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Maxim Integrated Products, Inc. (MXIM)
Q3 FY08 Earnings Call
May 1, 2008, 5:00 PM ET
Paresh Maniar - Executive Director of IR
Bruce E. Kiddoo - VP - Finance
Tunç Doluca - President and CEO
Vijay Ullal - Group President
Craig Hettenbach - Goldman Sachs
Craig Ellis - Citi investment research
Tore Svanberg - Thomas Weisel Partners
Ross Seymore - Deutsche Bank
Uche Orji - UBS
Chris Donley - JPMorgan
David Woo - Global Crown Capital
Christopher J. Neil - Division VP
Sumit Danda - Bank of America Securities
Jeff Rosenberg - William Blair & Company
Doug Freedmen - American Technology Research
John Pitzer - Credit Suisse
Sumit Dhanda - Banc of America Securities
Previous Statements by MXIM
» Maxim Integrated Products Inc. F1Q09 (Qtr. End 09/30/08) Earnings Conference Call Transcript
» Maxim Integrated Products, Inc. F4Q08 (Qtr. End 06/30/08) Earnings Call Transcript
» Maxim Integrated Products, Inc. F2Q08 (Qtr. End 12/31/07) Earnings Call Transcript
Paresh Maniar - Executive Director of Investor Relations
Thank you operator and welcome everyone to our fiscal third quarter 2008 earnings conference call. With me on the call today are Chief Executive Officer, Tunç Doluca, Group President, Pirooz Parvarandeh, Group President, Vijay Ullal, Division Vice President, Chris Neil and Vice President of Finance, Bruce Kiddoo.
There are some administrative items that I would like to take care of before we cover our results. First, we will be making forward-looking statements on this call and in light of the Private Securities Litigation Reform Act, I would like to remind you that the statements we make about the future, including our intentions or expectations or predictions of the future, including but not limited to possible statements regarding bookings and turns orders, revenues and earnings, inventory and spending levels, manufacturing efficiency or capacity, projected end-market consumption of our products, the estimated time to complete our restatement project and any other future financial results are forward-looking statements. If we use words like anticipate, believe, project, forecast, plan, estimate or variations of these words and similar expressions relating to the future, they are intended to identify forward-looking statements. It is important to note that the company's actual results could differ materially from those projected in the forward-looking statements. Additional information about risks and uncertainties associated with the company's business are contained in the company's SEC filing Form 10-K for the year ended June 25, 2005. Copies can be obtained from the company or the SEC.
Second, in keeping with SEC's fair disclosure requirements, we have made time available for a question-and-answer period at the end of today's call. This will be your opportunity to ask questions of management concerning the quarterly results and expectations for the next quarter. And operator will provide instructions at that time. We again request that participants limit themselves to one question and one follow-up question during the Q&A session.
Before I hand the call over to Bruce, I want to remind you of the contents of our January 31, 2007 press release, which reported that due to stock option accounting matters, Maxim expects to restate its financial statements. Since the company has not yet issued restated financial statements, we are unable to provide detailed GAAP or non-GAAP financials for the quarter ended March 29, 2008. As a result, all numbers contained in our press release and discussed on this call exclude all stock based compensation. These numbers should be treated as estimates only and are subject to change.
I'll now pass the call over to Bruce.
Bruce E. Kiddoo - Vice President - Finance
Thank you Paresh. I will begin by providing a status of the restatement effort which have seen substantial progress since our last update three months ago. We achieved a major milestone by delivering a draft SEC clearance letter and supporting materials to the national offices of our two independent accounting firms for their review and concurrence. This will be followed by a submittal to the SEC for final review. During these final stages of the process, we are dependent on our auditors and the SEC, whose completion timeline is not within our control. This makes it difficult to accurately predict the completion date. We are not able to make additional comments on this topic.
Moving on to the results of our recently completed March quarter, let us start with certain items from the income statement. Revenue for the third quarter was $487.4 million, modestly ahead of the midpoint of our guidance. This was a 2.4% increase from the same quarter last year and a 9.7% decrease form the second quarter of fiscal 2008. As we guided our cell phone, notebook and computing and peripherals businesses were down while our storage business increased.
Consequently, our revenue mix by major end market in Q3, shifted from the prior quarter to 29% computing, 27% consumer, 24% industrial, and 20% communications. This sequential makeshift combined with the manufacturing restructuring announced last quarter had a positive impact on gross margins, which partially offset the expected negative effects of lower utilization and increased inventory reserve requirements.
Consequently Q3 gross margin excluding stock based compensation and non-recurring charges declined by 60 basis points compared to Q2 and is in the middle of our target range. We have now achieved sixth straight quarters of stable gross margins.
Moving to operating expenses. We continue to tightly control our operating expenses. As we predicted the full quarter impact of our storage products acquisition and of the new 401(k) matching program was more than offset by the savings from the business unit restructuring and a decline in SG&A expense. Product development activity increased resulting in higher spending from assets. As a result, operating expenses in Q3 excluding stock based compensation and non-recurring items increased by 1% sequentially.