Good day, everyone, and welcome to the Altera Third Quarter 2013 Earnings Conference. As a reminder, today's conference is being recorded. At this time, I would like to turn the call over to Mr. Scott Wylie, Vice President, Investor Relations. Please go ahead, sir.

Good afternoon. Thank you for joining this conference call, which will be available for replay telephonically and on Altera's website shortly after we conclude this afternoon. To listen to the webcast replay, please visit Altera's Investor Relations web page, where you will find complete instructions. The telephone replay will be available at (719) 457-0820, use code 258712. During today's prepared remarks, we will be making some forward-looking statements. In addition, management may make additional forward-looking statements in response to questions. 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 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. With me today are John Daane, our CEO; and Ron Pasek, Chief Financial Officer. Ron will open the call with a few brief remarks before turning the call over to John. After John concludes his remarks, we'll take your questions. Prior to the Q&A session, the operator will be giving instructions on how you can access the conference call with your questions. I would now like to turn the call over to Ron. Ronald J. Pasek: Thank you, Scott. Q3's sequential revenue growth of 6% was in line with our expectations. New products led the way by growing 16% and were 44% of revenue for the quarter. 28-nanometer revenue was $33 million and increased 47% sequentially. Gross margin was 30 basis points above guidance, an improvement from Q2. OpEx, particularly R&D, was slightly under guidance. This under spend is due to timing and I will reiterate the full year OpEx guidance of $711 million. On to guidance for Q4. We see revenue in the range of minus 3% to plus 1%. Forecasted turns in the mid-40s is better than historical, though a slight increase from Q3. Gross margin will be 68.5%, plus or minus half a point. Finally, let me offer a few longer-term thoughts. We are putting together the final touches on our 2014 plan and will disclose this when we meet in November 18 in New York. As I've said during our call last quarter, you should expect minimal OpEx growth in 2014 before the small bump to annualize costs for our 2 acquisitions in 2013. As a byproduct of the planning process, it's created an opportunity to reassess our business model over the next 2 to 3 years. In the past, we have always articulated discrete amounts when, in fact, revenue can move these ratios around quite a bit. Therefore, it seems more appropriate to describe the future business model in terms of ranges. Having said this, we see the business model for the next 2 to 3 years as follows: Gross margin in the range of 67% to 70%; R&D in the 19% to 21% of revenue range and SG&A in the 14% to 16% of revenue range. This outlook delivers operating margin of 33% to 34% in the 2- to 3-year timeframe and is better than what we have experienced this year. With cooperation of top line over the next few years, our operating margin will increase. Again, this is not a forecast for 2014 per se and I will elaborate on this business model in greater detail next month in New York. With that, let me turn the call over to John. John P. Daane: Thank you, Ron. Third quarter revenue increased 6% sequentially. Our wireless, industrial, military and computer markets each had strong sequential growth. For fourth quarter revenue, we are forecasting a range of minus 3% to plus 1% sequential change. The telecom and wireless category is expected to be flat. Wireless was up sharply in Q3 with production shipments to customers for the China Mobile LTE deployment, and we expect wireless to be flattish in Q4 as LTE shipments continue. The auto, industrial and military categories should be flat. Where military increased sequentially in Q3, we expect it to be down in Q4 on program timing, offsetting expected growth in industrial. The computer and networking category should grow again on gains from computer. Our other category, we expect to decline. New products will continue their growth in the quarter. The tapeout for our first Arria 10 production product is in TSMC's 20-nanometer SoC process is imminent. Design wins for this product line are robust with active customer designs across a number of our top accounts. We're also well into the design of our Stratix 10 high-end product line using Intel's 14-nanometer tri-gate technology that will offer breakthroughs in FPGA density and performance required for a number of our key vertical markets, including computer, telecom and wireless. Test chips are in Fab, the first production tapeout is planned for Q4 2014 and software will be released in the first half of 2014. These 2 products, in addition to our new ultra-low end product designed in TSMC's 15- to 5-nanometer embedded flash, position Altera with what will be our strongest competitive lineup ever. In summary, our R&D investments over the last 3 years, combined with our strategic partnerships for access to advanced technology, have created a differentiated product line up, targeting the key growth vertical market opportunities and providing Altera a path to grow twice as fast as the semiconductor industry. Now let me turn the call back to Scott. Ronald J. Pasek: We would now like to take questions. [Operator Instructions] Operator, would you please provide instructions and poll for questions?

[Operator Instructions] We'll hear first from Tristan Gerra with Baird.

Could you expand a little bit on the LTE traction and perhaps give us a sense of your expectation for 14-nanometer revenue growth in Q4? We understand that 14-nanometer is basically where you're seeing traction in terms of new design wins, yet you're guiding for wireless to be flattish in Q4. Maybe if you could give us a little bit more feedback on those trends? John P. Daane: Certainly, Tristan. So in general, I think, what you're seeing out of the LTE deployments is -- and this is going to be true of really any deployment. There's going to be a mix of technology deployed going from 65-nanometer through 40 through 28. And depending on the piece of equipment and depending on the vendor and depending on the timeframe, you're going to get a mix of all 3 of those technologies going into the marketplace. In general, we expect our new products to grow, again, well within the fourth calendar quarter, certainly 28 will be a big component of that. It would not surprise if 40-nanometer increases yet again in the quarter.

Okay. And also as a quick follow-up. A couple of months ago, it looks as if there was still some lack of visibility in terms of radio content in terms of those TD-LTE deployments. What is the visibility today? Would you say that it's in line with expectation and do you expect any significance in software credible radios relative to what you were expecting a few months ago? John P. Daane: So the Chinese government is just now announcing the release of spectrum for LTE for the 3 carriers in China. So I think, ultimately, the spectrum or the frequency and the amount that they have is known and that is putting or driving ultimately the radio deployments. We have not heard a public announcement yet from China Mobile on how many F versus D band radios that they plan to deploy. Again, just to remind everybody, within their plan, they plan to deploy in D band, which would be all new radios. In F band, they were going to reuse some existing radios with the software upgrade and then also buy some additional F band radios, and that detail we have not heard released from China Mobile, although my guess is that our customers themselves probably have a good indication as to what those numbers are going to be, who won those and what frequencies that they're around?

Our next question comes from Jim Schneider with Goldman Sachs.

Two questions. First, would be on the China Mobile ramp. Can you give us some sense about what that China Mobile LTE business was in Q3 relative to what you expected to be in Q4? And then, do you expect Q1 to be at or above or below that Q4 run rate? John P. Daane: So Jim, in the third calendar quarter, we saw wireless, particularly base stations and radios up strongly in the quarter. Microwave was actually down and that just reflects what's going on in the overall microwave industry. So the portion of wireless specific to the China Mobile deployments was actually up sharply in Q3 for production shipments into our customer base and that will again happen this quarter. Too early to call the first calendar quarter. Again, as we traditionally do, we just take one quarter at a time in terms of revenue guidance. So we'll have to see how that plays out in terms of China Mobile. And for that matter, China Telecom, as well.

Okay. And then just as a follow-up, first of all, to clarify on the last question or your last answer, are you saying that China Mobile is up from -- in Q4 relative to Q3? And then can you maybe talk about what you're seeing in the wireline area, where do you're seeing any kind of -- any headwinds there heading into Q4? John P. Daane: Yes. Wireline was flat in Q3, and my guess would be flat to slightly down in Q4. Wireless could be flat to slightly up in Q4. Overall, I would say the Chinese business in fourth calendar quarter from the third calendar quarter is flat to potentially slightly up. And that is really -- China Mobile is driving a lot of that spend right now.

We'll hear next from Romit Shah from Nomura. Romit J. Shah: John, just so I'm clear. Revenue in the quarter, it looks like it came in a little bit below the midpoint of guidance and telecom and wireless specifically was only up 3%, which was lower than what I was modeling. Just so I'm clear, the China LTE portion of your business was strong in the quarter, but the offset was this microwave business. If that's true, could you just give us a little bit more color on what was dragging down that portion of your business? John P. Daane: Well, I think microwave, in general, if you look at the deployment is -- has been weak this year over last year. I visited 3 of the top 5 microwave customers in the last 4 weeks and they've all reiterated that. So I think that's just reflecting what's happening in the industry. And particularly where the deployments are happening. Right now, most of the advanced deployment are happening in countries that have available fiber and so they're using fiber instead of microwave for backhaul. Over time, as developed -- or some of the developing countries start to do more advanced deployments around 3G and 4G, it's possible we'll see microwave pick up. I think in general, remember, we're forecasting across a mix of a lot of submarket segments. In general, communications behaves close to what we expected. Other was probably down a little bit more than we expected and that's where you get your sort of puts and takes in terms of the business at a high level. Romit J. Shah: And then on Ericsson, Xilinx indicated last week that they were going to lose some market share to Altera in that account. Are you seeing that revenue here in the third or the fourth quarter? John P. Daane: So we're not -- we can't really correlate or understand specifically what our competitor was talking about directly there. We saw an uptick in revenues for a large European communications customer in the fourth calendar quarter of 2012. And at that point, we noted for you that they were over 10% and as a customer of Altera and they've been hovering just under 10% each quarter since. So they become very significant. And again, that was 2 major program transitions that we had. We would expect that there will be more program transitions over time that will benefit Altera from a market share perspective. But there's nothing specifically that happened in the third calendar quarter or in the fourth quarter calendar quarter of this year.

Next, we have Vivek Arya with Bank of America Merrill Lynch.

This is Aashish for Vivek. John, clearly there are expectations for 4G, wireless CapEx cycle led by China and Europe over the next couple of years. But I was wondering if you have any thoughts on what kind of trajectory one might see on 3G-related spending. Do you think we could see some growth headwinds here or could replacements and upgrade keep 3G spending stable for a while? John P. Daane: So my thought on 3G right now, Aashish, is that it is fairly low in terms of its spending. And the reason I say that is you're seeing some of the developed countries, instead of putting more spending into their existing 3G networks, now start to shift that spending into LTE. That's happened in North America and Japan, Korea and now in China. And since China has really slowed the spend on the 3G side, we're seeing 3G as coming down off of a peak, probably about 1.5 years ago. 2G is also very low because we've seen China really slow down 2G spending. I think 3G will pick up again as you see countries such as India or other developing countries start to deploy. And reason I think they will deploy 3G rather than 4G technology is the cost of the equipment and the cost of the handsets is certainly a lot lower. And so in summary, I would say the spending on 3G is low right now. Spending on 2G is very low. I don't think they'd get any worse. I think we have a chance to get -- to go up, particularly if we start to see more spending in developing countries like India, for instance.

Okay. Cool, that's helpful. And then one question for Ron. Ron, in the last year, the mix has shifted about 300 to 400 basis points away from industrial -- away from telecom and the wireless and towards industrial. I would normally guess that such a mix shift would be gross margin accretive, but yet we have seen a decline a little over 100 basis points. So what's causing this drop and do you see some of these pressures abating over the next year or so? Ronald J. Pasek: Yes. I wouldn't attribute it to one particular thing. There's more mix going on than what you've cited. And as you can see, I'm guiding slightly up in the fourth quarter for gross margin and then in a month or so, we'll give you guidance on next year. It does move around in ranges. Product transitions, certainly whenever you bring a new product out, that's something that will tend to put, all things being equal, a little more pressure on margin to get it to ramp at some bubble. So I wouldn't make a lot out of it.

We'll now hear from Ambrish Srivastava with BMO.

John, just to look out beyond the fourth quarter, if you look at next year, and given the fact that 3G is coming on a year-over-year basis, even if 4G grows, do you think there's a possibility that wireless is flat next year? John P. Daane: I think it's hard to predict. I think what we've seen from the carriers is they -- and whether they're in North America or China or any other country, they will say one thing and then potentially delay it or pull it in or push it out a year. And so it's been very difficult to predict wireless deployments, and I think much more difficult than a few years ago. So I think it's hard for us to really say with exact science, this is what we think next year is going to be. On a macro perspective, I think spending in wireless as well, we've seen 2G and 3G both come down pretty substantially from a couple of years ago. If you think of 2010 and 2011, those were good spend cycles for wireless equipment. 2012 and 2013 have been much weaker. So there's certainly the potential with LTE now layering on top to see growth. LTE, in China alone, is in its very early innings and in fact, just starting now because ultimately, China Mobile is the first to deploy. They're doing what they call a trial. They will have several more rounds, remember in TD-SCDMA, they went through what was 7 rounds in the end, they called it 6, but 7 rounds of spending over many years. So this will continue for them. China Telecom should start early next year based on what they're talking about. I would guess China Unicom is probably going to start the year after. So overall, you should look for China to be a multiyear spend on LTE. And again, I think there are some developing countries that will spend and I think there are other countries like Japan and the U.S. which will continue to see spending, particularly in North America. If you consider that both T-Mobile and Sprint will have to do 4G spending in order to be competitive with Verizon and AT&T. I think there's enough out in the horizon. You could say that we probably are going to trough for wireless and it's going to get a lot better. A couple with that, we're the #1 vendor in both base stations and radio, so we'll certainly benefit as those shipments happen. But particularly, when they happen by quarter, that's very difficult to predict.

Okay. My quick follow-up on the other business, you said that there were slightly worse than what you're expecting. What's your sense, what are you hearing from customers. We've heard a range of explanations from worse than seasonal to maybe the lack of said spending kicking in already. What's your sense of what are your customers -- why are these businesses worse than what you were thinking? John P. Daane: Yes, I'm sorry about that. When I said other, I meant the other category. So don't take it as all of the rest of the business at wireless. If you note, the other category was down last quarter, and we're expecting it to be down again this quarter. And that's a collection of other types of businesses that we have. I think, in general, again, if you look at last quarter, computer and networking, auto, industrial and military, telecom and wireless were close to what we thought. I think the other category was a little bit weaker and pulled us down a little bit. That's what I was commenting on. In terms of the overall macro environment, I would say the macro environment is sluggish. We're not seeing, in general, a lot of economic pick up around the world. And I think that does impact our numbers. Overall, we have seen now for a couple of quarters, our Industrial business come back. That's positive. We did see growth in military in the third calendar quarter. That's good. Even though military is coming down this quarter, that's a historical pattern we see where it tends to see buys at one period of time and then go away for a period of time. We haven't seen any impact really because of sequestration in the U.S. We haven't seen any impact because of government shutdowns. I would say, overall, what we see is just more of an overall sluggish worldwide economy, which is impacting some of these businesses and their potential to grow.

And next up, we have Christopher Danely with JPMorgan. Christopher B. Danely: I guess I just want to take a step back on the broader com market. So when I look at the figures in terms of CapEx from the China carriers and globally and I think, myself, you guys remain competitive, you're all pretty hyped up on the com spend, but it seems to be coming along a little slower than expected. So have you guys seen any sort of changes from that end market? Why they need to be? Sort of what should we be thinking about going forward in terms of the trajectory of growth or anything is peaking next year? John P. Daane: Yes. It's, Chris, as I mentioned earlier, really difficult to predict. As you know, the equipment manufacturers get an order usually between 2 to 4 weeks ahead of delivery. And so our customers themselves have very little visibility from the carriers in terms of what they're going to buy, and it tends to make it very difficult to predict what business is going to be like 1 quarter beyond where we are today. As I mentioned, it does feel like wireless spending has been low, certainly coming off of 2010, 2011 where we saw a lot of spend. China was going well at that time and we were seeing initial spend on LTE for North America. It does feel like it should pick up, but exactly when it does and to what level, I can't predict at this point. Christopher B. Danely: Okay. And as for my follow-up, I think you guys talked about some lead time extensions last quarter. Can you comment on the progress of that, if they gone out or come back in? Ronald J. Pasek: No, they've largely neutralized, I would say. In some cases, certain configurations of products have some extended lead times, but generally they have coming down from last quarter. John P. Daane: In general, there is capacity available on most process nodes and the foundry space and there is capacity also available within the package assembly side as well. So that means generally, our product lead time should be fairly normal.

And our next question comes from William Stein with SunTrust.

Early in the call, you gave a long-term business model outlook, that was very helpful. I'm wondering if you can also give us your longer-term view as to how the end markets, the split, the revenue split among the end markets might look, let's say, 2 years time? John P. Daane: That's a hard one to call. I would say, and we'll talk about this in our November Analyst Meeting. We see a lot of growth potential in the computer market, as an example. I think that can grow. Certainly, telecom and wireless are both markets that have a very strong opportunities to grow. These both, because of our products as well some good growth cycles in terms of the end markets themselves. Automotive, I think in general for programmable logic has been on a great growth tier of late. And there are some other markets like networking that we think can expand as well. So I think there's a number of exciting markets that make up probably anywhere around 2/3 of our overall business at this point that we could see some pretty good growth associated with, either because there's a macro trend in their favor, like LTE that we've been discussing or there's a product favorability such as the high-end with Stratix 10 where we're really opening up new density and new performance capabilities, which will open up much more of the ASIC market in order for us to capitalize on and therefore, through that replacement grow. So those would be some markets, I would say, will change. Overall what you see in 2 years, a substantial change in the percentages, probably not.

Okay, that's helpful. And then if I can, one follow-up. I'd love to hear what you see going on in that network compute and storage end market that you're guiding up, I guess, at least from my math seems to be better than seasonal, and runs in somewhat of a contrast to what we've seen from some of the OEMs? John P. Daane: Yes. I think what you're seeing there is sort of a pattern or an opportunity, which is new. And so where the market itself maybe lackluster because we're growing into newer applications, we're seeing much faster growth than the end market itself. And what you're seeing now in computers is FPGAs are being used as co-processors to servers in a lot of these cloud data center applications to accelerate algorithms such as search or compression, which are heavily utilized, again for a lot of the big companies that deploy their own data centers. And they're buying very large FPGAs and they're using them because they have better performance and better power than GPUs or CPUs for running these algorithms and they're being incorporated into these platforms. And it's a newer business for us and we're seeing a lot of strong growth in that side and again, that's in its very, very early innings. We'll go into that a little bit more detail when we talk in our November Analyst Meeting. But that's certainly one of the applications that's been growing for us and has a lot of growth potential in the future.

And we'll now hear from Hans Mosesmann with Raymond James. Hans C. Mosesmann: A couple of questions. What is your sense on your overall market share goals of 28-nanometer and in particular, in the China Mobile or China LTE. And then the second question, can you just comment on Intel's yield issues and push out of their 14-nanometer Broadwell into early next year? John P. Daane: Yes. I think the -- so I don't want to -- with any of our vendors announce something that they haven't. But since Intel did talk about this on their conference call, I think what they've characterized is they've pushed out 1 quarter, the production ramp of their microprocessors, and that will start in the first calendar quarter of 2014. Ultimately, if you go back to our comments, Hans, on our 14-nanometer tapeout, where our first production chip tapeout will be in the fourth calendar quarter of 2014. So by the time we go into production in the first calendar quarter, we start sampling customers and go into production thereafter. Intel will be at least a year into production of their product and so we would expect the technology to be very solid. In fact, the fact that they're going into production in 1 quarter tells you that the technology is very solid today. This will be the first time in many, many generations that we'll actually not be the first at prototyping in a node or among the first, we will actually be a trailer to Intel's other products. And that again means it's going to be very stable. Yield is going to be very solid, cycle times will be very robust. So we think that this is actually great benefit to us, and the fact that they slipped 1 quarter has absolutely 0 impact on our development. In terms of 28-nanometer in general, certainly if you look at the numbers, our competition is well ahead of us in terms of 28-nanometer overall, but I think if you look at the node for 28-nanometer, what we expect to breakdown between the products, both in this generation and generations going forward, we expect the low end, which is on a more cycle-end product and our competition's Artex will be about 20% of the revenue. Midrange which for us is Arria. Other competition's, Kintex, would be about 25% and then the high and for us is Stratix, in competition's Vertex, we expect to be about 55%. That's something in general that, I think probably 18 months ago, our competition came out and said that they agreed with. And more recently in their call, I heard that they also said they expect our high-end product to be larger than their midrange product, which gives you the indication, again, that the high-end is certainly the dominant share. But with what they're saying, we're also seeing, which is the high end takes a little bit longer to ramp into production grow. Clearly since we lead at the high end, we have a bulk of the design wins. Our vast market share, we would expect to have most of the 55% market share in our favor. And overall, if you look at the 28-nanometer node a few years from now, we expect to be at least at the 50% market share level. In general, if you look at 40-nanometer and 28-nanometer, which are our new products, we expect the market share to be minimum 50% if not greater than that. Overall, our market share versus our major competitor today in FPGAs is 40%. Anything north of 40% means we take market share. So we think we're certainly in a great position to grow. So nothing, no worries, no concerns from our end about 28-nanometer market share technology products. And again, certainly looking at the roadmap going forward with 14, I think that's really a game-changer where in that high-end 55%, we don't see how the competition can really compete. Performance, power, density, cost. I think we really win in every vector you can create. And as we roll out that technology in 2014, with software available in the first half of the year, I think really the market share will accelerate in our favor even more.

And next up, we have Srini Pajjuri with CLSA.

This is Ryan Goodman. This is a follow-up to the last one. You might have just addressed this, but maybe you can add a bit of color to it. I'm seeing that the Stratix byproduct was down a bit in Q2 and then the growth was a little bit less than Arria V, and than Cyclone V in this quarter. So I'm just curious, I mean, is this kind of what you were just talking about, where the high-end products are taking a bit longer or what is driving the different growth rates there? John P. Daane: Well, the high end does take longer to go into production. Part of that is because of the vertical markets that it addresses. Things like military, telecom, are traditionally longer design qualification cycles than consumer equipment or other types of products that can go into production much more quickly. In those areas that go into production much more quickly tend to use the lower end. To say, in general, if you look at the products, Stratix, for us, is a bigger product line in dollar terms. So while it was up at a lower percentage, it was actually up in dollars more than Arria was up, even though Arria was up higher in percentage terms. So we think the ramp for Stratix V is very strong. We're pleased with the growth of Arria V as well, and we think both product lines should continue to grow very well into the fourth calendar quarter.

Okay, great. And then just for a follow-up, as I look specifically to LTE products, I think this has been addressed a bit on the last quarter, but I'm curious for an update there. Are you seeing more traction in your 40-nanometer or your 28-nanometer today and when do you think 28-nanometer really starts taking over there? John P. Daane: It's a -- so what ends up getting deployed for a carrier is whenever they have qualified at that particular time. And I think many of you are familiar with the way that carriers operate. They're very concerned with equipment reliability, obviously, if equipment is unreliable, it brings down their network. So they will actually qual [ph] the equipment before they take it into production. And then they will not allow equipment substitutions until a later date at which they requalify. I would say, in general, if you look at the LTE deployments, there is not going to be very a requalification cycle anytime soon. The reason I say that is China Mobile is just deploying equipment now. Ultimately, they're going to wait to get feedback out of their network, potentially make some modifications and then late next year or earlier the following year, we'll look to ask the equipment vendors to make some changes or redesigns. Probably most of that would be in software, it's possible some of that could be in hardware. So as such, we're not seeing anything transition from 1 node to another node any time soon for any of the equipment, because whether it's China Mobile, China Telecom, Verizon, AT&T, NTT, DOCOMO, KDDI; they're all going to deploy equipment around what's already qualified and whatever they're comfortable with. So as such, we have a mix of technology that we're shipping. Some of the products that we're shipping into have 65-nanometer, some have 40, some have 28. And I think that mix will last for several more years as time goes on, you'll see 20-nanometer start to get integrated. We already have a number of design wins in Arria 10 and 20-nanometer in wireless, probably those get integrated into production for year 2015. And you'll see this is just kind of a slow migration. But there's always a tail and we will always be spread across multiple nodes. None of the business ever centers in any one node, and it's just because of the qualification cycle times that the carriers have.

And we'll hear from Doug Freedman with RBC Capital Markets.

It's Earl Hege calling in for Doug Freedman. I just wanted to ask how big is the microwave portion as a percentage of your sales for the telecom and wireless sector? John P. Daane: We haven't broken that out. But it is, I would say, when we categorize in wireless, there are 3 major categories: base stations, radios and microwave. Microwave, by far, is the smaller component of that. But it is significant enough that changes in it can change the direction of our overall wireless business.

Okay, great. And I guess my second question, what are you guys seeing in the deployment of small cells, pico sento [ph]. We heard from TI yesterday that they expect, I guess, larger deployment in the second half of trials going on today. What are you guys seeing out there? John P. Daane: It's by carrier. So I think in China, you're likely to see very little. In North America, AT&T is an example, has announced that they're going to use some small cells for buildings. It really will depend on the frequency that you get allocated for use in LTE. If you get very high frequencies, as we mentioned before, the signals do not penetrate buildings very well. And what you'll see some of the carriers do in high-density buildings is augment by using low-power radios and a small base station in order to provide indoor coverage. And that probably is a transitory thing, because I think, a few years from now when you see, for instance, in this country when GSM spectrum is recovered, GSM being deployed in below 1 gigahertz. That once they get that spectrum available to deploy radio, there will be no need for any small cells anymore, because again, that frequency is great for broad coverage and distances in penetrating buildings. So I think right now what you're seeing is some carriers are looking at small cell deployments for building coverage. And I think you probably see that for a couple of years and then go away. At a higher level, though, it does not take away from the macro market, number one. And so, that's important to understand because for a while, people thought that maybe the small cells would take over some of the macro deployment. So what you're seeing is, everybody has come out and said, no, the macro will need to be deployed and in the numbers that they need it to be deployed. And so that doesn't change at all. Small cells are really being used only for areas where macro coverage doesn't work well, particularly the high-density buildings. And so I think that's important to understand. And number two, we do, as an industry, have product and in particular, Altera also has product in some of the small cell deployment. So it is really for us an additive business.

And the next question comes from Glen Yeung with Citigroup.

Last time you guys grew 2x the industry, which I think what you said your long-term target is. China was deploying 3G and figured in quite aggressively into that growth. To what extent do you think that this 4G deployment is contributing to the idea that you can grow twice the industry? John P. Daane: I think it's a component of it. Certainly, we expect that wireless should be able to grow. I think China is a component of that. I think North America and a -- deployment, eventually Europe will be a component of that for LTE. And then, I think, there is -- or will be additional 2G and 3G sales into other developing countries that I think will help us well. So longer term, I think longer term being that over the next several years, we do have a good wireless opportunity cycle ahead of us and that certainly can help with growth. We do need to see growth in some of the other markets as well because wireless is roughly 25% of our revenue. So just having wireless growth does not get the 2x. I think we need to see more than that. We have seen strong growth in computer and expect that to continue. Automotive has been doing well, small portions of the business, yes, but continuing to grow very well. And then we think we have some great potential in areas like telecom and networking as examples. All totaled, that's probably about 2/3 of our overall revenue and that's enough certainly with growth cycles in those markets to grow 2x the industry. I guess the other thing I'd say, Glen, just as a reminder. If you go back to 2010 and remember, we grew, I think, it was 67%, 68% that year. All of our markets -- we talk about 11 sort of markets within the breakdown. All 11 of those markets grew between 55% to 75% that year. So it wasn't just a wireless specific growth that drove the growth of the company during that period of time, as much as it was just a broad-based growth. And over the last couple of years, we've seen industrial weak, military weak, those have certainly pulled down our numbers. 2G, 3G spending slowed down in wireless. Industrials now come back for a couple of straight quarters, that's good. Military came back last quarter, that's good. So we brought them down several of these markets and so now it feels like as we are able to grow with some of these other industries, we should be able to post better growth numbers.

Understood. As a follow-up maybe for Ron. You're talking about in your sort of in your median -- I don't know how long the timeframe is, but your target model, operating margin, as you say, in the 33% to 34% range and as you pointed out, better than what we've seen this year. I wonder if you can talk about if your move to Intel, is pulling a factor into those better margins, is that somehow improving your profitability by working with Intel versus TSMC? Ronald J. Pasek: Yes, so the model I gave, Glen, was a 2- or 3-year timeframe. I wouldn't say specific to any particular foundry at all. It's really looking at where our cost structure is. We told you several years ago we're going to grow OpEx past our [ph] revenue for 2 to 3 years, it's leveled off now. And to John's point, we need to see the revenue growth going forward which we are well-positioned in many key end markets. So it's really not at all a cost issue from a foundry standpoint.

And next, we'll hear from Anil Doradla with William Blair. Anil K. Doradla: Guys, a couple of clarifications now. For your wireless deployment, is the Stratix products or the Arria products most favored and based on your commentary now it sounds like you're making a case for stronger case for 65-nanometers and 40-nanometers rather than 28-nanometers. Is that the right way to understand or do you think in a year from now, most of them will be 28-nanometers [indiscernible]? John P. Daane: I think the thing to understand about programmable logic is look at our tail. Our business doesn't ramp up and ramp down quickly in nodes. We tend to have a tail that lasts for a very long period of time. And so that's the way you have to think about equipment purchases from Altera, as you'll see, telecom and wireless, that will buy out of a very old node for a very long period of time for existing equipment. So today, what you're seeing is 65, 40 and 28, probably a few years from now, which you'll see it, it will be 20, 28 and 40. A few years after that, it will be 14, 28. It just kind of moves along like that. There's never a period of time where everything switches off to 1 node. And again, I just told you to go back and look at the amount of business that as an industry we have in the mainstream and mature categories. You can understand that our business is quite different than consumer products, which tend to ramp up and down very quickly within the node. In general, what you're going to see in wireless, and I say in general, is that radios will use the Arria and Cyclone class products. The base stations will use the Stratix class products. Anil K. Doradla: But again, if I look at it as 2 buckets, I put 28-nanometer one and 3 28-nanometer, 65 and 40, if we look at calendar 2014, would it be fair to say that it would be more of a 50-50 or would it be 30% 28-nanometers and 70% non-28? I mean, I'm just trying to get a sense. John P. Daane: I can't break it out for you, Anil, and part of the reason that this comes up, and again I just will throw it out so those of you fellow PLD's will know, we did not have a 40-nanometer low end, right? So that's why we still sold for a long period of time our 65-nanometer low end. So when you consider the Cyclone III, Cyclone IV class of products, those were around the 65-nanometer node that we sold for a long period of time which are used today still in design wins, just shifting now to Cyclone V. And so that's why you see those older nodes still in base stations because designs up through recently have still been targeting that technology base. I don't know if that sort of helps, but as an overall break down I can't really provide you one today.

[Operator Instructions] We'll hear next from Parker Paulin with Wells Fargo Securities.

Just curious if, following on to your earlier 14-nanometer question, you guys have been working with Intel for a while at this point with [indiscernible] and the upcoming 14-nanometer node. I was just curious if you might be able to speak more broadly about how you're foundry relationship has progressed to date, any hiccups or highlights in particular? John P. Daane: So far, it's been going extremely well. We did test chips with them. Those are in the fab, exactly on schedule. Test chips that we always do revolve around our analog structures like high-performance I/O or transceivers. Another technology, which you want to see in silicon beforehand, before you tapeout the final design to make any tweaks. All of that went extremely well. The service and technology sharing that we're getting is excellent. We have access not only to their foundry technology, but also their packaging technology and other capabilities that they are offering as well. Service-level has been high. It's probably the area that most people would want to know. And that has been extremely good. So far, everything has been going very, very well with Intel.

We have no further questions at this time.

Great. Thank you, operator. And as we're drawing to a close today, finally, a scheduling reminder. We will host a meeting for the investment community on November 18 in New York. Please RSVP if you have not done so already and contact us if you need more information. As the conferences this quarter, we will present at the Raymond James Systems, Semiconductors, Software & Supply Chain Conference, December 10, in New York. This concludes Altera's earnings conference call. Thanks for your interest and participation.