Tom Krause – VP, Corporate Development Hock Tan – President and CEO Doug Bettinger – CFO

Terence Whalen – Citigroup Ross Seymore – Deutsche Bank Vivek Arya – BAML James Schneider – Goldman Sachs Parag Agarwal – UBS Christopher Danely – JPMorgan Romit Shah – Nomura Vijay Rakesh – Sterne Agee Brendan Furlong – Miller Tabak Joanne Feeney – Longbow Research Mark Lipacis – Jefferies & Co. Ian Ing – Lazard Capital Markets

Good day, ladies and gentlemen, and welcome to the third quarter 2012 Avago Technologies Limited earnings conference call. My name is [Chanel] and I will be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Innstructions]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Tom Krause, VP of Corporate Development.

Thank you, operator, and good afternoon, everyone. Joining me today are Hock Tan, President and CEO, and Doug Bettinger, Chief Financial Officer of Avago Technologies. After the market close today, Avago distributed a press release and financial tables describing our financial performance for the third quarter of fiscal year 2012. If you did not receive a copy, you may obtain the information from the Investors' section of Avago's website at www.avagotech.com. This conference call is being webcast live and a recording will be available via telephone playback for one week. It will also be archived in the Investor section of our website at avagotech.com. During the prepared comments section of this call, Hock and Doug will be providing details of our Q3 fiscal year 2012 results, background to our Q4 2012 outlook, and some commentary regarding the business environment. We'll take questions after the end of our prepared comments. In addition to U.S. GAAP reporting, Avago reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the tables attached on today's press release. Comments made during today's call will primarily refer to our non-GAAP financial results. Please refer to our press release today and our recent filings with the SEC for information on specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. At this time, I would like to turn the call over to Hock Tan. Hock?

Thank you, Tom. Good afternoon, everyone. We're going to start today by reviewing recent end-market highlights and then Doug will provide a summary of third quarter financials. Now, revenue for our Q3 fiscal year was $606 million, just slightly above the midpoint of our guidance, and this represented an increase of 5% from last quarter but an increase of less than 1% from the same quarter a year ago. Now, during this Q3, industrial was strong, driven by continued recovery in Asia; wired infrastructure was modestly up; enterprise was flat; but we were helped by strength from service providers. Wireless was down below our estimates at the beginning of the quarter because of product transition at one of our major OEMs. Now, looking into next quarter, Q4, however, we no longer have the revenue contribution, if you recall, from our consumer navigation products which represented approximately 7% of Q3 revenues. In this Q4, we foresee, we forecast industrial and wired infrastructure to be down, which leaves us really with only one cylinder running on turbo charge for Q4. I would like to point out though that the strength of this wireless will still enable us to grow modestly quarter over quarter in Q4. And if I look at our three primary target markets, excluding consumer business, our total revenue is actually expected to increase in the mid to high single digits in Q4 on an apple-to-apple comparison, no pun intended, compared to Q3. Let me provide more color on each of our end-markets. Starting with wireless, second half our fiscal year is playing out pretty much as we expected. Revenue from wireless declined 5% sequentially and represented 40% of our third fiscal quarter revenue. As you may recall, during my last earnings call in May, I pointed out two near-term challenges to our wireless business in the third quarter; namely, the supply constraint of Qualcomm's 28nm LTE baseband chipset as well as the product transition cycle at one of our large OEM customers. These two near-term challenges were the main reasons wireless revenues were down sequentially in a quarter that is normally a seasonally strong quarter. I also noted on our last call that we expected wireless to be very strong in Q4. As many of you know, we are very well-positioned Qualcomm's 28nm LTE platform. The 28nm supply has made some progress, as we have seen, as small supply becomes available to some of -- many of customers, OEM customers. Consequentially, we're now seeing demand for RF frontend solutions associated with this platform accelerating with certain ODMs today. In addition, we're now seeing the full benefit of the product transition at one of our large OEM customers. Our content at this OEM and volumes are also up significantly, and as a result, we expect wireless revenue to be up in the range of 20% to 30% in Q4 compared to Q3. Moving on to wired infrastructure, revenue here represented 29% of Q3 revenues. Wired was in line with our expectation at the beginning of this quarter, with revenues up 3% sequentially. We benefited from double-digit growth in 2.5G and 5G power uptakes used in core routing applications as we ship-in to major programs at service providers in North America and China. Demand for ASICs remained, and looking into Q4, we expect sequential growth in ASICs because of strength in data center switching. However, reflecting what we perceived as the hiatus in the implementation of core routing programs, we expect to see a temporary decline in our parallel optics, primarily tied to one of our large OEM customers. As a result, we expect overall revenue from wired infrastructure to decline high single digits on a percentage basis for the fourth quarter. Finally, turning to industrial and automotive markets, revenue from this target market accounted for 24% of our Q3 net revenue. Net sales grew 19% sequentially, which was slightly better than our expectations. Worldwide resales were up again growing 5% and gave us confidence the recovery we saw last quarter is continuing. As we expected, demand from China was strong. We believe government stimulus programs and a looser credit environment drove our distribution partners and local Chinese customers to more aggressively take products in the quarter. However, revenues still remain 17% below the same quarter a year ago. So, China is recovering, Japan, North America were flat, but Europe remained a weak spot. Even though we expect resales to grow in Q4, given the robust revenue uptick, particularly our ship-in to distributors we saw in Q3, and a relatively soft demand environment outside China, we expect industrial revenue to decline mid to high single digits in Q4. Revenue from consumer, as a note -- as a final note, revenue from consumer and computing peripheral markets represented as I mentioned earlier about 7% of our Q3 revenues, reflecting really last-time buys resulting from a transition to a royalty business model in consumer navigation. And in this market sales grew 47% sequentially from the prior quarter and grew 33% from the same quarter a year ago. So in summary, as we mentioned, we grew 5% sequentially in the third quarter, driven largely by strength in industrial. For this fourth quarter, we forecast overall revenue growth of between 0% to 3% from Q3 caused by the sharp falloff in revenue from our consumer navigation business, and frankly, on certain demand in carrier routing, despite what is a very strong revenue ramp for wireless business. And again to reiterate, without looking at revenue from our consumer business, revenue growth from our three primary targets will be projected to be up mid to single digit -- mid to high single digits. With that, let me turn the call over to Doug for a more detailed review of our third quarter 2012 financials.

Okay. Thanks, Hock. Good afternoon, everyone, and thank you for joining our call this quarter. Before reviewing the third quarter fiscal 2012 financial results, I want to remind you that my comments today as always will focus primarily on our non-GAAP results. A reconciliation of our GAAP and non-GAAP data is included with the earnings release that we issued today and is also available on our website at avagotech.com. Revenue of $606 million in Q3 represents an increase of 5% from last quarter and an increase of 0.5% versus the same quarter a year ago. The sequential increase was in the upper half of our guidance for the quarter. Revenue from our industrial and consumer target markets were a little stronger than we expected. Revenue from our wired target market came in approximately as we expected. And then finally, revenue from our wireless target market came in slightly weaker than we expected. And for the last two quarters, we've disclosed that Foxconn was a greater than 10%, and that continued to be one again this quarter. For the second consecutive quarter, distribution resales grew in the mid single digits. And as Hock described, the sequential growth of resales was primarily driven by strength in Asia, China in particular, while Europe remained weak. Looking into Q4, we expect resales will continue to grow. During Q3, however, our inventory and distribution grew at a rate slightly greater than resales. Hence, we expect revenue into the distribution channel would decline somewhat in Q4. And then just to remind you, the end-market impacted the most significantly by distribution is our industrial and automotive target market. Our Q3 gross margin was 51.2%, slightly below the midpoint of our guidance. This result was driven by a slightly negative product mix within the wireless target market as well as greater revenue from our lower-margin consumer target market. So, turning to operating expenses, R&D expenses for Q3 increased by $4 million to $83 million, while SG&A decreased by $4 million to $41 million, which left operating expenses unchanged at $124 million from last quarter. OpEx came in $5 million lower than our expectation a quarter ago due to the timing of certain R&D programs as well as lower litigation spending. As a percentage of sales, R&D remained at 14% and SG&A decreased to 7% of net revenue. Income from operations for the quarter increased by $15 million sequentially to $186 million, and this represented 31% of net revenue. Compared to the $177 million for Q3 of last year, income from operations increased by $9 million. We recorded a net gain of $1 million in interest and other, primarily due to the interest on our cash balances. Taxes of $5 million for Q3 were $1 million lower than the prior quarter. The decrease was related to the jurisdictional mix of income. Q3 net income of $182 million increased 8% from the prior quarter, and Q3 earnings per diluted share of $0.72 was $0.06 higher than Q2. Compared to Q3 of last year, net income was $6 million higher, and for earnings per diluted share, it was $0.04 higher. Earnings were higher versus the prior year primarily due to lower spending, and the sequential increase in Q3 earnings was primarily attributed to the higher revenue. Our share-based compensation in Q3 was $15 million. The breakdown of the expense for Q3 includes $1 million in cost of goods sold, $6 million in R&D and $8 million in SG&A. In Q4 our anticipated share-based compensation will again be approximately $15 million. And just to remind you, the company's definition of non-GAAP net income excludes share-based compensation expense. So now let me move to the balance sheet. Our day sales outstanding came in at 50 days. This was up seven days from the prior quarter. The increase was due to the linearity of revenue within the quarter. Our inventory ended at $216 million, which was a slight decrease of $2 million from last quarter. Days on hand came in at 66 days, which decreased 4 days from Q2. We ended the quarter with a cash balance of $973 million and we generated $128 million in operational cash flow. We spent $65 million on new capital equipment, and for next quarter, Q4, I expect CapEx will be in the range of $70 million to $80 million. The increase is primarily due to incremental FBAR filter capacity to support growing customer demand. During the quarter we consumed $50 million on stock repurchases. And on June 29 of 2012, we paid a quarterly cash dividend of $0.15 per ordinary share, which consumed $37 million of cash. This dividend was raised by $0.02 from the prior quarter. Since the inception of our dividend program in Q1 of 2011, we've continued to increase our dividend each quarter. We also continued to evaluate potential strategic investments in acquisitions as another way of deploying cash to maximize the return to shareholders. However, as a matter of policy, we do not comment on rumors or speculations regarding any specific acquisition targets or strategy. Now let me cover the balance of our non-GAAP guidance for the fourth quarter of fiscal 2012. This guidance reflects our current assessment of business conditions and we do not intend to update this guidance. Revenue is expected to be in a range of flat-to-up 3% over Q3, driven primarily by growth in wireless. Gross margin is expected to be approximately 51.25% plus or minus 75 basis points. Operating expenses are estimated to stay flat at $124 million. Interest and other is projected to be approximately $1 million. Taxes are forecasted to be approximately $8 million. Taxes are slightly up due to the timing of certain discrete tax items. Finally, the diluted share count forecast is for 253 million shares. That concludes my prepared remarks. Operator, would you please open up the call for questions?

Will do. [Operator Instructions]. Our first question comes from the line of Terence Whalen, Citigroup. Terence Whalen – Citigroup: Hi, good afternoon. Thanks for taking the question. I think I'd like to start off by asking a question around the FBAR comment that you made. You said the CapEx is going to be $70 million in the fiscal fourth quarter because you're expanding FBAR capacity. Can you just give us an idea of the magnitude of the capacity expansion you're thinking about for FBAR perhaps over the next one year and two-year period and also indicate what's driving the need to expand capacity? Is it just one OEM or is it a broader trend that you're seeing in conversations with service providers? Thanks.

Terrence, this is Doug. I think we've kind of commented on this last quarter. We're on a path right now of doubling our FBAR capacity between now and call it mid next year. That capacity comes online bit by bit, but we're in the middle of doing the heavy spending right now. And we're investing in that capacity for the broad market. It isn't any one customer. I mean certain customers do tend to use more FBAR than others, but we are investing for the whole market, Terrence. Terence Whalen – Citigroup: Okay, terrific. And then as my follow-up, I guess the question that I would like to ask is, if I think about the $30 million drop in consumer and PC, roughly going to $14 million, my question is, what's the gross margin of that? Because if I were to assume that that's a licensing stream with a very high gross margin, then it appears that your gross margin guidance in October for a 20 basis-point increase is conservative even when taking into account wireless up 25% and wired and infrastructure down mid single digit. So I guess my question is, why are you guiding gross margin flat if we were to assume a much richer gross margin from that licensing stream in the fiscal fourth quarter? Thanks.

Terrence, this is Doug again. There's a lot of moving parts in gross margin at Avago. We have our largest growth coming from wireless which tends to be our lowest gross margin end-market. That's a piece of it. That's offset by the point that you're picking up on. I would tell you that that's not a 100% profit in what's remaining in the consumer business. There are some costs associated with that. And then understand that each end-market gross margin moves up or down quarter by quarter. It isn't static. So things move around a little bit. And when you mix it altogether, the 51.25% is where our estimate is coming out, Terrence. Terence Whalen – Citigroup: Okay. Thanks, Doug.

You're welcome.

Our next question comes from Ross Seymore, Deutsche Bank. Ross Seymore – Deutsche Bank: Hi, guys. Just, Hock, a question on the industrial side of things. It makes all the sense in the world about burning some inventory given what resales and selling did in the third quarter as far as your fourth quarter guide. But in prior quarters, you also talked about year over year those revenues being down significantly. Still seems like they are down about 15% to 20% year-over-year, so I'm surprised you really think you have to burn a lot of inventory. Can you just talk a little bit about how we reconcile the sequential to the year over year, please?

You're right, Ross, in all that you said. Well, our industrial revenue is, broadly speaking, about 15% to 20%, still down from the same time a year ago. And so we still think that recovery -- still some ways, some possible ways to go. Having said that, I mean, the recovery is very, as I pointed out, right now as we see it, is very much limited in Central Asia in industrial, especially in China where we see the strength of it. We see some -- we see flatness, not down, but flatness in Japan and Europe for industrial. And partly maybe that's probably because things have gone down -- though they haven't gone down much in those home markets, but we also see the possibility of some of those exports from those countries in Europe and Japan through industrial OEMs to China too. And you're right, it's growing up. It is still improving, but as we indicated, it's growing at above 5% mid single digits, we think. And against that last quarter, if you recall, we saw an industrial revenue which we recognized on a shipping basis of closer to 17%, 18%, 19% sequentially. So we kind of feel that our distribution market might be getting ahead of itself and might be prudent for us to kind of pull back. That's the forecast obviously. And if obviously resale goes beyond the mid single digits we are forecasting for Q4, we might reassess and re-evaluate what we do here. But this is basically our current thinking. Ross Seymore – Deutsche Bank: Great. And I guess, as my follow-up, switching over to one for Doug, moving away from the gross margin impact of that change to the royalty model, is your fiscal fourth quarter OpEx guidance fully encompass the decrease in OpEx that I assume comes along with changing over to that IP royalty-based model in consumer?

Yes, Ross it does. Obviously some other things are growing spending. R&D, when you strip out that consumer bit going away, would be up slightly on an apples-to-apples basis. Ross Seymore – Deutsche Bank: Great. Thank you.

Thanks, Ross.

Our next question comes from Vivek Arya, BAML. Vivek Arya – BAML: Thanks for taking my question. First one, on wireless. Hock, you mentioned Foxconn as a 10% customer. I was wondering if you could talk about Samsung also. And just a broader context of how you think about the customer diversification, because the October quarter is great, there is a big ForEx cycle, but what happens a quarter after that or a quarter after that? How long can you be sort of subject to all this fluctuation just because of these product transitions? If you can talk about diversification, if that is even possible as you look out at smartphone industry right now?

Well, interesting question. Let me try to address that, but to answer -- to jump straight on, yeah, we have a fairly broad customer base in wireless. We're pretty much doing business now with every smartphone manufacturer. Not every phone manufacturer, but every smartphone manufacturer. That includes by the way and on the -- obviously top line, the largest tier 1 manufacturers including people like Samsung, you correctly pointed out, and we do a very good amount of business with Samsung and they are very valued and very significant customer. We also sell to tier 3 whitebox phone manufacturers in China on a case-by-case basis depending on the programs and when and the specific technologies they are using. So we have a pretty broad base. But you are right, in that respect it's a very interesting tiered market now. Very, very much a question of picking winners and losers, so to speak, in terms of OEMs. And we try to cover the full range with the product we have and the technology we have. And some customers really appreciate and are willing to obviously subscribe to our business model of very high-performance RF components, be -- particularly our FBAR components. And some of them use I guess frontend modules [with pull-along] power amplifiers, our power amplifiers which help us increase volume. Overall, we -- but to address your question on the pattern of behavior, forecasting is always hard, but let me try to do that, we have drawn some reference point by looking back to last year, the last 12 months. And typically prior to the last year, what happens is, in our fiscal Q3, is when we see a strong seasonal uptick in wireless business, typical seasonality, it's end of the year, headed towards back to school and Christmas. So, strong typical seasonality up, and a continuing strong seasonality in Q4. And by that I usually mean 10% per head sequentially, maybe then mid to high single digits in Q4. Then Q1 will show a -- the next Q1 following Q4 will show a sharp drop and could be mid to even 10% drop. And Q2 from -- Q2 will be kind of flat from Q1. And the cycle repeats itself. That used to be the case say two years ago, three years ago. Come last year, we see a significant change in the pattern, in this whole pattern, and part of it is related to what you're pointing out, the way the market has segmented itself among OEMs and based on how those OEMs launch new products and the timing in which it launches. And what we've seen last year was, as we see now, is Q4 -- there was some seasonality in Q3 -- Q4 was a very uptick for us, in last Q4, not this Q4, last Q4. Q1 remains at Q4's level, and Q2 was pretty close to what Q1 was, flat, at that high level, and then Q3 showed a sharp drop-off because of a product transition at a major customer, and Q4, as we see now, bounced right back up. So if I use this, say, new trend, I would say following this new trend, I'm not giving you a forecast, I'm just saying strictly following that new trend, Q1 coming out might be flat from Q4's level in wireless. Vivek Arya – BAML: Got it. And for my follow-up, maybe one for Doug. Doug, as you think about these product transition issues that Hock alluded to, the fact that you're bringing in a lot more FBAR capacity in-house, should we start bracing ourselves for a little more gross margin volatility over the next one or two years just because your largest customers do go through these product transitions as it's well known? But now that you control more of your own manufacturing, how are you reflecting that in sort of how we think about gross margins?

Yeah, Vivek, you know, there might be a little bit. But quite honestly, when you look at how we've come through this last transition through, we were building inventory in advance of a stronger back half of the fiscal year. We were building inventory in Q3, Q4. And so we didn't have a big swing in utilization in the fab. Maybe we were a little bit lucky this year, and that won't always be the case, but we'll try to manage it that way as best as possible. So, yeah, there could be a little bit, but understand still that two-thirds of our manufacturing spending is still outsourced. We are adding more internal spending. But they're still the vast majority of what we spend on manufacturing, is outsourced, and that varies with volume. Vivek Arya – BAML: Great. Thank you very much.

Thanks, Vivek.

Our next question comes from James Schneider, Goldman Sachs. James Schneider – Goldman Sachs: Good afternoon. Thanks for taking my question. First of all, on the wireless area, I was wondering, relative to the up 20% to 30% guidance for next quarter, could you maybe give us some color about how much of that is being driven by an increase in units and how much is being driven by the increase in content given the transition to LTE and other content increases?

Wow, that's a tough one to call.

That's a tough one.

Because of the mix of our products even in wireless, James, I'm trying to think, we're thinking of that as you say, because the mix changes quite dramatically and the price thus change dramatically based on the mix of products. Because I mean, as you know, if you look at the categories of products we have, we have discrete FBAR, discrete PA, though that's not that big a volume except recently. And when we have frontend modules. And the prices on each are quite distinctively different. And there's a shift obviously based on the shift in architecture as we move on to new generations. So if I give you an ASP, which is -- which may be the answer you're asking for is content, but it depends on the phone we're using. To try to get to -- to answer your question basically, don't know how to answer it, but it's not an ASP push. It's more content. And the content is tied to an architecture that goes from maybe largely PAs to frontend modules. And that does definitely increase ASPs quite significantly. James Schneider – Goldman Sachs: Understand. That's helpful. And then maybe as a follow-up, following up on the industrial market for a second, you talked about the inventory burn-off in this coming quarter. Can you talk about whether you think that inventory reduction scenario happens maybe even into the January quarter? And then maybe talk a little bit about the linearity you saw in the July quarter and what you've seen so far in terms of orders for August.

Okay. Let me try to take them together. Well, as I mentioned in my -- as a respond to an earlier question, what we foresee, and it's pretty close, is that we obviously want to burn off inventory in our distribution channel in this current Q4 simply because we felt we shipped too much in the quarter before, relative to resale. But if resale were to pop up stronger, we want to take advantage of the fact that we need inventory in the channel to maximize our return -- maximize our share. So we might now be as aggressive in burning it off as we are postulating today, which we are very aggressively postulating that we will burn off a lot of inventory in Q4. That may not be the case if resale strengthened. And so it all boils down really at the end to the strength of resale and the growth of resale. We are obviously forecasting mid single digits resale, which is something we've seen over the last six months in our business, and we continue to assume that’s the case in determining the level of burn-off. So we might adjust that level of burn-off, which relates to our shipping revenues based on that resale level. Okay. What was your second question again, if you don’t mind repeating? James Schneider – Goldman Sachs: About linearity, and what you are seeing --

Linearity, well, in our July quarter, the non-linearity you see is very obviously because we were starting already to see a ramp in the month of July, late in July, towards the wireless business in terms of recovery from the product transition of a major OEM. We already to start that happening partially. So there is this thing non-linearity because of that. Now coming back to this quarter, we would obviously become much more linear, because we are now in full ramp mode. James Schneider – Goldman Sachs: Great, that's helpful. Thanks so much.

You bet. Thanks, James.

Our next question comes from the line of Parag Agarwal, UBS. Parag Agarwal – UBS: Hey, guys. Thanks for taking my question. Just had a question about your manufacturing strategy. You hinted that you're increasing the capacity for bulk filters. Could you tell us what are you doing on the gallium arsenide side and also your views on whether there is room for you to differentiate on the gallium arsenide side as well?

Okay, thanks. Yes, by the way, it's not -- we don't call it bulk filters. Just a small [mint] here, we call it FBAR just to differentiate somewhat a bit from -- one of friendly competitors called theirs to be, but the basic technology is bulk, you're right, is FBAR. And yeah, we invest a lot in FBAR because that's a very distinctly differentiated technology and process, especially in duplexing, in handset RF signals. We will continue, as Doug said, we're going to double our capacity over the, let's say in the 12. By middle of next year we expect to have doubled the FBAR capacity. We have a year before that, which is this year. And we expect to fully utilize it based on demand we are seeing out there. So, strategically, we think that's exactly the right thing to do. It is also a differentiated technology which is exactly in line with our business model of providing that kind of products. In turning to the other point you have, gallium arsenide. We did announce about two, three quarters ago, three quarters ago, investment in relatively small capacity in gallium arsenide HBT, used for power amplifiers. In fact, used in power -- used to produce power amplifiers we sell today, many of which are in conjunction in frontend modules with FBAR, but some discrete like the multi-mode power amplifier we have been selling this year. In answer to your question, is there differentiation? There always is generation to generation based on mainly design, some process, but mainly design. But unlike FBAR, I do want to say to you, it's hard to make that sustainable differentiation on power amplifiers, which is why our focus is really on FBAR. The reason we build that small capacity on gallium arsenide is that most of our requirements on gallium arsenide is right now outsourced through our foundry in Taiwan. We figured for second sourcing, security of supply purposes, as well as to have the ability to tweak process, improve performance of sound on power amplifiers as we need to. It's good to have a small fab in-house to be able to do that so that we can pass that process over to our foundry. But most, by far 75% of our demand, 80% of the requirements on power amplifiers, will come from our foundry. Parag Agarwal – UBS: Okay.

Yeah. That's about it. Parag Agarwal – UBS: Okay. Next question is about RF content in the handsets. You indicated that, going into the next quarter, you're going to see a significant increase in the RF content. How much headroom do you have going forward? Do you think that every year your content is going to increase or do you see that flatting out at some point of time?

First and foremost, I should be -- I apologize if I may have mis -- given you a wrong impression. Content does, in today's market on smartphones especially, will likely vary generation to generation. And it would likely, given the trend of where the technology and industry is headed, will typically -- RF content in every smartphone will keep increasing. Why? Because of the fact that you increase the amount of functionality and capability of roaming with the same handset as you move up from 2G, 3G and now LTE. So there's that underlying trend. Having said that, depending on the phone manufacturer, OEM, a particular phone may have -- may not have as much content as pulled from another OEM simply because it depends on the carrier, it depends on the region, and the band that -- and the performance they want to make this phone. So it doesn't necessary mean that it's a monotonic increase across the board as time passes on all phone. It depends on what particular phone program we are designing and what particular OEM. So it does vary. My sense is that with among some of the tier 1 guys, customers, we tend to address the very high-end smartphones, which tends to lend itself to a lot of functionality, a lot of ability to support multiple bands. And because of that, the opportunity falls to increase our content keeps growing. Parag Agarwal – UBS: Thank you.

Thanks, Parag.

Our next question comes from Christopher Danely, JPMorgan. Christopher Danely – JPMorgan: Thanks, guys. Hey, Hock, can you just maybe rundown your three big end-markets and also the geos? And how do you think things are playing out here? Where are you more worried? And how do you expect the recovery to look in some of the troubled end-markets and geos out there?

Well, yeah. Let's start with wireless. I mean, our perception on the wireless side is, on the high-end -- on the smartphone side, things continue to look fairly strong, fairly robust. Part of it may be a matter of being able to -- fortunately on our side, as well as a strategic purpose in addressing all winners and losers in the smartphone area. And secondly, on some of those OEMs we're addressing, our business model requires us to pretty much try to differentiate our products, differentiate in a sense of better performance, and better performance typically means more content in many cases, and we have the advantage of getting that in, especially in a situation where in many OEMs where -- in certain bands, in LTE, where the use of FBAR is increasing for duplexing for filtering. So, all that is good in the direction we're headed. But we, as far as we see, that high-end handset market is still fairly robust. Turning to wide infrastructure, as I touched on lightly earlier, we see enterprise side, which is a large part of our wide infrastructure business, which is why -- which is enterprise networking and enterprise computing and storage. We see that the market has been rather -- has been very flat, almost I use the word sluggish and flat. And that’s been that way now for about three, six -- almost -- at least three months, maybe even six months. It’s not down, but it's not up either. And overlay on it is a sector of the business we address, which is carrier routing from service providers. And that’s a lumpy kind of business. We have seen good strength or a lot of strength on the investment in it in Q3. A big part of it is going into core routing, using a lot of backhaul for wireless infrastructure investments, a big part of it. So we see that investment coming in chunks, and we sell a lot of content when that happens at very high-margin products of our fiber optics. And then -- so, but that's pretty much what we continue to see in wired infrastructure. In industrial, things have gone down a lot, things did go down a lot late last calendar year and Q1, Q2 of our fiscal year this year. And since we have been on the recovery. Recovery has been very limited, as I said, very focused in Asia, and also been relatively slow in a sense that it's mid single digits if you look at worldwide. And really what we see is China is probably growing faster than that, in maybe around 10%. But the rest of the world is kind of flattish. So it's kind of a pull, up, and when you average it out, it's mid single digit. And we see that continuing for the next six months or so. Beyond that, I don't really know. But that's our view of the world as we see it right now. Christopher Danely – JPMorgan: Great. And then just a quick follow-up for Doug, what should we be thinking about for tax for the next fiscal year?

Yeah, Chris. The way to think about tax here, our effective tax rate is 4% to 5% on a run rate basis. Quarter by quarter you get some lumpiness depending on when tax returns get filed or different true-ups each quarter depending on what's happening in each jurisdiction, but think of it as up 4% to 5% ETR. Christopher Danely – JPMorgan: Okay, great. Thanks, guys.

Thanks, Chris.

Our next question comes from the line of Romit Shah, Nomura. Romit Shah – Nomura: Thanks. You mentioned that, Hock, industrial would be down in October, I believe, around 5%, 6%. A lot of the analog guys like Maxim, TI and Linear, in July they guided industrial flat to up. I'm just curious if August booking trends in industrial, did they weaken relative to July or do you see something unique in your mix?

No, no. Let me clarify. Sorry, maybe I wasn't clear enough. As you know, Romit, most of our industrial go to distributors, whether it be Europe. Most of it, not all, but China, Japan or the United States, North America, go through distributors, and we recognize revenue on a shipping basis to distributors. On a resale basis from distributors as well as direct OEM business we sell to certain large industrial OEMs, the revenues, resale, I should say, has been steadily recovering. As I say worldwide, we see it around mid single digits for the last couple of quarters. It's been steadily recovering. Now, a lot of that recovery comes from China where we see resale actual consumption by OEM customers in China industrial, actually growing close to double digits, 10%, early on was even faster, it kind of slowed down a bit, but it's still pretty okay. The rest of the world, be it North America, Europe, it's pretty flat. Even Europe was down, has been down, Japan and US has been pretty flat. So, average about mid single digit. And that's what we saw. What we saw last quarter, July quarter, was fairly -- was a continued recovery in industrial, especially in China. What we did was we replenished a lot of inventory in our distributors. And that's why when resale was growing last quarter, industrial resale was growing mid single digits, we were growing in the mid-teens on our shipping basis. What we're also seeing therefore in Q4 is we're pulling back on that and actually we'll likely burn inventory because what we're foreseeing is resale in industrial will continue mid single digits in our October quarter, Q4, but our ship-in to distributors, which is how we recognize most of the industrial revenue, will actually be down. Romit Shah – Nomura: Okay. That's helpful. As a follow-up, I wanted to ask about acquisitions. You haven't been acquisitive in the past, but there are some reports that have been saying that Avago is looking to make a large deal in the, sorry, in the industrial market. Can you at least comment on your acquisition strategy in this environment where the end-markets don't seem to be bailing anyone out? Are you more inclined to do a deal?

Romit, this is Doug. I'm going to take that one. Romit, we always look at a lot of stuff we have over our history. We'll continue to do so. I don't think that's changed necessarily, and we're not going to comment on any specific acquisition activity or targets. Romit Shah – Nomura: Okay. Thank you.

Thanks, Romit.

Our next question comes from the line of Vijay Rakesh, Sterne Agee. Vijay Rakesh – Sterne Agee: Yeah, hi, guys. Just on the wireless side, good work with the up 25% on the wireless side. I was just wondering when you look at your FBAR, you mentioned your capacity will increase, will double here and double again next year. Do you see any advantage in bundling your PA with your FBAR for the OEMs?

So let me just clarify one thing, Vijay. We're doubling capacity between kind of where we were six months ago and where we'll be mid next year, it's not doubling and then doubling necessarily. Although it may, we haven’t made that decision yet. And then I’ll let Hock take the second part of your question.

Would you mind repeating the second part of your question, Vijay? Vijay Rakesh – Sterne Agee: Yeah, I was wondering. Is there an advantage where in bundling your power amplifier with your FBAR, when you -- for the handset OEM. Do you see upside from the PA business as well as you leverage your FBAR side?

Well, there are couple of advantages, most notably of which is obviously when you bundle -- when I say bundle, let me be clear about clarification. We don’t sell two discrete elements together. If we do, it certainly is coincidental more than pre-planned, because the customer, the OEM customer can design and have a duplexer, which is one an FBAR is, quite differently and laying it out then from designing in a power amplifier, that discrete element. What we do is many customers in architecting their [look] of their handsets would find it beneficial, and we totally agree. We find it beneficial that you put a power amplifier and a duplexer on the same -- of handling the same spectrum, the same band, in a single package. They call it a frontend module, and it gives a lot of flexibility in design. We'd like to believe by matching the duplexer with a power amplifier ourselves, we optimize yield by optimized performance itself. And of course for us it's increased content. It doesn’t necessarily improve our gross margin or product margin, in fact usually it doesn’t, as opposed to selling a discrete FBAR. But it definitely increase the content and it definitely, in our minds, improve design flexibility for the OEM customer. Vijay Rakesh – Sterne Agee: Got it. Just a follow-up here, [not to be my epiphany], but when you look at your gross margins and [inaudible] you have some headwinds here, right? I mean your industrial is weak and your FBAR is -- wireless you are just bringing in house. But as you look out a couple of quarters when you see a recovery in industrial and probably you saw the FBAR is in-house, where do you see your gross margins move?

Yeah, Vijay, I'm not going to give gross margin guidance more than one quarter at a time. Our business model hasn't changed. Our medium to long-term business model is gross margin between 50% and 53%. We're not changing that. There's ups and downs each quarter and I'll talk to you about that each quarter. Vijay Rakesh – Sterne Agee: Got it. Thanks.

Thanks, Vijay.

Our next question comes from Brendan Furlong of Miller Tabak. Brendan Furlong – Miller Tabak: Just a couple of loose ends more than anything else here. On the consumer side, the roughly $10 million or $11 million for next quarter, a little bit higher than we would have thought. Is there some end of life stuff left in there and is the run rate for that on a go forward basis is more in $5 million, $6 million, $7 million type of levels?

Yeah, there is a couple million dollars of carryover in there Brendan, things that are there in Q4 that would go away. I would expect this to be below $10 million on a steady state basis as we get out of the current quarter in front of us. Brendan Furlong – Miller Tabak: Okay, perfect. Thanks. And then I guess on the OpEx, came in nicely below and the guidance looks pretty decent, but how should we directionally or whatever way you want to couch this, think about OpEx into fiscal '13?

The way to think about OpEx here is we have a business model that we invest to. We want R&D as a percent of revenue to be around 14%. So as revenue goes up, we'll tend to spend more; as revenue goes down, we may spend a little bit less. SG&A is around 7%. I'm pretty pleased that we've gotten it down to 7%. We are not going to let that tick back up. But that steady state investment in R&D is required to keep the business growing the way we wanted to grow long-term. So it's not going to change too much from there. Brendan Furlong – Miller Tabak: Okay, thanks. Thank you. Bye-bye.

Thanks, Brendan.

Our next question come from Joanne Feeney, Longbow Research. Joanne Feeney – Longbow Research: Hi. Thanks. And congrats on a nice quarter, folks.

Thanks, Joanne. Joanne Feeney – Longbow Research: So could you perhaps give us a breakdown on your industrial exposure, geographically?

You want to take that one.

Geographically?

You're asking region by region, Joanne? Joanne Feeney – Longbow Research: Yeah, Europe versus Asia versus North America.

Roughly industrial, that's a tough one. Roughly, I would say, yeah, it's -- this is where we ship revenue, not necessarily where we design. It gets transferred to Asia to be built. I would say it's interesting in that regard. It's probably about -- Europe, Asia, is probably around the same amount and they probably comprise 60% between the two of them. And Japan and North America takes the other 40%. So, you may say 30%, 30%, 20%, 20%. Joanne Feeney – Longbow Research: Perfect. Thanks. And then could you give us a breakdown between the industrial and the automotive within that category?

Our automotive is really very small. Joanne Feeney – Longbow Research: Okay.

It's very, very small. Of the total industrial, our automotive is probably about less than 10%.

It's less than 10, Joanne. Joanne Feeney – Longbow Research: Okay, great. And then back to industrial for just a second, so, inventories climbed as your shipment exceeded resale. Was that a fairly constant pattern over the course of the quarter? How were things at the beginning of the quarter versus the end of the quarter in that regard?

It was relatively constant. Well, it comes in spurts. Beginning quarter was pretty strong. Slowdown middle quarter and restarted again by the end of the quarter. Joanne Feeney – Longbow Research: Are you referring to resales Hock, or ship-in?

Ship-in.

Ship-in, Joanne.

Ship-in. Joanne Feeney – Longbow Research: And more resales fairly --

It tends to follow resale. With a little lag. You know how distributors are like. They see a strong resale, they jump at it and they rush. So there is a lag. Joanne Feeney – Longbow Research: Okay. And then you were talking earlier about the discrete parts you sell versus the integrated FEMs and then FBAR versus PAs. Do you have -- happened to have a split you could give us between the revenues you derive from discrete parts versus from the integrated FEM?

Not with me right now and I'm very low to give it to you because it varies every -- it varies a lot. It fluctuates, because every -- just about every OEM handset maker has a different architecture, and it depends on mix in each OEM that dictates the mix in our products. Joanne Feeney – Longbow Research: So it sounds like that varies then pretty significantly, even among your top two customers?

No comment.

It varies a lot, Joanne. Joanne Feeney – Longbow Research: And then finally, if I could sneak one more in, you talked in the past about some traction with the China smartphone makers. I'm wondering if you could give us an update on how that's going.

Well, we continue to have pretty good traction among the Chinese whitebox guys and data card manufacturers too I might add, because as you, know both Huawei and ZTE are among the largest two data card manufacturers in the world, and they also make smartphones. And we've pretty good traction with pretty much all of them, as well as small tier 2 guys like Lenovos and a few -- a bunch of other names. It's just the strength of our sales organization in China that enables us to keep sustaining that business. Joanne Feeney – Longbow Research: Okay. Thanks. That's it for me. Thank you.

Thanks, Joanne.

Our next question comes from the line of Mark Lipacis, Jefferies. Mark Lipacis – Jefferies & Co.: Hi. Thanks for taking the question. Do you guys have a sense of what percentage of LTE phones or designs that are out there that you're seeing the FBAR filter penetrate?

No, I don't have the answer. It's very hard -- again it's a very hard question to answer because not every LTE phone would use FBAR. First of all, it depends on the bands. Certain bands are more -- are harder for signals to receive which is what a lot on FBAR filters do. So it tends to favor the use of FBAR, but then at the end of the day, depending on the OEM manufacture, how important is it to then strategically philosophically that they want superb performance, because buying an FBAR would require them to pay a premium, typically. So they may choose not to. So it gets rather subjective on what -- who uses FBAR versus who doesn't. Mark Lipacis – Jefferies & Co.: I understand that it's a function of OEMs. I was wondering if your own market research suggested, are we talking -- if you have a view like is this -- you're talking like 10% of the LTE market or a lot more than that, where you think you likely have the opportunity to tackle?

I'll give you one. At the resale sounding a bit high pitch about our business model. If you sit here right now, last quarter or this quarter, or last quarter, I would probably say LTE phones using FBAR could be 20%. If you ask me a year ago -- a year from now, I would probably say 50%, 40%, 50%. Mark Lipacis – Jefferies & Co.: Fair enough. Thanks.

Thanks, Mark.

Our final question comes from the line of Ian Ing, Lazard Capital. Ian Ing – Lazard Capital Markets: Thanks for fitting me in. Just to follow up on the RF discussion. As OEM build 3G and 4G world zones, I think we understand you got nice opportunity as higher PIN filter content, but really how many OEMs eventually go to that model when you look at companies like Samsung? So, you got the big two doing different strategies there? Thanks.

Well, that's a $10,000 question. I don't think we know who is going to architect their phones in which way. You're right, you have two that are on polar ends of how they do things and everybody else probably fits partway in between. Ian Ing – Lazard Capital Markets: Okay, thanks. And then Hock maybe just briefly on uncertain demand of carrier routing. I'm trying to reconcile that with Cisco's comments which were more positive in a tough environment. Is it lumpy orders and short lead times or some underlying softness here you think?

Carrier routing is always lumpy and very often very short lead times as far as equipment and even our fiber is concerned. See, our products go into a very specific area in carrier routing. We're not that much in EDGE routing; we're very much in the core routing side. So you're really talking about few OEM customer who do core routing and just as few service providers who use those kinds of throughput, core routing throughput in their networks associated in backhaul. So, yeah, it gets very lumpy necessarily, but it's very substantial and very profitable, but very lumpy. So, you're right. I mean, you read -- even as you say, you read the Cisco remarks, it's hard to figure from it how it translates to our business outlook. All I can tell you is, what we saw last quarter, which was pretty good and what we feel is likely to happen given how strong it is last quarter in this current Q4. Ian Ing – Lazard Capital Markets: Okay. Thank you much.

Thanks.

I would now like to turn the call back over to management for closing remarks.

Thank you, operator. Before we close, I'd like to remind everyone that Avago will meet with investors at the Morgan Stanley Corporate Access Day in Chicago on August 22. We'll also present at the Citi Tech Conference in New York on September 6 and at the Deutsche Bank Tech Conference in Las Vegas on September 13. Thank you for participating in today's earnings call. We look forward to talking with you again when we report our fourth quarter fiscal year 2012 financial results in early December. Thank you.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.