Venk Nathamuni - Managing Director of Investor Relations Bruce E. Kiddoo - Chief Financial Officer and Senior Vice President Tunc Doluca - Chief Executive Officer, President and Director

Andrew Paik James Schneider - Goldman Sachs Group Inc., Research Division Romit J. Shah - Nomura Securities Co. Ltd., Research Division Sumit Dhanda - ISI Group Inc., Research Division Christopher B. Danely - JP Morgan Chase & Co, Research Division Evan Wang - Stifel, Nicolaus & Co., Inc., Research Division Blayne Curtis - Barclays Capital, Research Division Mark Lipacis - Jefferies LLC, Research Division Doug Freedman - RBC Capital Markets, LLC, Research Division Christopher Caso - Susquehanna Financial Group, LLLP, Research Division Terence R. Whalen - Citigroup Inc, Research Division Aashish Rao - BofA Merrill Lynch, Research Division Michael McConnell - Pacific Crest Securities, Inc., Research Division Craig A. Ellis - B. Riley Caris, Research Division Steven Chin - UBS Investment Bank, Research Division Shawn R. Webster - Macquarie Research

Good day, ladies and gentlemen, and welcome to the Maxim Integrated Reports Results for Fourth Quarter Fiscal Year 2013 Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Mr. Venk Nathamuni, Managing Director, Investor Relations. Please go ahead.

Thank you, operator, and welcome everyone to Maxim Integrated's Fiscal Fourth Quarter 2013 Earnings Conference Call. With me on the call today are Chief Executive Officer, Tunç Doluca; and Chief Financial Officer, Bruce Kiddoo. During today's call, we will be making some forward-looking statements. In light of the Private Securities Litigation Reform Act, I would like to remind you that these statements must be considered in conjunction with the cautionary warnings that appear in our SEC filings. Investors are cautioned that all forward-looking statements in this call involve risks and uncertainty and that future events may differ materially from the statements made. For additional information, please refer to the company's Securities and Exchange Commission filings, which are posted on our website or available from the company without charge. Now, I'll turn the call over to Bruce. Bruce E. Kiddoo: Thanks, Venk. I will review our fourth quarter financial results. We are disappointed that both revenue and earnings were below expectations. During this call, we will explain why we missed and why we're still confident in our long-term business model. Revenue for the fourth quarter was $608 million, up slightly from the third quarter. Our revenue mix by major market in Q4 was approximately 44% for Consumer, 29% Industrial, 15% Communications and 12% Computing. Our Consumer business declined significantly due to weakness in smartphones. The product transition at our largest customer was impacted by an inventory correction for the S III. The severity of these issues was unexpected and worsened towards the end of the quarter. Our Industrial business increased significantly with double-digit percent sequential increases in both vertical and general purpose markets. Automotive, smart meters, medical and control and automation were all up strongly. Our Communication business was up across all markets with particular strength in cable infrastructure. Finally, our Computing business was up slightly across all market segments. Gross margin, excluding special items, was 62.3%, down from 63.5% in the prior quarter due to higher inventory reserves in Q4 and a one-time favorable vendor warranty settlement in Q3. Special items in Q4 gross margin were intangible asset amortization from acquisitions. Operating expenses, excluding special items, were $214 million, down from $216 million in the prior quarter due to tight control over hiring and lower profitability, driving lower profit-sharing bonus. On an annual basis, FY '13 operating expenses declined compared to the prior year while revenue increased slightly year-over-year. Special items in Q4 operating expenses included acquisition-related charges. Q4 GAAP operating income, excluding special items, was $165 million or 27% of revenue. Overall, for FY '13, operating margin was 27.5%, up 2 points from the prior year. The Q4 GAAP tax rate, excluding special items, was 18.5%, flat with the prior quarter. GAAP earnings per share, excluding special items, was $0.44 compared to $0.45 in Q3. Turning to the balance sheet and cash flow. During the quarter, cash flow from operations was $214 million or 35% of revenue. Inventory was 110 days, flat with the prior quarter. Inventory in the channel, excluding catalog distributors, increased slightly from 51 to 53 days as channel inventory in dollar terms increased by 7%. Net capital additions totaled $31 million in Q4, down for the fourth consecutive quarter. Overall, for FY '13, capital additions were 7.3% of revenue, down significantly from the prior fiscal year. Free cash flow was $631 million in fiscal year 2013 or 26% of revenue, up $122 million from the prior year. Share repurchases totaled $193 million in Q4 as we bought back 6.4 million shares. This is a significant increase from prior quarters consistent with one of our stated uses of the new $500 million of debt raised in March and our confidence in the long-term value of Maxim. We also paid $70 million in dividends to our shareholders. Overall, total cash, cash equivalents and short-term investments declined by $373 million in the fourth quarter to $1.2 billion as we paid off $300 million in bonds that came due in the quarter. Moving on to guidance. Our beginning Q1 backlog decreased to $357 million. Based on continued weakness in the smartphone business, we forecast Q1 revenue of $570 million to $600 million or down 4% at the midpoint from Q4. Q1 gross margin, excluding special items, is estimated at 60% to 63% due to lower fab utilizations from lower revenue. Other variables that may influence Q1 gross margin include product mix and changes in inventory. Special items in Q1 gross margin are estimated at $8 million, primarily for amortization of intangible assets. Q1 operating expenses, excluding special items, are expected to be flat with the prior quarter due to continued tight spending controls, offsetting the impact of our annual salary and equity adjustments. Special items in Q1 operating expenses are estimated at $4 million, primarily for amortization of intangible assets. This excludes potential items that may occur during the quarter. It is also worth noting that interest expense will decline this quarter due to the pay off in June of our $300 million in debt, leaving only interest expense for our new $500 million debt. Our Q1 and future tax rate, excluding special items, is estimated at 16% to 20%. For Q1 GAAP earnings per share, excluding special items, we expect a range of $0.37 to $0.41. Net capital expenditures in Q1 are expected to be up from Q4, as we invest in new manufacturing technologies. On an annual basis for FY '14, we are targeting CapEx around the midpoint of our long-term business model of 5% to 7%. Our Board of Directors has approved a new $1 billion share repurchase program replacing the prior authorization. With the new $1 billion authorization and availability of funds from our recent debt deal, we are prepared to continue our increased level of repurchases based on market conditions. Finally, our Board of Directors has also approved an 8% increase in our cash dividend to $0.26 per share, approximately a 3.8% yield at yesterday's closing stock price. I'll now turn the call over to Tunç to further discuss our business.

Thank you, Bruce. Good afternoon to all our participants. We appreciate your interest in Maxim Integrated and thank you for joining our call. Our June quarter results represent a disappointing setback to our short-term performance expectations. Our Smartphone business slowed during the quarter, as our revenues were impacted by a major smartphone product transition at our top customer. The June quarter revenue shortfall was driven primarily by a sharp drop off in demand for the prior-generation Galaxy S III and Note II and the associated inventory adjustments. To fully capture these shifting market dynamics, I would like to point out the trajectory of revenue contribution from our top customer. During fiscal year '13, revenue from this customer accounted for 28% of total company sales, with the contribution peaking at 33% in the March quarter. Looking ahead, the contribution is expected to be less than 20% of revenue in the September quarter. Despite the lower revenue from our top customer, we are very encouraged by the broad-based strength in all our other businesses. Perhaps, to best illustrate our diversified business mix, I would note that in the June quarter, we grew revenue in 22 out of our 24 market segments. Maxim strategy of broad diversification across multiple end markets positions us well as we work through the challenges in the high-end smartphone segment. We are confident in our long-term business model, as demonstrated by the increase in our dividend and share repurchases. We continue to generate strong profits and cash flow, highlighting the inherent strengths of our business model, despite demand fluctuations. As Bruce indicated, the board approved an 8% increase in our dividend and authorized a new $1 billion share repurchase program, further reinforcing our commitment to return cash to our shareholders. Let me now provide additional details on the just-completed quarter, with an overview of lead times and bookings. During the June quarter, our delivery lead times declined, while customer order lead times increased from the prior quarter. This was predominantly due to product mix changes. Bookings overall decreased during the quarter, resulting in a book-to-bill ratio slightly below 1. However, Industrial market bookings were strong in the June quarter and this trend has continued thus far in July. I will next provide some color on our major markets. Let me start with consumer. We expect our September quarter consumer end market revenue to be down due to demand weakness for the Galaxy S4 and the associated inventory adjustment I mentioned earlier. While we're impacted by the slower-than-expected uptick of this platform, we continue to make progress in several other smartphone and tablet offerings at this customer. Our high-integration interface power system-on-a-chip is designed into these new models. We remain uniquely differentiated due to the breadth of our analog IP, depth of our systems expertise, proprietary high-voltage process technology and agile design execution. Now moving to the area of sensors, you might recall that we announced our first-generation gesture product in the March quarter. We're pleased to report design wins for our second-generation sensor technology, which includes gesture, proximity, RGB and ambient light sensors, all combined in a highly integrated solution. Shipments resulting from these wins will begin shortly. This extends our technology lead in the optical sensor domain and provides compelling value to our customers due to a combination of high performance, small footprint and lower volume cost. Overall, we're working with multiple customers across a host of technologies, including power management, sensors, touch controllers and audio. Additionally, we continue to extend the adoption of these products beyond smartphones into tablets and hybrid devices. We recognize that growth in the high-end smartphone segment is slowing as the market shifts towards the midrange. I want to emphasize that we are well positioned to participate in the midrange and to do so with solid profitability, as we leverage our technology, products and systems expertise. Despite the slower high-end growth, we will continue to emphasize high-end smartphones. This segment is where all the innovation takes place. And the remaining new consumer features are underway here, but it is too early to talk about these. As we develop these new technologies, it is relatively straightforward for us to leverage and selectively migrate the technology to midrange opportunities. This is what we're doing. In summary, while we're not immune to market weakness in the smartphone segment, we're investing in future technologies, platforms and customers in order to provide differentiated solutions to the Mobility market. As a result, we expect a return to growth in our Mobility business in calendar 2014. Second, let me discuss the Industrial market. We project the September quarter Industrial revenue to be up slightly, following a very strong performance in the June quarter. Order strength in several Industrial segments continued their momentum during the quarter. We saw strong sequential increases in bookings from Automotive, Smart Meter and Medical end market segments, partially offset by a moderation in orders in control and automation. In Automotive, we have been gaining traction in power solutions, RF and serializer-deserializer products, providing us good long-term visibility into our Automotive business. Our design win span multiple product categories, including infotainment, powertrain and advanced driver assistance systems. We're also expanding our footprint in battery management solutions for electric vehicles and hybrids with several Automotive OEMs. Our differentiated strategy in Industrial where we generate roughly half our business from targeted virtual ASSP markets played out very well in the June quarter. We had very strong sequential increases in all vertical segments. Our application-specific SoC approach allows differentiation through high-integration capabilities that are specifically target for these markets. Additionally, our core Industrial business also saw a broad-based improvement. Let me provide some color on our Distribution business. After declining slightly in the March quarter, inventory days in distribution channel increased by 2 days quarter-on-quarter in Q4. Basis inventory was 53 days at the end of the June quarter. As such, distribution inventory continues to remain well below our target mark. We continue to perform very well in the Industrial end market through a combination of SoC-based solutions for vertical segment and state-of-the-art building block products for the general purpose market. This differentiated strategy has enabled us to deliver strong results in our Industrial business, which grew 17% sequentially in the June quarter and now constitutes 9% -- 29% of Maxim revenue. Third, let me discuss Communications. We project revenue to be down slightly in the September quarter after a strong showing in the June quarter. We expect a slight increase in business from the networking and data comm end markets, offset primarily by a decline from base stations. Our Fiber Optics business is experiencing strength as the China market is recovering, following an inventory correction in the prior quarter. Bookings trends are improving and channel inventory appears to be normal. Last quarter, we also secured a new design win at a major Chinese vendor for PON deployments. Overall, we're seeing optical strength across a range of applications including PON and backhaul. Longer term, we have technology to deliver highly integrated solutions across a broad range of Communications product lines, such as power management, optical and RF transceivers. This will help drive system-level benefits that enable next-generation networks with improved coverage and capacity and lower power consumption. Fourth, in the computing market, revenues will be up sequentially. We forecast an increase in business from financial terminals, as well as authentication products. In closing, we remain well positioned for growth in the Industrial, Automotive, Medical and Communications segments. While we're impacted by what we believe to be short-term weakness in the smartphone market, we have a solid track record of managing through market fluctuations. Our business model remains very attractive and our strong profitability allows us to return a significant portion of our free cash flow to our shareholders. In fact, during the past 4 years, we returned 93% of free cash flow to shareholders in the form of dividends and buybacks. We will continue to focus on delivering winning products and technologies that provide highly differentiated solutions to our customers. Venk, you now have the call.

Thank you, Tunç. That's the end of our prepared remarks. We would now welcome your questions. [Operator Instructions] Operator, please begin polling for questions.

[Operator Instructions] Our first question comes from the line of John Pitzer from Crédit Suisse.

This is Andrew Paik from John's team. I was curious about -- you talked about your mid end strategy. Can you help us understand your exposure to Chinese OEMs in particular?

Yes, sure. So let me just repeat. Our mid end strategy is really to take all the great products and technology that we developed for high end and really use that to leverage to make products that are specific to midrange smartphones. Obviously, those smartphones have fewer features and we have to adjust our products to fit into that well. Particularly for China, there are a couple of -- 2 or 3 customers there that are the leading phone makers. And the strategy is to do the same for them. In other words, same product that we've developed for the market in general and really make them so that they fit the requirement for those specific customers in China. So in general, we do model where we really leveraged the IP that we had developed for the high end and really customize it for the midrange phones. And that works well both in China, as well as our other customers when they make phones for the midrange.

Got it. Very helpful. And also as my follow-up, can you share, I guess, looking over the next 12 to 18 months, if you have like a target end market exposure relative to Industrial, Auto? That will be very helpful as well.

Actually, I think the short answer is going to be no. I mean, we have -- obviously, we're trying to grow our business in all of the segments we're investing in. We've got confidence in our strategy that I articulated in my prepared talk, basically going both in the vertical markets as well as in the horizontal markets. And we've got great traction and you can see the results that we achieved in the last quarter. And we expect to really -- we add a lot of value to the customers, that's what they're telling us, basically, and we're going to continue to do that. We're really trying to pin down our numbers and what the share is. That's not something that we should talk about at this point. Bruce E. Kiddoo: I mean, I think it goes without saying, this is Bruce, that we're obviously happy with the results in the fourth quarter, where Industrial went from 25% to 29%. And obviously, we've talked about continued strength in that market. And as we continue our strategy around the diversified business model, we'll continue to grow our Industrial business. But as Tunç said, as well as -- we're going to continue to focus on all of our invest markets.

Our next question comes from the line of Jim Covello from Goldman Sachs. James Schneider - Goldman Sachs Group Inc., Research Division: It's Jim Schneider in for Jim Covello. One follow-up on the smartphones, if I may. Can you maybe talk about your view of the inventory correction at your largest customer. How much is the inventory correction versus how much is just plain old demand weakness? If you have any color on that, that will be great, and just comment on any kind of return to growth in that segment.

Well, I think those 2 are always linked. If you -- usually, an inventory correction is the result of demand not being as high as you project it. So that's essentially what we believe what's happened here. Customers -- all our customers, when they're going to the market with a new product, they have estimates of how much they're going to sell and they pretty much drive the supply chain to deliver to those estimates. And if those estimates don't occur, you get an inventory build up. And when that happens, pretty much our customers will take their suppliers and tell them to turn down shipments to them. So the 2 are really very coupled, you can't really separate them and we've seen this for years in many other cases as well. So this was one of those cases. James Schneider - Goldman Sachs Group Inc., Research Division: Sure, I appreciate that. And then I guess as a follow-up, you mentioned the late sensor portfolio and how you're extending that to the second generation. Can you maybe talk about your motion sensor portfolio and what the strategy is there? Any kind of new product initiatives or design wins to speak of?

Sure, I love to do that. So in terms of our product development, you probably remember, we started this with the SensorDynamics acquisition. It's been a couple of years, I believe, now. We're pretty much where we expect it to be in terms of our development. We have successfully brought up the MEMS technology internally. We developed our first three-degrees of freedom product and introduced those pretty much at the end of calendar 2013, and we're already shipping -- calendar '12, sorry, not '13. We're already shipping those products. And we are well on our way on our first six-degree of freedom product, the performance differentiation that is confirmed by a few customers, which is great. Usually, people who follow was asking about what's the revenue going to look like. It's too early to talk about that. But in any case, revenue won't show up until possibly in 2014, calendar year 2014. So we're very pleased with the progress we've made so far. But obviously, there's still a lot of hurdles to clear.

Our next question comes from the line of Romit Shah from Nomura Securities. Romit J. Shah - Nomura Securities Co. Ltd., Research Division: You guys mentioned that Samsung in the September quarter would be less than 20% of sales. I was wondering if you could get some more granularity there. In particular, with so much focus on the high end, how much does this segment, Galaxy III and 4, constitute today, or what do you think it will constitute this quarter as a percentage of either your Samsung business or overall sales? Bruce E. Kiddoo: Yes, Romit, this is Bruce. So we said it's going to be less than 20%. I wouldn't expect it to be significantly less than 20%, so -- I think, from that point of view. And then as far as the percent of sales, certainly, in the -- in our third quarter, when Samsung was 33% of revenue, we had strong S III, Note II and we had the S4 ramping. And then when we got into the fourth quarter, we saw the S III and the Note II fall off rather significantly, as Tunç said, due to lower demand and/or inventory that built up in the prior quarter. As we actually look at the first quarter, obviously, the S III and the Note II stayed and continued to decline, whereas the S4 is actually going to decline as well due to the kind of the channel fill in the fourth quarter and the lower demand resulting in that inventory correction for the S4 in Q1. I mean, overall, those are still the majority of our business. We do sell into the midrange for Samsung. Some of their products, the Galaxy Mini, the camera phone, those type of devices, but that's probably 10% to 20% of revenue right now. Romit J. Shah - Nomura Securities Co. Ltd., Research Division: All right, that's helpful color, Bruce. Tunç, a question for you. I guess, one concern that people have had is that you're overly dependent on one customer and that finally caught up with you guys here in the June and in the September period. What do you think you guys can do over the next year to help diversify the business out of Korea and maybe eliminate some of the volatility that we're seeing here in the near term?

Well, frankly, in previous calls as well, we've articulated pretty well, I think, what we're trying to do. It's -- so that's not -- I want to make sure that nobody thinks that this is -- I mean, what we say now is the need for torque reaction. For over a year, we've actually been working to try to do 3 things. Number one is to get more technologies into our largest customers' phones. We've been successful at doing that. Number two, we've been trying to get into more platforms in general, other than smartphones, get into midrange, which Bruce talked about a little bit, get into tablets and phablets and readers so on. And number three, we've also been going at other customers, and we actually frankly are successfully winning many sockets and other customers as well, but their volumes are not high enough to really compensate for any big fluctuations we have in our major customer. So we have been executing on a plan to diversify the customer base. It will somewhat depend on what -- how successful those end customers are. And I think that because of this three-pronged strategy that I mentioned, as I stated in my prepared talk, we think that we will return to growth again in calendar year 2014. So yes, we have been actively trying to diversify the customer base and with some success. But as I said, it depends heavily on how successful that customer is in the end market. Romit J. Shah - Nomura Securities Co. Ltd., Research Division: Sure. And then just last question for me. You repurchased almost $200 million worth of stock this past quarter. Bruce, is that a good proxy for what we should expect in the upcoming periods? Is there a potential for you to be even more aggressive with the buyback, depending on where the stock trades too? Bruce E. Kiddoo: Yes. As you know, Romit, we use a matrix approach, which -- obviously, if the stock goes down, we buy more. We're very confident in our long-term strategy and long-term financial model. So to the extent that there is some near-term weakness in the stock, I think you will see us participate in the market and use that opportunity to get our stock at what we think is a good value. So yes, I think you will -- it's always based on market conditions. But certainly, with the new authorization from the board and from the $500 million in debt that we took down in March, I think we're very well positioned to take advantage of any market weakness.

Our next question comes from the line of Sumit Dhanda from ISI Group. Sumit Dhanda - ISI Group Inc., Research Division: Yes, first question, Bruce, the big ramp in the Industrial business in the quarter of 17% sequentially, it sounds like a high number relative to what your peers reported. Any special drivers do you think that allow you to post such a strong sequential growth number?

Well, when we look at where the growth came from, it basically came from both segments. It came from our broad-based products, as well as coming from our vertical market products. Frankly, if we compare the 2, I'd say that it was stronger on the vertical market side. However, we really have not had time to digest yet what our competitors have said in terms of the exact numbers from all of them. But in our case, we do know that most of the growth came from the vertical segment. So that might be a difference between us and some of the other competitors we have. Bruce E. Kiddoo: This is Bruce. I think as we've talked before, we're obviously big believers in the idea around integration and we've obviously had seen that advantage in the consumer business. But we talked about how we've also been very successful with integration in our Industrial business and Communication business. I mean, if you look at Industrial, it's really in those vertical markets where you're providing those system solutions to customers. And so as Tunç said, that's probably -- we saw a good growth in both our Industrial -- I mean, both our vertical and core businesses. But I think it was the vertical that showed higher growth, and I think part of that is due to our integration and system strategy. Sumit Dhanda - ISI Group Inc., Research Division: Okay. Then as a follow-up, I sort of had a 2-parter on the Smartphone business. The implication is your Samsung business is down somewhere between $80 million and $90 million over 2 quarters, and if you ascribe even a $4 sort of average content across the Note II, the S III and the S4, that's a $20 million unit correction. I understand that smartphones have been weak, but it doesn't seem like the weakness has been that significant. So is it -- is the inventory -- was the inventory build heading into the September quarter that big? And then on a relative basis, as you look over the 2 quarters, is the weakness more in one versus other product, i.e., the Note II versus the S III or the S4? And then finally, when do you think this bottoms for you? Is just the sub 20% number a reasonable bottom and you're poised for some growth in December? Sorry for the multipart question.

Yes, that was definitely a multipart question. So in terms of the correction, basically, most of the corrections for, especially the last quarter, the Q1, the September quarter, really, as Bruce and I stated, is coming from S4. I mean, there was a pretty good ramp up of S4 shipments in the June quarter from us. And that was ahead of what the real uptick was from consumers. So a lot of that was coming from that. And then the other average was the inventory correction was really from the S III and Note II in the quarter that ended in June. So the sum of those 2 is the number you were referring to, about, I think you said $90 million or so was your estimate. So yes, I mean, the correction that we saw was that large. Now your second part of your question was well, when does it come back or resume growth, very difficult for us to predict that. And we, frankly, in June, we were quite surprised about how big a correction that we were seeing from our customer. And I think it's made frankly both myself and Bruce very gun shy in trying to predict what you ask, which is, you're asking what's the bottom and we certainly don't have enough information to be able to predict that, frankly. Sumit Dhanda - ISI Group Inc., Research Division: I'm sorry. Just one quick follow-up on that. Tunç, you said the Samsung S4 business was up in June, but I thought you'd guided that business flat given the pull in, in the March quarter. So in other words, how did that move up and then move down so suddenly into the September quarter?

Yes. So basically, going from the March quarter to June quarter, S4 was definitely up, that's when they were ramping. And then basically, our customer realized that they were building too many, too much inventory. And basically, they reduced their consumption rates for the September quarter. So big up and then down in the next -- in the September quarter. Bruce E. Kiddoo: And just sort of clarification. What we had said in our guidance was that Mobility was going to be flat. We always assumed that S4 would be up. It was up less than we thought because they did pull some of that in as you stated correctly. But we thought -- we felt -- thought S4 would be up, S III, Note II would be down. What we did not anticipate and what caused us to miss the midpoint was that the -- there was less demand or over inventory for the S III and the Note II, and so that rocked off much faster than we have anticipated. The S4 was down slightly from our estimates. It was down a little bit. But in general, they still kind of filled -- took their initial shipments because of that and because of the lower demand that I think is kind of well understood out there in the industry now. That's what's causing the inventory correction in the first quarter.

Our next question comes from the line of Christopher Danely from JPMorgan. Christopher B. Danely - JP Morgan Chase & Co, Research Division: Just a follow-up on the previous questions. Can you maybe just kind of hold our hand and give us the reasons why you think that there's a bottom for the Samsung revenue and bookings? You're confident that there might not be anymore? As for [indiscernible], do you think that their revenue will be up in the December quarter or down, or would you care to estimate on that? Bruce E. Kiddoo: Sure. As far as the December quarter, that's the one that's probably tricky to understand. That's the quarter we know Samsung normally does their inventory corrections. Obviously, there's a lot of inventory correction happening now with the S4 ramps. As well, you're going to have the -- potentially, a next-generation hybrid will ramp during the quarter as well. So I think it's hard to say what's going to happen in the December quarter and as Tunç said, we got burned once, so we're going to be careful on that. As far as whether we think we've hit the bottom this quarter, there is no guarantee of that, right? It is dependent on how well the S4 continues to sell. Clearly, we've been, I would say, very careful. I think we're always careful, but -- continue to be careful this quarter in trying to estimate what we think it's going to expect and to take into account the various risks out there in the marketplace. But as the June quarter shows, there's no guarantee. Christopher B. Danely - JP Morgan Chase & Co, Research Division: Fair enough. And then in terms of your inventory and utilization rates, after this quarter, assuming we get back to -- Samsung to normalcy, do you think your inventory will be at a sort of -- like the desired level for you guys, or could your utilization rares stay kind of flattish or go down a little in the December quarter? Bruce E. Kiddoo: Yes. So I think inventory, we were 110 days. Our target is around 100 days. Certainly, long term, we'll get back down to that. When that happens exactly will really depend on how we work through these various product transitions from that point of view. So it's certainly within probably a couple of quarters, we would expect to start moving back down. It's hard to predict that exactly for the first quarter. As far as utilizations go in the factories and impact on gross margin, you've seen we've done a pretty good job continuing to manage our gross margin with that -- with about 50% of our manufacturing still outsourced. And I think most people understand a majority of that outsource is for the Mobility products where we're having a lot of that volatility from a revenue estimate point of view. So I think, we do expect as revenue grows in -- throughout the next 12 months, I think utilizations will go back up. And gross margin today, we guided 60% to 63%, that's just a point off of our 61% to 64% range. So I think we still feel comfortable that gross margin is going to stay solidly above 60% and ultimately get probably within the range where we've been operating for the last couple of years.

Our next question comes from the line of Tore Svanberg from Stifel. Evan Wang - Stifel, Nicolaus & Co., Inc., Research Division: This is Evan Wang calling in for Tore. I was wondering if you could talk about your Industrial segment, it grew so much, especially the vertical markets. Among the Smart Meters, Automotive and Medical, I was wondering if you can break down the relative strength in those markets and what kind of percentage of revenue they represent?

Yes, so I'll take that one. Usually, we prefer not to break down the subsegment as a percentage of our revenues and only really give it at the higher 4 major market levels. But in general, if I do talk about the strength in these markets in terms of growth, I'd say that all 3 of them had -- all 3 you mentioned, automotive, medical and utility meters markets, they were definitely all up double digits in the prior quarter. And looking forward, basically, they'll kind of get up to the stepped up level that we predicted. They're going to probably remain at those levels in this quarter. So we're really happy to seize it. All of these were up double digits and they're remaining there, which is maybe the better... Bruce E. Kiddoo: And Evan, we've said before, if we look at our Industrial, which was 29% of revenue, it's about 50-50 between the vertical markets and core Industrial. Evan Wang - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great. My -- for my follow-up, I'd like to just ask a little bit more about the gross margin going forward. In the past, I think you managed your utilization rate really well to keep the gross margin at a very good level. Could there be any -- could there be additional pricing pressure with the changes that we're seeing in Mobility? Could there be additional pricing pressure that could influence gross margin more going forward and if you could add some color on that?

Yes, so this is Tunç, I'll take that one. So in any market, and it's no different in Mobility where we can make the types of products where we're first to market and we have very attractive specifications and features on our products. We're really not seeing tremendous amount of ASP pressure. There always is on products, but it's really not -- I would not call it an abnormal pressure on our products. And our -- we always try to make sure that we're first to market and we showed it in many examples that we've come up with, especially in Mobility, but in other markets as well. So there really is no change in that structure.

Our next question comes from the line of Blayne Curtis from Barclays. Blayne Curtis - Barclays Capital, Research Division: The first part may be a dumb question, but when you're selling the Samsung, is that through a hub or are you selling parts ahead? Just -- could you just talk about the supply chain there and just kind of your visibility? And then as you look on follow-on products, you saw a fall -- a pullback in the Note II. How do you feel about your positioning in kind of the follow-on products for the rest of the year?

So on your first question, was about are we selling through a hub, are you -- meaning like a VMI hub or... Blayne Curtis - Barclays Capital, Research Division: Yes, is the product on VMI or you ship products straight? Just kind of if you can talk about the supply chain and kind of your visibility through it and where the inventory was sitting, end product or kind of was it somewhere in the hub.

There is -- the shipments is direct, so there is no hub. There is, on one of the products, we shipped to a margin [ph] maker for Samsung, but that's a little different. But in general, there's no VMI hub that's being used. And I'm going to have to ask you to repeat your second question. Blayne Curtis - Barclays Capital, Research Division: The second question was your visibility on and positioning on future products. You saw a fall off in the older generation of products. I think you've discussed your content in the S4 and that we -- people have seen teardowns, the Note III and other kind of follow-on products. How do you feel about your positioning?

So in terms of the phablets or the larger display size, we feel good that's going to be closer term type revenue for us. In terms of what comes after the Galaxy S4, we're well positioned there. It's obviously -- all the decisions are not made. But we've got the right products. We -- with our customer is very interested in. And we've shown those products and all the different technologies that I talked about for power, for various sensors products. We've shown these to our customers and they're very interested in those. But those final decisions get made later, so there's no certainty yet. Blayne Curtis - Barclays Capital, Research Division: And then secondly, if you could just talk about -- you mentioned your gen 2 sensor and I just wanted to clarify, is that shipping this year and any sort of material volume? And then when you public it next year, you're starting to layer on other parts. You used to ship the PMICs to that customer for a processor baseband kind of prospects for getting back more material in that product, as well as some of the new products you're working on with the MEMS and/or touch.

Yes. So in terms of our second-generation sensor and follow-on, I think we're in a good position on those. In terms of the motion sensors and so on, it was apps, previously, where progress was. Well, we've got some products and we've shown it to multiple customers, our top customer being one of them. So they are interested in these parts. But as I've said, the final decisions won't be made yet. In terms of the power management IC, I think we're in good position in terms of the interface, power management IC. We're not quite sure about the apps, applications processor PMIC. But I think that dynamic there is probably likely not the change next year in terms of where we are today.

Our next question comes from the line of Mark Lipacis from Jefferies. Mark Lipacis - Jefferies LLC, Research Division: 2 questions, actually. First one is on -- can you give us a sense, in your consumer business now, what -- roughly what percentage of your business is power management devices versus the sensors? And how do you expect to see the non-power management products become? And could you quantify how you expect to see them become a bigger part of the business going forward?

Yes. Actually, for competitive reasons, we really prefer not to give any indication of what the -- how much of the revenue comes from power, how much of the revenue comes from our sensor products. And the reason is really simple. Since we do have concentration, essentially, any kind of breakdown we give is too indicative of what our average selling prices are. So I'd say that it's still -- without giving any numbers, I'd still say that it's dominated more by power than by sensors today. And that will be the way it is for next year as well.

Our next question comes from the line of Doug Freedman from RBC Capital Markets. Doug Freedman - RBC Capital Markets, LLC, Research Division: Can you talk a little bit, Tunç, about what you're seeing in terms of ASPs across the overall product portfolio and how we should think about sort of ASPs going forward, maybe if there is some key drivers one way or the other?

We're not really seeing any major -- if you look at the ASP as a whole company, we're not really seeing major shifts in that. But I think I've said in the past that ASPs are not really a very good indication for our business, it might be for other companies. Because we -- the standard deviation of our selling price is just so high that trying to make that in metrics that we follow, it just doesn't work for us. I mean, so tens of millions of things that are less than $0.20 and then we still have ASPs that are more than $50, but there are not so many of them. So we really -- we're focused on making sure that we have competitive winning products and the price really takes care of itself. It's -- so therefore, it's not something that we've focused on a lot. As long as we can get the returns on investments that we want to get, then we go with it. But I think, in general, we really have not seen some big change or shift or high price pressures in the markets that we're participating.

Our next question comes from the line of Chris Caso from Susquehanna Financial. Christopher Caso - Susquehanna Financial Group, LLLP, Research Division: I guess, going back to your comments where you do have confidence in growing the Smartphone business next year, does that necessitate design wins in the midrange phones? And I ask that because it seems that this year, rather than last year, Samsung is building new phones for the midrange as opposed to last year where they dropped the G S II to the midrange. If that being the case, is there time for you to get the design wins in the midrange for next year to be impactful to the business? And is there enough content, is there enough margin in the net business to be interesting and allow you to grow the business?

Well, it's a combination of a lot of things. I mean, there is content. Obviously, it's less than the content in a high-end smartphone. But there is content there that is available to us. We also have new technologies that are -- that we hope to be able to bring in line next year. An example was the motion sensing products. And as I said when someone else asked, we're also working with other customers as well to bring more revenue in. So the reason that we're optimistic about calendar year 2014 is because of all of these, because exposure to more customers, introducing newer technologies, and also expanding our footprint into more platforms, including midrange phones.

Our next question comes from the line of Terence Whalen from Citi. Terence R. Whalen - Citigroup Inc, Research Division: I think you had about 15% to 20% growth in Industrial in the quarter, but you did note that days of inventory through distribution increased. I was wondering if you could perhaps provide us the point-of-sale increase in the Industrial market. Bruce E. Kiddoo: Sure. The point-of-sale overall was up slightly. So we did see some growth there in that market, but we also did see -- obviously, from a rev rec point of view, we saw on a -- we recognized [indiscernible] on a selling basis on international. So that restocking did provide some help as well. Terence R. Whalen - Citigroup Inc, Research Division: And then my follow-up question is regarding your prospects for growing the Smartphone business in calendar '14, how much does that rely on perhaps adding new customers or gaining content at customers outside of your #1 customer?

Well, it relies on both. And I'm trying to predict which one is going to be larger than the other. It's going to be really tough because we don't know end consumer use of any particular product that's made. But our strategy is to do both of those things, and I think that they -- both of those will contribute to growth next year.

Our next question comes from the line of Aashish Rao from Bank of America. Aashish Rao - BofA Merrill Lynch, Research Division: Tunç, a question for you, then I have a question for Bruce. Dialog Semi has been highlighting share gains at Samsung. I mean, they themselves are trying to wipe customer concentration issues. Do you see them competing for the same sockets in Samsung? And if you have to compete, what would be the impact on margins because clearly, they're operating at about 12% or so, which is less than half of where you are?

Well, in my discussions with the executive that runs the Mobility business for us, Chae, the -- in my discussions, that company doesn't really show up that much in our conversation. So we must be in pretty different phone platforms with each other, so we're not seeing it, again, in the market, is all I can say right now. So we don't really have enough information or interaction to be able to answer that question very well. Aashish Rao - BofA Merrill Lynch, Research Division: Okay. And then Bruce, quick question. I mean, a couple of years ago, you had set a target of distributors growing to about 35% to 40% of sales. Could you remind us what it was in fiscal '13 and how you see it trending with the change in mix that's currently occurring? Bruce E. Kiddoo: Sure. It's -- right now, it's been about -- and it's been pretty steady at about 30%. I think, when we had Industrial weakness kind of in the back half of last year, it gets down to maybe 28% or so. In this quarter, I think it went up to 31% with the growth in Industrial, so -- but it's been pretty constant around that range of 30%. And I think, from our point of view, our target was probably 30% plus. We thought maybe we could get a little bit over 30%. But to be candid, right, from our balanced business, right, our other businesses have done very well as well, and so that's kind of held that kind of percent of revenue down a little bit. So I think overall, I think we're still very pleased with our Distribution business. We're pleased with the relationship with ABnet, with the kind of the demand creation and the number of customers and converting that to POS revenue. And so overall, I think we're happy and it continues to be an important part of our go-to-market strategy.

Our next question comes from the line of Mike McConnell from Pacific Crest. Michael McConnell - Pacific Crest Securities, Inc., Research Division: Looking at the -- over the last 2 or 3 quarters, that 80-ish kind of hit to the Consumer business, I just want to be clear, do you feel this is strictly unit driven or was this also anything to do with content?

So I'll take that question. So in terms of the reductions that we saw in revenue, the -- obviously, a vast majority of that is because it's unit driven. It is true that our content is slightly less on the S4 than it is on the S III, but the amount of reduction that you've seen is completely dominated by the number of units or the number of phones that are being sold rather than the dollar content, slight dollar content reduction from the S III to the S4.

Our next question comes from the line of Craig Ellis from B. Riley. Craig A. Ellis - B. Riley Caris, Research Division: Bruce, going back to your prepared remarks, you noted that there was an inventory charge in the fiscal fourth quarter. Can you quantify what that was? And as you guided to gross margins in the outlook quarter, what's the assumption for that charge? Does it reverse or does it stay there? Bruce E. Kiddoo: So we don't disclose that exactly. I think most people know we usually model around $5 million a quarter. It was certainly materially above that this quarter. So it probably costs us a point, especially when you compare it to the prior quarter which was actually below our modeling assumptions. So quarter-over-quarter, that probably cost us about a point. As far as going forward, it's really dependent on -- once that charge gets taken, that inventory gets written down, it doesn't get written back up until that product ships. So going forward, it's really about what's the demand looking like on the products that are -- the good products that are still in inventory. And to the extent that business, our Industrial business and overall business continues to be well, there shouldn't be any significant increase, but that's always difficult to predict. So obviously, this quarter's inventory reserve was, as you would expect, more about the inventory correction in our Mobility business.

Our next question comes from the line of Steve Smigie from Raymond James. Steven Chin - UBS Investment Bank, Research Division: You guys have done a pretty good job here on the handsets despite the near-term inventory shifts. And it's been -- as you position it from sort of unique way of doing your integration across functional blocks, it's been mostly folks on handsets. Are there other verticals that you're taking that same various integration to?

Well, the answer is absolutely yes. We've got -- when we talk about -- for instance, let's take them one at a time. In Industrial, we said half of the business is ASSPs and vertical markets, the other half is going through the horizontal markets. I mean, in pretty much all of those vertical markets, like utility meters and the medical products, in all of those Industrial segments, we have a high integration plan where we provide a lot of functionality on a single chip and it's very compelling to those customers, so -- in Automotive as well, that's another area. Our transceivers, some of our products were Keyless Go, they're all high-integration parts. Very similar in Communications. We're using the same philosophies. How can we take a customer's problem and give a complete solution to them, whether it's in a single highly integrated chip or maybe even multiple highly integrated chips. Do the same thing in Communications, again, in small cell base station products. Our transceivers for that, products for optical communications are very high integration, almost single-chip solutions for an entire module. So clearly, we've really taken this from being a handset strategy to being a strategy in every one of our markets over the past 3 or 4 years. So the strategy that we believe will work because what -- that's what the customers are asking for.

Our final question comes from the line of Shawn Webster from Macquarie. Shawn R. Webster - Macquarie Research: So coming back to the midrange versus high-end part of the market, so the high-end part sounds like it was weaker than expected for June and going into September. Did -- and you're exposed to the midrange as well. Did you see upside on the midrange or did you see those orders come down as well? Bruce E. Kiddoo: Yes, this is Bruce. I think those phones were in line. And when we look at the new phones that we're in, say like the S4, many -- I mean, those are still relatively smaller volumes. So I don't think that was the -- a major part. It was really the legacy S III, Note II coming down off of strong shipments in Q3. Shawn R. Webster - Macquarie Research: Okay. And then as the -- for the midrange, as you try and do a little bit more focus there, can you quantify it all what, in percentage terms, perhaps what your content is in the midrange versus high end? And do you run into any different competitors in that part of the market than you do on the high end?

Yes. I think I'd rather not quantify what it is. The competitors that we're faced with in terms of that, they're really not that much different than the midrange. The competitors are very different in the low end, but that's not where we're playing, so that's really not relevant. But it's really the same set of types of competitors. And there's a new group in the midrange that I think most of you know about. I mean, especially in the midrange, they don't sometimes need all of the functions that we provide. So sometimes, they would break up the solution and use discrete functions. And in that case, obviously, there are some competitors that come in. But whenever we're providing a sensor technology and so on, there's -- it's the same competitors that we see in the high end. When you go just the power-type solutions, you do run into more competitors that are providers of discrete solutions. So in those cases, we look for customers and applications that value our integration and go after those. So that's our strategy there.

Great. Thank you, all, for those questions and thank you, operator. This concludes Maxim Integrated's conference call. We'd like to thank you for your participation and for your continued interest in Maxim.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.