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Mindspeed Technologies, Inc. (MSPD)

Morgan Stanley Technology, Media & Telecom Conference

February 28, 2013 02:25 PM ET

Executives

Steve Ananias - SVP and CFO

Analysts

Dan Fuss - Morgan Stanley

Presentation

Question-and-Answer Session

Dan Fuss - Morgan Stanley

As we begin, let me just quickly read our disclosures. Please note that our important disclosures including personal holding disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website or are available at the registration desk. And for those of you how don’t know me, my name is Dan Fuss and I work with Joseph Moore, the lead U.S. semi-connector here at Morgan Stanley and with me here is Steve Ananias, CFO of Mindspeed for about year and half now and prior this role you were working over at Broadcom as controller in the Broadband Communications Group.

Great, thanks for being here.

Steve Ananias

Well, thanks for having me.

Dan Fuss - Morgan Stanley

For those who aren’t familiar with the Mindspeed story, could you provide kind of quick overview of the company, the product portfolio and your general and market exposure of what’s your focus on?

Steve Ananias

Sure. So, we are publically traded on NASDAQ under the ticker MSPD. We focus on communications, semiconductors superficially infrastructure equipment. Our prior portfolio spans several different market segments. The largest today is our high-performance analog business. It represents approximately 50% of our revenue. The second is communications processors, represents approximately 38% of revenue and then last but certainly not least is our emerging wireless infrastructure business which represents 12% of our revenue.

Dan Fuss - Morgan Stanley

And I was actually hoping that we could start there. Obviously you’ve got an exciting story in small cell infrastructure. If we could kind of dig into that business, provide an overview, obviously its 12% revenues now but you got it to 150% growth this year. Provide a kind of a high level of overview of that business.

Steve Ananias

Yes. That business clearly has the ability to completely transform the company. We’ve been investing in the small cell space now for about 5 years. Our initial investment is in a product line that we refer to its Transcede and that is a 4G, the initial implementation was a 4G LTE implementation and that prior plan actually started shipping in production to first in the world production employment in Korea in the December quarter, last quarter.

We took a big step forward last year about this time and we acquired private company out of the UK by the name of Picochip. This company had a tremendous amount of experience and a leadership position in the 3G version of small cells, not only the FD or WCDMA version but also TD-SCDMA for China. And that acquisition certainly strengthened our position in the small cell space and immediately gave us the incumbent position and just about every single operator around the globe. That product line has been deployed in over 50 operators and is a very strong business for us.

With a combination of the Picochip technology, the 3G technology that it brought and our own organically developed Transcede or 4G LTE gave us the broadest portfolio in the industry and actually as I just mentioned I just returned back from Mobile World Congress where we were actually demonstrating our dual mode SOC. So in a single chip we support the 3G WCDMA and 4G LTE interface standards.

Dan Fuss - Morgan Stanley

And did that development really start with the acquisition of Picochip or were you working on that beforehand?

Steve Ananias

Yes, the development for our dual-mode solution was really accelerated by the acquisition of Picochip. So we had the 4G technology but Picochip brought the 3G technology.

Dan Fuss - Morgan Stanley

And before we get too into the weeds here, I was hoping that taking a step back; describe the excitement about the small cell opportunity. How the small cell fits into kind of a carrier's network strategy, why they need them going forward?

Steve Ananias

So today the architecture of the cellular infrastructure, you have the macro base station and it's pretty much just that, it's what they refer to as a homogenous network. So you have the macro base station and the 3G standard, which is really the lion's share of the volumes today, it was defined a decade ago and when they define that, the primary factor was quality efficiencies in the voice network and so on, and so at the time we didn't have the adoption of smartphones, didn't have the tablet PCs and other data devices, and so what's happened now, fast forward to today, the amount of data flowing through the mobile network has really created issues for the operators. So anything from capacity, the macro base stations, can’t handle all capacity, the performance is very low relatively speaking, and coverage has also suffered as a result of this.

So when the operators have stepped down and others have stepped down to define the 4G standard LTE, they definitely had data in mind. And so they developed a completely new architecture that is referred to as HETNET or heterogeneous network and this is so the combination of macro base stations and small cells. And to be quite honest, it will require small cells in order to deliver the types of performance and coverage that 4G promises. So, we are excited about small cells. It’s a true paradigm shift in wireless communications and we are certainly in the leadership position.

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