improvement that we see in Q4 in mobile. And we expect it to go into the early part of next year as well.

Operator

The next question comes from Brendan Furlong from Miller Tabak.

Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division

Kind of follow-on from that question. If you could shed in more light on what you said in the RFQs for China LTE in 2013 and related on the design front, your comments about the SSD, secured design win in a major OEM for your SSD.

Gregory S. Lang

Okay. So maybe that's 3 pieces here. I think, at a very fundamental level, I think we all know that there's been kind of quite a bit of weakness over the past year in carrier spending, which is kind of inconsistent with the rollout of LTE phones. And clearly, there's more network build-out the needs to happen now. In North America, we have probably the -- one of the better build-outs, but it's still just getting started. And if you view some of the networks of different carriers, you know that they're not all equal and I would argue that the network matters and that might actually be a bit of the challenge when you look at the new subscriber numbers that came out of AT&T and Verizon in the last quarter. AT&T had something in the order of 150,000, Verizon had 1.5 million, so about a 10x difference. And to me, that just screams the fact that the network matters and I think people, once they start using these phones and they start getting frustrated with the service, the carriers are going to have to respond. And I think maybe that's part of what we are seeing at the beginning of -- with these orders that I just referenced. Now on the China side, there's a number of activities that I think are positive signs. Again, I'll believe it when I see it in this environment but the signs that we're seeing are we've had expedites for some IP RAN build-outs with China Unicom, also some expedites on the China Mobile side. And then the other news in China is that China Mobile just announced that they put out their 100-Gb tender, which is basically the first step to starting the rollout. And that's big news in a couple of ways. One is, it'll be a nontrivial deployment on their part, but it's also big news because they're essentially skipping the 40-Gb node as they move to 100 Gb. So I was there a couple of weeks ago and we're getting a tremendous amount of pull on our OTN products, both kind of at the access level with our 20-Gb HyPHY flex products, as well as our 100 Gb and customers really pushing us to get them into production well ahead of our initial schedule. So positive signs. Again, let's -- I'll believe it when I see it. But it looks, at least, there's activity and energy going on around some of this infrastructure. And then the last question you have was on the SSD front. The comment that I made is we have kind of got our first major design win of a major SSD provider. We're not in a position yet to announce it, but that program is moving forward now to help us enable delivering a complete end-to-end solution next year, second half of the year when 12-Gb solutions start rolling out.

Brendan Oliver Furlong - Miller Tabak + Co., LLC, Research Division

And then I guess the follow-up is, if you'll give us your thought process on the write-down from Wintegra and Passave? Just your thought process around what you've done there.

Gregory S. Lang

I think the thought process on it is -- it's actually kind of maybe 2 different pieces that I'll comment on. One is, I think everybody that's followed us in the last couple of years is aware that the pump part of the business never really grew or took off as fast as we like. There wasn't a DSL or cable type of pop there. And I think it was really, in my opinion, is due to the large CapEx requirements and people are really motivated to get the last drop they can get out of their copper networks. So other than places like China where they have new infrastructure they have to put it everywhere, it really hasn't done much, almost nothing in Europe, very little in North America relative to what you'd expect. And it's primary been Japan, Korea and China. So the size and speed at which the market grew is not up to expectations and we thought it makes sense to write that down. On the Wintegra side, I think the big challenge there on the wireless backhaul front has just been the weak carrier spending and the big lull that we've seen in the last 1.5 years or so. We still believe this is a key growth driver for the company, but the timing of those returns has been pushed out at least a couple of years. So that was the rationale on the win side.

Operator

Next question comes from Srini Pajjuri from CLSA Securities.

Srini Pajjuri - CLSA Asia-Pacific Markets, Research Division

Greg, you mentioned that you expect China Mobile or China telcos to roll out LTE second half of 2013. If that's the case, when would you normally see component orders kind of pick up for that particular rollout?

Gregory S. Lang

I think it's probably safe to assume we would start seeing orders come in a quarter ahead of when they were awarded. So if they start to roll out platforms in Q4, we would expect to start seeing orders sometime in Q3. So it means, 60 to 90 -- 60 days is kind of a minimum although we get squeezed for better than that sometimes. But 60 to 90 is a pretty normal type of lead time.

Srini Pajjuri - CLSA Asia-Pacific Markets, Research Division

Okay. And on the optical front, it's been declining and you're forecasting for another quarter of a decline. Just wondering, is this related to the Fiber To The Home business? Or is it the fact that OTN is not taking off? And also, if you could help us understand where you'd expect the legacy business to be lined up this year? I think you said it's about 8% at end of Q3.

Gregory S. Lang

Yes, it's about 8%. I think it's going to hover in that range for a bit for the legacy part. And the answer to the first part of your question about is it optical, is it Fiber To The Home? It's actually some of both. Actually, the spend out of Japan has been very weak on the Fiber To The Home front. So it's taken a hit this year relative to expectations, as well as kind of the general wireline spending. It's kind of prioritized after the mobile spending unless it's required to support the mobile investment, so that's been weak as well.

Operator

You next question comes from Kevin Cassidy from Stifel, Nicolaus.

Dean Grumlose - Stifel, Nicolaus & Co., Inc., Research Division

This is Dean Grumlose calling in for Kevin Cassidy. As you look at the carrier spend and activities for the cellular build-out, could you comment on whether you're seeing this activity in small cells, large cells? Where are you seeing the actual build-outs start to pick up for the LTE? And this may vary by geography.

Gregory S. Lang

Yes, at this stage, I think the -- most of what we're seeing, and I don't know if this is a statement about the market or just our visibility of it, most of what we're seeing is in the macro-level build-out. I think the macro sites exist, the assets exist, the power, the connectivity is all there. So we're expecting to build that out first and then supplement with smaller cells as needed. But I would say the majority is macro at this stage.

Operator

[Operator Instructions] The next question comes from Sandy Harrison from Wunderlich Securities.

William S. Harrison - Wunderlich Securities Inc., Research Division

Real quickly, sort of my first question back to talking a little bit about mobile. Going forward, when you look at some of the opportunities and where you look for growth is going to come from over the next several quarters after this, is it more legacy platforms that you're adding capability to? Is it greenfield opportunities where these are new installations for the technology? Just an idea of sort of where this is going to go to.

Gregory S. Lang

Yes, my belief is we're seeing most of this in kind of new, I'll call, hybrid backhaul systems that because we're moving through both TDM, T1/E1 devices of different sorts, as well as the Wintegra processor platform, so we're seeing kind of both of them go forward. And I think that's going to be the case for another 5 years-ish before people go to all-IP because they're still -- I mean, they have to be able to move the traffic off the older builder platforms and that's all TDM base. So I think it's going to be a while before we see a majority of the platforms be greenfield IP deployments. But for now, clearly, we're seeing kind of a hybrid model being like most.

William S. Harrison - Wunderlich Securities Inc., Research Division

And Mike, a quick follow-up on the balance sheet. After going through all the spend for the buyback and the debt and other stuff like that, did you give a net number of where you guys think that you'll end up for cash at the end of Q4 based upon all the activity you've seen?

Michael W. Zellner

Not specifically but, obviously, we've been generating kind of mid-20s in operating cash. And no reason to believe that, that won't be a similar situation. The lion's share of the buyback was done well before. It's just that kind of a bow was put around it in Q4, so there actually has been a lot of cash spent other than on the bond, which I referred to that $68 million. But in terms of the stock itself, that -- the lion's share that was done prior to Q4. So pretty much just make the adjustment for the bond and assume $20 million, $25 million in operating cash.

William S. Harrison - Wunderlich Securities Inc., Research Division

Take $68 million out and $65 million at.

Michael W. Zellner

$68 million out and 20 -- mid-20s at.

Operator

With that, we'll conclude today's conference. Thank you for your participation in the PMC Third Quarter 2012 Earnings Conference Call. This concludes the call for today. You may all disconnect at this time.

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