Ashish Saran - Director, Investor Relations Hock Tan - President and Chief Executive Officer Tony Maslowski - Chief Financial Officer

Vivek Arya - Bank of America Craig Hettenbach - Morgan Stanley Romit Shah - Nomura Vijay Rakesh - Mizuho Ross Seymore - Deutsche Bank Ambrish Srivastava - BMO Doug Freedman - Sterne Agee Srini Pajjuri - CLSA Securities Amit Daryanani - RBC Harlan Sur - JPMorgan Edward Snyder - Charter Equity Research

Welcome to the Avago Technologies Limited Fourth Quarter and Fiscal Year 2015 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Ashish Saran, Director of Investor Relations. Please go ahead, sir.

Thank you, operator and good afternoon everyone. Joining me today are Hock Tan, President and CEO and Tony Maslowski, Chief Financial Officer of Avago Technologies. After the market closed today, Avago distributed a press release and financial tables describing our financial performance for the fourth quarter and fiscal year 2015. If you did not receive a copy, you may obtain the information from the Investors section of Avago’s website at www.avagotech.com. This conference call is being webcast live and a recording will be available via telephone playback for 1 week. It will also be archived in the Investors section of our website at avagotech.com. During the prepared comments section of this call, Hock and Tony will be providing details of our fourth quarter and fiscal year 2015 results, background to our first quarter fiscal year 2016 outlook and some commentary regarding the business environment. We will take questions after the end of our prepared comments. In addition to U.S. GAAP reporting, Avago reports certain financial measures on a non-GAAP basis. A reconciliation between GAAP and non-GAAP measures is included in the tables attached to today’s press release. Comments made during today’s call will primarily refer to our non-GAAP financial results. Please refer to our press release today and our recent filings with the SEC for information on the specific risk factors that could cause our actual results to differ materially from the forward-looking statements made on this call. At this time, I would like to turn the call over to Hock Tan. Hock?

Thank you, Ashish. Good afternoon, everyone. I will start with a short summary of fourth quarter and fiscal year 2015 business highlights and Tony will continue with more details on our financial results. So, fiscal 2015 was an important year for Avago where we saw the significant increase in our top line from a full year of LSI contribution augmented by strong growth in wireless revenue. On this expanded base, we drove higher levels of profitability through leveraging our largest scale, continual richer product mix and the full achievement of LSI acquisition cost synergies to deliver operating margins over 40%. In other words, mission accomplished. Our fourth quarter results exemplified this, loud and clear. Revenue came in at $1.85 billion, a 6% sequential increase and continuing to be very pleased with our execution which drove the fourth quarter margins above the high end of our range and earnings per share to $2.51. We ended our fiscal year on a very strong note delivering record levels of revenue and profitability. Let us now turn to a discussion of our segments starting with wireless. In the fourth quarter, wireless segment represented 37% of our total revenue from continuing operations in this very difficult strong seasonal fourth quarter. As we expected during this seasonal upturn, revenue from our wireless segment grew by 10% sequentially, with the customary product ramp at our North American customer partially offset by the product cycle rollover at one of our large Asian customers. While there was an increase in overall RF content in the new phone model, our, Avago’s RF content on a dollar basis in the new phone model remained largely flat, the same as it was in the prior generation. We had to walk away from supplying additional RF content in the new phone model because of a constrained filter manufacturing capacity. This will not happen again. Our long-term expectation for our wireless business remains very strong and we expect our RF content per smartphone to increase at over 20% every year. We have concrete plans in place to address this. We may remain on track with our plan to increase FBAR filter capacity in fiscal 2016 by 50% as we convert our fab from 6-inch to 8-inch wafer manufacturing. We also expect our portfolio in fab to remain at near full capacity as we start to pre-build inventory to support anticipated new phone launches later in fiscal 2016. Now, looking more short-term at the first fiscal quarter 2016, unlike last year, we do see a seasonal decline in demand and expect our wireless revenue to sequentially decline in the low-teens on a percentage basis. Last year, first quarter demand had held up offsetting normal seasonality, but we don’t see the same phenomenon this year. And therefore, on a year-over-year basis, we expect our wireless segment revenue to also decline similar to the sequential drop. While that is just one part of our portfolio, let me now turn to another segment of portfolio, which has been performing rather amazing, and that’s our enterprise storage segment. In the fourth quarter, enterprise storage revenue grew by 9% sequentially and enterprise storage represented 35% of our total revenue from continuing operations. In the fourth quarter, we also saw strong growth from our RAID and SAS products. We also benefited from increasing shipments into enterprise and datacenter hard disk drives. Despite macro worries, enterprise storage markup held up quite well in fiscal 2015 and in fact, our core enterprise storage revenues in the fourth quarter grew close to 20% on a year-on-year basis. Looking towards first quarter 2016, we expect this segment to maintain its momentum from the strong fourth quarter and we expect revenue to be up slightly on a sequential basis. We also believe we may be gaining share in this segment. On to wired infrastructure, in the fourth quarter, wired revenue grew by 2% sequentially and our wired segment represented approximately 20% of our total revenue from continuing operations. The ASIC business was up slightly in the fourth quarter driven primarily by an increase in shipments into routing, especially edge routing. Our fiber optics business after a strong third quarter maintained much of its momentum into the fourth quarter delivering a small sequential increase. We saw increase in fiber-to-the-home shipments and stable deliveries into the enterprise OEM market. The addition of wafer fab capacity at our Breinigsville, Pennsylvania at a meeting laser facility help us better meet the increase in demand for fiber-to-the-home market. In the next quarter, first quarter, we expect sustained performance from this segment and project our revenue to also be up slightly here. Moving on to industrial, in the fourth quarter, industrial and other miscellaneous products represented 8% of our total revenues from continuing operations. Focusing on industrial, resales held up reasonably well during the quarter and were in fact up slightly. By region, Asia-Pacific was quite strong with e-resales growing close to double-digits. Europe also grew by nearly mid-digits sequentially, but Americas and Japan were both weak and resales declined in the mid single-digits sequentially in those regions. However, similar to a number of peers, we saw – we took a cautionary tone from customers during the quarter and consequently reduced shipments into our distributors, which drove channel inventory down. As a result, our industrial segment revenue declined by 10% sequentially in the fourth quarter. And please keep in mind we recognized revenue here on a sell-in basis. As we look at first quarter, anticipating the normal seasonal declines as well as of course lingering macro uncertainty, we plan to continue to reduce inventory in distribution. And accordingly, we expect revenue for industrial segment to decline in the low single-digit sequentially. In summary therefore, after the strong close for fiscal 2015, we expect an approximate 4% sequential decline in consolidated first quarter 2016 revenue, driven primarily by seasonality in our Wireless and Industrial segments, offsetting projected sustained performance from our Wired and Enterprise Storage segments. With the LSI integration completed in fiscal 2015, we have created a very powerful business model that leverage our largest scale and increase diversity to deliver strong growth in earnings for the year. As Tony will provide more color on his – in his summary, we expect our earnings strength to carry over into the first fiscal quarter regardless of revenue seasonality. And as we go into the rest of fiscal 2016, we expect this earnings machine to further strengthen with the pending Broadcom acquisition. With this in mind, I would like to mention that the Broadcom acquisition process continue to progress very smoothly and day one integration planning continue – planning, including identification of all key, business leaders and supporting teams have – has been completed. We have made very good progress, in fact on the regulatory approval front and expect to be in a position to close the transaction early in the first calendar quarter of 2016. In fact, we believe that we could present an integrated set of financial results starting with our second quarter of fiscal 2016. With that, let me now turn the call over to Tony for a more detailed review of our fourth quarter and fiscal 2015 financials. Tony?

Thank you, Hock and good afternoon everyone. Before reviewing fourth quarter and fiscal year 2015 financial results, I want to remind you that my comments today will focus primarily on our non-GAAP results from continuing operations unless otherwise specifically noted. A reconciliation of our GAAP and non-GAAP data is included with the earnings release issued today and is also available on our website at www.avagotech.com. Revenue of $1.85 billion in the fiscal fourth quarter represents an increase of 6% from the prior quarter. Foxconn was a greater than 20% customer in the fourth quarter. Our fourth quarter gross margin from continuing operations was 62%, which was above the high end of our guidance range, primarily due to better revenue mix and continued high fab utilization. Turning to operating expenses, R&D expenses were $257 million and SG&A expenses were $81 million. This resulted in total operating expenses for the fourth quarter of $338 million, $2 million above guidance, primarily due to higher bonus accruals, driven by higher profitability. On a percentage basis, total operating expenses were 18% of revenues, a reduction from 19% in the prior quarter. As a percentage of sales, R&D was 14% and SG&A was 4% of net revenue. Operating income from continuing operations for the quarter was $811 million and represented 44% of net revenue. Taxes came in at $43 million for the fourth quarter. Fourth quarter net income was $737 million and earnings per diluted share were $2.51. Fourth quarter interest expense was $41 million. Other income net was $10 million, resulting from a number of items, including cash from a legal settlement, interest income and gains from foreign exchange hedging. Our share-based compensation in the fourth quarter was $63 million. The breakdown of the expense for the fourth quarter include $7 million in cost of goods sold, $30 million in R&D and $26 million in SG&A. In the first quarter of fiscal 2016, we anticipate share-based compensation will be approximately $65 million. Just as a reminder, our definition of non-GAAP net income excludes share-based compensation expense. The non-GAAP guidance from first quarter fiscal 2016 also excludes estimated ticking fees of approximately $47 million related to debt commitments for the pending Broadcom acquisition. Moving on to the balance sheet, our days sales outstanding were 50 days, an increase of eight days from the prior quarter caused by linearity of our revenue across the quarter. Our inventory ended at $524 million, a $17 million increase from the third quarter. Days on hand were 68 days. We generated $582 million in operational cash flow and ended the quarter with the cash balance of $1.8 billion, which increased by approximately $400 million from the prior quarter. Our fourth – in our fourth quarter, we spent $106 million on capital expenditures. On September 30, 2015, we paid a cash dividend of $0.42 per ordinary share, which consumed $116 million of cash. This dividend was raised by $0.02 from the prior quarter. Since the inception of our dividend program in the second quarter of 2011 to-date, our financial performance has allowed us to increase our dividend each quarter. As a reminder, our Board reviews and determines our dividend policy on a quarterly basis. Based on our financial performance and condition, the contractual provisions related to our outstanding indebtedness and other factors deemed relevant by our Board. Now let me briefly recap our fiscal year 2015 full year results. Net revenues increased by 60% year-over-year to $6.9 billion, benefiting primarily from a full year of contributions from continuing operations of the LSI businesses as well as strength in our wireless business. Gross margin increased 5% year-over-year to 61%, driven by an improvement in product mix, with higher contributions from our FBAR related wireless products as well as comparatively higher gross margins from the Enterprise Storage segment. Net income for fiscal 2015 increased to $2.6 billion or $8.98 per diluted share as compared to $1.3 billion or $4.90 per diluted share in fiscal 2014. Now let me turn to our non-GAAP guidance for the first quarter of fiscal year 2016. This guidance reflects our current assessment of business conditions and we do not intend to update this guidance. This guidance is for results from continuing operations only. Net revenue is expected to be $1.78 billion plus or minus $25 million. Gross margin is expected to be 61% plus or minus one percentage point. Operating expenses are estimated to be approximately $314 million. Taxes are forecasted to be approximately $40 million. Net interest expense and other is expected to be approximately $37 million. And finally, the diluted share account forecast is for 295 million shares. That concludes my prepared remarks. However, I would like to make one final comment. Earlier this week, Avago became 10-years-old as an independent company. Just as a contrast to today’s results, our first year in operations, we had $1.51 billion in revenue and a non-GAAP net loss of $108 million. I would like to personally thank all employees for their hard work and contributions in this first decade. Operator, please open up the call for questions.

[Operator Instructions] Our first question is from Vivek Arya of Bank of America. Your line is open.

Thank you for taking my question and congratulations on the consistently strong execution. Hock, you mentioned on the wireless business that on the next year’s flagship model, you expect at least 20% higher content, can you give us some context what is driving that higher content and what is your differentiation and competitive advantage versus another competitor who also has FBAR filters and is also adding capacity, what can you do consistently that they cannot, so what’s really driving up content and what’s your competitive advantage?

Well, let’s start with content. Content keeps increasing in smartphones, especially the high-end smartphones because of as I say increasing number of bands, spectral bandwidths that come into play worldwide as carriers expand the bandwidth by which they connect phones, connect us to each other. A number of especially LTE bands are increasing even in places like Japan, where you have new introduction on new bands, the band 21, which had not existed before. And of course the same applies in China where you have both TDD and FDD as well. So, it’s really the proliferation of LTE bands. And for high-end smartphones, the need for the creation especially towards the high end for phones that can roam. But adding on to this mix is the fact that two other things are happening that drives, not just RF content, but our particular kind of RF content, which is the form of FBAR filters, which allows signals to be received or transmitted in extremely discreet very narrow base – on a very accurate, call it, narrow basis, which is the problem of with that number of bands in one little device, you start to create the phenomenon of coexistence. And coexistence, which exists and exists not across several bands alone, but across WiFi, Bluetooth as well crossing cellular bands too. That coexisting issue creates a specific need for filters that can attract signals from a very collective air space from ether. Then of course you hear now about downlink carrier aggregation. And next year on, you start to see some of – certain phone models with uplink carrier aggregation. What carrier aggregation meant and I may have discussed it in previous calls is simply the ability to max or de-max multiple bands, signals from multiple bands into one single channel in the phone or out externally. And in order to do that, you need components. You need filters that are able to do the maxing and de-maxing in the RF space. And that’s where FBAR filters come in to the own. So, because of all that, we have been consistently seeing over the last several years and we see that trend continue over the next three years, because it’s as far as we can probably look within a degree of certainty, the increase in content, in RF content and in particular in the need for filters, which are not able to be integrated into one single chip. Each filter is a very discrete element. So, that’s pretty much what’s driving what I postulate as perhaps a trend of 20% a year increase in dollar content of RF over the next several years for high-end smartphones. Okay?

And as my follow-up, Hock, you also mentioned good growth in your enterprise storage business. That’s very different from some other more sluggish, weak enterprise spending environment trends that we have heard from others. So, I am wondering what is helping you outgrow the broader spending environment in enterprise? Thank you.

That’s a very good question and sometimes we sit there and wonder ourselves by the way. All we do know is it is. And I suspect in specific areas, there is market share gains on our site simply because we do a better product, simply because we are able to execute on better products, but also we have been perhaps fortunate in being focused on certain customers, certain OEM customers, in particular that have done better than others and that allows us through their process by itself to gain share. And we will display that because yes, we are fully aware of what’s out there, what we hear out there on a macro side. But we are seeing strength particularly on the enterprise front, less so the cloud datacenter side. So maybe that’s something to do with that as well.

Thank you.

Thank you. [Operator Instructions] Our next question is from Craig Hettenbach of Morgan Stanley. Your line is open.

Yes, thank you. I had a question on the FBAR capacity expansion, in particular, move from 6-inch to 8-inch, I know it’s early on, but that is an important factor for wireless growth in the back half of fiscal 2016. So, can you just give us some early insight in terms of how that’s progressing in the confidence of bringing that online?

Yes, that’s been progressing very much, very well. To be direct about it, we are almost ready now give it a few more months for the back half. And – but that will not be a full completion for back half. We will anticipate continuing the migration from 6-inch to 8-inch of existing lines through even the first half of 2017 in anticipation of the generation of phones in 2017, not late 2017, not just 2016, but we are pretty prepared right now.

Got it. Thanks. And as my follow-up, good to hear that the integration of Broadcom is going smoothly and day 1, you can hit the ground running. So, as to get your thoughts more on the product side as you had more time to look at the portfolio, anything standout to you positively, particularly with their networking business and the prospects there?

Oh, we love their products, we love their engineering. It validates entirely our premise, our investment thesis in making this acquisition as far as we found so far. So, we liked a lot of what they are doing. To be more specific, it might be a bit premature, sorry about that, but I am not in a position to really disclose it. Frankly, I want to do it, not because I don’t want to, but I think I am not totally in the picture 100% until we really do have the operations under our control after day 1.

Thank you. Our next question is from Romit Shah of Nomura. Your line is open.

Yes, thank you. Couple of questions. First, Tony, I noticed that operating expenses are declining, I think about 7% in the January period, which really stood out to me. Can you talk a little bit about that?

Sure. It’s mostly due to two factors. We completely completed the Emulex transition. So, there is some OpEx drop off from that. But more significantly, it’s the reset on the bonus accrual. So, on the bonus side, we are significantly above 100% attainment and that gets reset into Q1 at 100%. So, you get some benefit from that as well. Now, just to give you some perspective in 10 years of working here with the bonus is that it’s not reset to last year’s numbers. We have new numbers that are a little bit stretch targets for next year. So, every year that we accomplish over 100%, it’s a pretty Herculean feat. So, it’s not that we go into it saying we are going to earn 150% in the next year and you have kind of expense catch up at the second half of the year. So, it’s a true reset and those are the two reasons for the expense drop off.

Okay, helpful. Thanks. And Hock, can you give us a couple of data points on wireless? You said that RF content in high-end phones would increase at 20% or so. And then you also told us that you are planning to increase the capacity by about 50%. So putting those two data points together, how do we think about expectations for the wireless business, how fast it grows in fiscal ‘16?

Well, I don’t know. I cannot really answer for fiscal ‘16 because we don’t give guidance, Romit on an annual basis, but I tell you the trajectory we have been seeing and continues I believe to be on. And I have taken things in my opening remarks to clarify why this year, this as end of ‘15, early ‘16, as we sit here, why it’s more of an exception, a hiatus I call it than the rule. But content as we are bundling all this additional spectral bandwidth into a single device has increased content wise, physical content, might what we have seen is anywhere from 30% to almost 50% every year compounded every year. But then there is always a value to some level of integration in terms of dollar translation, which is why in dollar terms, that content increase of 30% to 50% typically translates to, I think 20% to 30% on an annual basis. That’s really what it comes out to.

Thank you. Our next question is from Vijay Rakesh from Mizuho. Your line is open.

Hi, guys. Good quarter and guide on a given all the wordings. I have a question on the RF side and as you look at China where probably just don’t have much of carrier aggregation today, where do you see carrier aggregation penetration in China by the end of next year?

Last – probably some, but there is some carrier aggregation, a high level of carrier aggregation going on in China right now. Not as much perhaps as out here in the U.S., but there is. And there is a need to do that because that’s where the operators in China are where and want to go. And so we are seeing that now and we are selling some products, some are more discrete module products that addresses downlink carrier aggregation. Uplink, that’s a different method, probably out for a couple of years at least if not longer for China. Uplink will happen here and some parts of the world fast, but downlink carrier aggregation is already happening in China.

Got it. And on the first side, as you talk about 8-inch capacity, is it – do you already have output 8-inches bus? Thanks.

We have, at this point what I would call pilot lines. We have been doing the conversion over the past 12 months, which is more investment and developing the process. We are at a point that we are starting to go into production fairly soon.

Great. Thanks.

Thank you. Our next question is from Ross Seymore of Deutsche Bank. Your line is open.

Hi guys. Thanks for letting me ask the question. Hock, back on the wireless side of things, you mentioned that the capacity constraint was never going to happen again and then you are kind enough to give us that 20% increased number, is part of that 20% increase just simply your ability to address the sockets that you are limited on today or is that above and beyond the content increase that you are going to get on average with RF into phones?

No, I am basically – it’s almost one and the same. We have all a sense of trying to be too arrogant or buoyant please, but it is one and the same, because in order to integrate their turn of increase of content into a tiny little device and do it very well, not many people can do it is our view. And so as I say, it becomes almost one in the same, which is our perception of the trend last 3 years and forward 3 years, is that content keeps growing up. It keeps growing in that range, at least in dollar terms. And we are always able to capture that. But it’s a broad trend, we believe in month-to-month and we do not see that changing over the next 3 years as it has been happening the last 3 years.

And I guess as my follow-up, another one for you Hock. And I know you are not going to give full year guidance and maybe it doesn’t even matter once Broadcom comes into the mix, but as you look at your four segments, can you just walk us through some of the areas that you are most excited about going up in fiscal ’16 and then areas where you think there might be some headwinds as you look at your current portfolio of businesses?

I am most excited about networking, wired infrastructure, so to speak and very excited about – continue to be excited about wireless. And enterprise storage has been, as I have mentioned performing very well. And I will be very pleased, but totally not disappointed if it doesn’t hit the level it did in 2015 in enterprise storage. But definitely in wired and wireless, I believe, those two areas will continue to grow and grow very well.

Great. Thank you.

Thank you. Our next question is from Ambrish Srivastava of BMO. Your line is open.

Hi. Thank you, Hock. Clearly, there is a tailwind on the wireless side and you have executed very well within that. I was just having a tough time understanding and trying to reconcile what you said at the top of the call regarding the capacity, so you were constrained by capacity and so you said that you walked away from certain business. And I am assuming that it can’t be at the high end because you have a very differentiated product at the high end, so what gives you the confidence then that the competition or the customer will come back to you for that content that you could not provide? And then I had a quick follow-up.

Because we are very good at what we do and we are just about only of the very few people can do to what we say we do here. Any really, my purpose in explaining that at the beginning was that because this quarter and last we saw as you saw a sort of a pause in that 20% growth rate year-on-year. And I took the pain to explain that as basically as not about people catching up as much as it’s our inability capacity wide to meet all of their needs for this particular short window of time. But otherwise if, in fact the content the demand will still keep going at that rough 20% a year rate.

Okay. My follow-up then on the tax side Tony, should we, I just want to make sure I get it right, so we should use the baseline from the guide for the Q1 because...?

Yes. So everything we have right now and again this is assuming model that no Broadcom. So I mean in a full year, if you do just us, it’s this new run rate. We will have our new mid-year merit increases, which is a couple of percent. And then if we outperform our businesses, you will see some bonus catch up in the second half. So yes, this is the – I would consider stable run rate. Again, we throw that out of window when we do Q2 and we start integrating Broadcom, so.

Okay, got it. Thank you very much.

Thank you. Our next question is from Doug Freedman of Sterne Agee. Your line is open.

Hi guys. Let me echo the congratulations on excellent execution. I guess Hock, sorry to beat a dead horse here a little bit, but I am getting a sense that your approach to the FBAR business may have changed here at your commentary about not wanting to supply constrain the market going forward. I did notice intra-quarter in the news, you guys procured a large factory up in Oregon. I believe it was cited as being for wireless, can you give us sort of maybe the timing of getting Oregon up and running and whether you have in fact changed your strategy to not supply constrain the FBAR market and if so, how quickly do you think you will remove that constraint?

Well, I guess our strategy was never to want to constrain the market to first of all to make that clear. What probably I am implying the color to what you just said and is true on what I just said is we are seeing the market grow even faster than we had originally thought. And again, consistent we have got one thing to constrain the market we want to address, those specific high end smartphone markets, we are taking steps to make sure we will never constrain it again.

Okay. Moving on...

And that includes that potential fab up in Oregon to just complete that thought and tying with what you said. Yes, that include – that plan of our to address that longer term includes that facility. And that’s a long-term plan because we don’t expect that to – once we get that going, if we get that going, that won’t come into play – come into line until more towards 2018. 2016 and ‘17, what we have in [indiscernible] 8-inch conversion is pretty cool, ‘18 uncertainty we better get this additional Oregon fab.

I guess as my follow-up, what capacity addition does that Oregon fab enable if you could on a percentage is that going to double your FBAR capacity going forward?

We generally don’t want to disclose that Doug. Sorry.

Okay. Thank you. I tried.

Thank you. Our next question is from Srini Pajjuri of CLSA Securities. Your line is open.

Thank you, Hock. Again on the wireless, I know you said you have visibility into the next 2 years to 3 years on that design wins and also on the architectures. I am just curious as to how much of visibility you have on the pricing front because obviously to say that your content is increasing 20%, you got it seemed pricing curve. And the reason I am asking is given that your competitors are also adding capacity, what’s the risk that your pricing assumptions could go wrong here?

Oh, you are right. It’s, again, I am approaching it from a very macro point of view and a very trend basis. And if you look at my trend in macro over the last four years, that 20% is what I have been achieving and have been able to achieve and achieving. And there is nothing reeling that we see out there though I should never take it for granted, because each one is an interesting challenge by itself. I will be honest the products we do in FBAR, in front-end module, PATS as I call them, very, very difficult things to do. I mean, I am not saying they are moon shots, but they are not that far from that. And we spend an enormous amount of money, talent doing it. So, the best way to describe it is we don’t see anything that dramatically change though each one is a tough one by itself. So, if I have seen it the last four years, I am basically commenting that it sure looks that for the next two, three years, we will see a continuation of this trend and we see that as I answer an earlier question through more bands to the increasing issue of coexistence across bands in handsets plus just as much the phenomenon of downlink and uplink carrier aggregation as operators need to run their network and base station much more efficiently and all that is happening. It’s not pie in the sky.

Great. Thank you. And then Tony, on the balance sheet side, I guess once you closed the Broadcom deal, I think you told us you are going to have the leverage ratio around 2.5 times or so. My question is if an opportunity comes along to do additional M&A next year or some other time, first, what’s your strategy in terms of additional M&A here and then how much debt capacity you think you have? Thank you.

Yes. So, taken in reverse order, we definitely have the debt capacity go probably back to three years slightly above it. So, you can think about it at any given time we could be another turn here right out of the gate. However, the Broadcom acquisition, there will be a digestion phase for Broadcom. And as we have said, we don’t wake up every morning looking for the next acquisition. We are very opportunistic on the acquisition front and we will look at it as we go. But again, I think we have flexibility with a starting point at 2.5 to do what we need to do. And if something opportunistic comes along, we will take advantage of that.

Great, thank you.

Thank you. Our next question is from Amit Daryanani of RBC. Your line is open.

Yes, thanks a lot and congrats on the good quarter guys. A question for me, I guess if I go back to the wireless segment, Hock, to the extent you can talk about when you add capacity in the near-term over the next 12 months, call it are you doing it basically the design wins you have or do you have much more firm purchase commitments from your larger OEMs and hence you are adding capacity?

It’s a judgmental process. That judgment tends to be very tight to start by conservatively, but you are right, it’s tied to sockets. I believe in sockets that we will win over the next 12, 18 months. And you are right sometimes we have to scramble to put capacity in place because of that kind of approach, but we believe that we prefer to be conservative than the other way around, but it is – but at the end of it all, it’s all based in judgment and we tend to be rather conservative in lagging capacity build out behind what we see as demand. We might have based on an earlier statement started to behave a little differently, but basically, we are very conservative creatures is what we know we are, but it’s all based on judgment. And obviously, our judgment is that we will use that capacity that we are putting in place for the next two, three years.

Got it. And then on the enterprise side, you talked about share gains and business doing better. Is that more on your HDD side or is it more the fiber channel adapters from Emulex, where you think you might be thinking of more share?

I think it’s more on the connectivity side than the HDD side. HDD market doesn’t change very much.

Thank you.

Thank you. Our next question is from Harlan Sur of JPMorgan. Your line is open.

Hi, good afternoon and congratulations on the solid quarterly execution. On the wireless business, typically calendar Q1 is when your large Asian smartphone customers ramps production of its flagship platform. So, the question is are you seeing some of this ramp in your fiscal Q1 or is that typically seen in fiscal Q2? And then Hock, in line with your commentary, are you anticipating 20% plus content gains on their new flagship smartphones?

I am saying yes to all three. Yes, there is an uptick there late Q1, probably Q2 on fiscal, not calendar, fiscal Q2, more like fiscal Q2. And yes, we do see improvement in content.

That’s great. And then industrial you had anticipated revenues to be down kind of low single-digits in Q4, it came down 10% sequentially, but I think it’s obviously a good decision to be prudent and take down inventories in the fourth quarter. As you think about Q1 and another quarter of inventory reduction, can you just help us understand your expectations for sell-through and also any commentary on demand by geography that you would expect in Q1?

Yes, good points. Keep in mind maybe the first – simplest way to answer is our Q1 is November, December and January. So, as you know – as you probably know, industrial seasonality is down late end of the year and up again beginning of the year. So for Q1, we only have one month, no much. So, that’s why we continue to be – to forecast and be conservative in our guidance of industrial revenue whether they be resale or shipping. On the resale front, yes, we kind of see – industrial – it’s hard to breakout between seasonality versus secular in this case. All we see is that industrial is kind of struggling even to stay flat at this point. We saw our Q4, as just to emphasize, was actually August, September October. So, we only saw part of the downturn of the back end of the year. And so that – so even though our shipping was down, our resale, as I indicated, wasn’t that bad. So, I would expect our resale Q1 to be not so good and that’s why I use the word struggle to even say flat, which is why we believe we better guide our shipping, which is our revenue at down single-digits and we could have – and not more or less, that’s what they are in, because if the resale maybe down a bit more, but our shipping is best, because we already pulled under it last quarter.

Thank you. Our last question is from Edward Snyder of Charter Equity Research. Your line is open.

Thank you very much. Hock, you said 8-inch probably take you through the transition in about 2017, Hynix fab in Portland probably wouldn’t get turn on and I think you indicated till what 2018. It seems kind to be a flat spot between the two. I was just curious the silicon soft stuff that you have been working on is that there to take up the slot to take some of the pressure off the FBAR fab by moving some of the lower end stuff into that or is that more of a push by Avago to expand your filter offering beyond just traditional bond something maybe that will be more competitive in the soft run? And I have a follow-up please.

Well, I think we think we have planned it pretty well, because you are right, 8-inch will take us all the way through product generation of ‘17, which will just be in time for the fab up in Oregon to come in for ‘18. So, it’s straight on and it’s all largely focused on filters.

Okay. And then the 20% increase I know it’s more of a general number for the TAM growth overall, but it sounds like you are pretty enthusiastic about that for the next year. In 2015, as it specifically applies to Avago, will more of that come from say the max filters and is that really a content gain like you are getting more parts or is it more of an ASP boost given how tough these are to do maybe not more dye size itself, but you are just getting paid better for it?

No, we are very nice people to our customers. We basically be more content and we actually give a discount as on a filter basis. It’s a lot more content, a lot more filter.

Great, thank you.

Thank you.

Thank you, operator. Thank you for participating in today’s earnings call. We look forward to talking with you again when we report our first quarter fiscal year 2016 financial results.

That concludes Avago’s conference call for today. You may now disconnect.