Power Integrations, Inc. (POWI)

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Power Integrations, Inc. (POWI)

Q3 2008 Earnings Call

October 23, 2008 4:30 pm ET


Joe Shiffler - Director of IR and Corporate Communications

Balu Balakrishnan - President and CEO

Bill Roeschlein - CFO and Corporate Secretary


Tore Svanberg - Thomas Wiesel Partners.

Ross Seymore - Deutsche Bank Securities

Sumit Dhanda - Banc of America Securities

Vernon Essi - Needham & Company, LLC

Steven Smigie - Raymond James

Christopher Longiaru - Sidoti & Company, LLC.



Thank you for standing by, and welcome to the third quarter 2008 financial results conference call for Power Integrations. Today’s conference is being recorded. Now, at this time, it’s my pleasure to turn the conference over to Mr. Joe Shiffler, Director of Investor Relations and Corporate Communications. Mr. Shiffler, please go ahead.

Joe Shiffler

Thank you, and good afternoon. I’m Joe Shiffler, Director of IR and Corporate Communications for Power Integrations. With me on the call today are Balu Balakrishnan, President and CEO of Power Integrations, and Bill Roeschlein, our Chief Financial Officer. Since there are a number of other calls going on this afternoon we will keep our introductory remarks very brief to try to get as much Q&A as possible before the top of the hour.

During today’s call we will make reference to financial measures that are not calculated according to generally accepted accounting principles. Please refer to today’s press release for an explanation of our reasons for using such non-GAAP measures as well as tables reconciling these measures to our GAAP results. I would also like to note that our discussion today, including the Q&A session, will include forward-looking statements reflecting management’s current forecast of certain aspects of the Company’s future business. Forward-looking statements are denoted by such words as will, would, believe, should, expect, outlook, estimate, plan, anticipate, suggest, project, forecast, and similar expressions that look toward future events or performance.

Forward-looking statements are based on current information that is, by its nature, dynamic and subject to rapid and even abrupt changes. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied in our statements. Such risks and uncertainties are discussed in today's press release and under the caption Item 1A, Risk Factors, in part 2 of our Form 10-Q filed on August 8, 2008.

Lastly this conference call is the property of Power Integrations, and any recording or rebroadcast of this conference call is expressly prohibited without the written consent of Power Integrations.

With that I’ll turn the call over to Balu.

Balu Balakrishnan

Thanks, Joe, and good afternoon. Obviously the impact of the economic downturn is the number issue on everyone’s minds. So I will begin with an update on what we are seeing.

It is not unusual for us to be on the leading edge of the downturn and that seems to have been the case this time around. As we indicated on the July call we saw the first signs of slow down mid way through the second quarter. That softness persisted through the month of September and the seasonal ramp that we typically expect in the third quarter did not materialize, as a result revenues increased only slightly on a sequential basis coming in at $53.8 million. After holding up reasonably well through September orders have dropped down significantly in October. As a result we are protecting a sequential revenue decrease of 15% to 25% in the fourth quarter. The wide range indicates the lack of visibility that we have in this highly uncertain environment. While our business is obviously being impacted by a very challenging macro-environment we remain confident about our long term business model and we are staying focused on things that we can affect, meaning designs, developing new products, controlling costs and expenses and prudently deploying our cash. Our strong balance sheet and cash flow allow us to take advantage of the current depressed stock price by aggressively repurchasing shares and our Board has authorized an additional $50 million on top of the prior $50 million program that is nearly complete. Our Board has also declared a quarterly dividend of $2.5 for the fourth quarter. Despite the weaker end market demand, design activity continues unabated and our pipeline of opportunities continues to expand. Our current [3:47] of products is highly competitive in the power supply market and is made even more attractive by the combination of factors that we have talked about on our past couple of calls including tightening energy efficiency specs and rising labor costs in Asia.

While metrics related to design wins have limited quantitative value we do look at them as a directional indicator of how we are doing in the market. The third quarter was our best ever in terms of the number of designs won, as well as the expected dollar value of those designs. Some designers of note included chargers for TomTom GPS Devices and Philips shavers, a high volume cell phone charger designed for Huawei in China, a handful of cordless phone designs replacing linear adaptors, PC standby designs for HP, Dell and Acer and a number of home appliance designs ranging from washing machines to Kimchi refrigerators.

We also won design wins by two of the three vendors supplying utility meters for the upcoming conversion to automated meter readings in France. That conversion will result in the installation of 35 million new meters over a 5-year period and we expect to get a healthy share of that business. In all, we won more than a hundred design wins in the industrial market in the third quarter including about a dozen metering designs more than 2 dozen LED lighting designs and a number of process control and motor control designs.

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