Utilization Levels Outlook
Atif Malik – Citi: This is Atif Malik for Terence. Can you provide the utilization levels for the March quarter and what are your expectations for the June and then to the September quarter?
Ilan Daskal – CFO: So, the utilization for March was in the 70s, we don’t guide for the utilization going forward, but it’s going to be higher than that.
Atif Malik – Citi: Then as a follow-up, is the management thinking about moving to a more flexible or variable compensation structure given lower operating margins versus some of your peers?
Ilan Daskal – CFO: I’m not sure understand, what’s your mean by variable compensation structure?
Atif Malik – Citi: Basically, I’m trying to ask the long-term model for the Company given the resizing of the manufacturing facilities, like what’s your long-term gross margin, operating margin target?
Ilan Daskal – CFO: So, what is your question, I really don’t understand what you’re asking?
Atif Malik – Citi: The long-term growth margin, operating margin target for the Company.
Oleg Khaykin – President and CEO: So, basically our long-term stays intact of the $1.25 billion in revenue and gross margin, high 30s to the low 40s as we progress with resizing our manufacturing footprint and we are trying to keep our – that’s our goal to keep the OpEx at $75 million a quarter and that will get you to the operating level of mid-teens to the high-teens.
Atif Malik – Citi: Then, with respect to your bookings into the summer, I mean, historically in the last four years, we’ve seen bookings kind of moderate or come down in the summer, what are your expectations for bookings trajectory into the summer and why would things be any different this year versus last four years.
Oleg Khaykin – President and CEO: I don’t know where you’re taking the numbers from. Traditionally summer quarter is one of our stronger quarters for our business. So, I don’t know where you’re taking the data that summer is weaker. It’s been actually opposite.
Ilan Daskal – CFO: We did indicate last time that we have a better visibility into the outlook of the bookings, I mean, do you know, it extended from the traditional last year – at least the 3 months to the 6 months. With that said, we do not guide and it’s very difficult to assess how the second half of the year will shape up there, but definitely if the gradual recovery will continue, we believe that the bookings will shape up the same and seasonality reacts a little bit different this time and it’s also defined by the end market.
Oleg Khaykin – President and CEO: Historically, summer quarter has been the stronger quarter for IR.
Gross Margin Guidance
James Schneider – Goldman Sachs: If you look into your gross margin guidance for the June quarter can you give us any kind of sense about how much of the increase is being driven by mix and how much by utilization?
Ilan Daskal – CFO: So, Jim we don’t really split the abnormal level that we were prior to March definitely contributes a lot to the improvement of the margin, but definitely the fact that we see more on the industrial end market you know an increase on the revenue there, helped a lot also this quarter specifically in the overall gross margin improvement. When you think about June definitely the continuation of having the better absorption doe help the utilization more than the rest of the components there.
Oleg Khaykin – President and CEO: So, I mean Jim also I would add I mean if you look as far as June quarter is concerned mix probably plays a little bit greater role than anything because remember lower utilization in June quarter is much stronger. You’re still a caring of bulk of lower utilization from the March quarter in your P&L. So, actually the result of strong June quarter utilization will be more pronounced into the September quarter. So as far as the June quarter comes along the clearly better mix and higher utilization both play meaningfully, but probably I’d say mix gives you a bit better – more – takes a bit more credit that he normally would in the typical quarter…
James Schneider – Goldman Sachs: Then if you look at the pricing environment you’re currently seeing certainly there’s been pricing pressure for a while as we’ve been bouncing along the bottom of the cycle. Are you seeing any kind of changes in the pricing environment from competitors and specifically are you seeing any changes from your Japanese competitors, given the depreciation of the yen?
Oleg Khaykin – President and CEO: So actually Jim for the March quarter pricing pressure was not, again they almost not there. I mean it was the regular even below the normal price erosion that we are accustomed to. So, specifically for March, it’s definitely different than what you’ve described that what we have seen kind of last year and before then.
Ilan Daskal – CFO: In fact, I would actually go further to say that we are seeing pricing is firming up as a lead times and inventories have been pretty much depleted, and a lot of distributors are sitting on very lean inventories and at least, I don’t see anybody offering big discounts and with extending lead times and lower inventories, if anything we’ve seen people placing orders at the current book pricing. So, I think the aggressive tactical pricing is pretty much behind us at this time, who knows maybe somebody will come out surprise me. But at this point in time, we’re not seeing any irrational behavior.
James Schneider – Goldman Sachs: And then just a final housekeeping question for me, which is in the quarter your gross margins in Enterprise Power segment went up significantly despite the 29% sales decline sequentially. So, can you explain what happened there?
Ilan Daskal – CFO: Well, I think in this particular it’s really mix because we had a big revenue drop mainly a lot of the computing business one away. And Enterprise Power actually sources quite a bit of its manufacturing services externally. So, as a result, there is less of the underutilization burden on the Enterprise Power from our internal factories. Conversely, business units like Power Management Devices, Automotive and especially Energy Saving Products carry a greater underabsorption burden within our manufacturing facilities.
Ilan Daskal – CFO: The Enterprise Power, Jim, revenue actually is – it’s just pushed out, as we said already in June, it’s going to be up very nicely.
A Closer Look: International Rectifier Earnings Cheat Sheet>>