Spansion (CODE)

Q1 2011 Earnings Call

April 28, 2011 4:30 pm ET

Executives

Randy Furr - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Shubham Maheshwari - Investor Relations

John Kispert - Chief Executive Officer, President and Director

Analysts

Rajvindra Gill - Needham & Company, LLC

Atif Malik - Morgan Stanley

Kevin Vassily - Pacific Crest Securities, Inc.

Krishna Shankar - ThinkEquity LLC

Glen Yeung - Citigroup Inc

Daniel Berenbaum - Auriga USA LLC

Doug Freedman - Gleacher & Company, Inc.

Presentation

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Operator

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Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Spansion Earnings Conference Call. My name is Erica, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Mr. Shubham Maheshwari. Please proceed.

Shubham Maheshwari

Thank you very much, Erika, and welcome to Spansion's First Quarter 2011 Earnings Conference Call. On the call with me are John Kispert, CEO; and Randy Furr, CFO of Spansion. We will be referencing a slide deck during the portion of today's call. You can download a copy of the slide from our Investor Relations section at www.spansion.com, under Events & Presentation. There will be an audio replay of this call available by dialing 1 (888) 286-8010, and passcode 49058165. A webcast replay will be available on the company's website for the next 30 days. Before we begin, please note the following Safe Harbor statement.

During the course of this meeting, we may make forward-looking statements regarding future events or the financial performance of the company. Such statements are based on assumptions as of the current date and may differ materially from our current expectations. We encourage you to review risk factors in the most recent SEC filings, including our Annual Report and Form 10-K for fiscal year 2010. The company disclaims any duty to update forward-looking statements. And with that, I will now turn the call over to John.

John Kispert

Thank you, Shubham. Good afternoon, and welcome to our Fiscal Year 2011 Q1 Earnings Conference Call. For the next 10 minutes, I will highlight our results and update you on the market and our strategy. Then Randy will give you the financial details for the quarter and the outlook for the second quarter and then finally, we'll field your questions. To begin, I want to thank our employees, partners, customers and suppliers for the absolute incredible support during the Japan tragedy. We know this is top-of-mind for many of the folks on this call so Randy and I will both address our assessment on the business and the impact moving forward in our prepared remarks.

At a high level, we delivered another solid quarter in what is historically, seasonally the lowest quarter of the calendar year for Spansion. Compared to Q1 last year, our performance as a company has improved across the board. Our overall revenues are up roughly 6% over last year at this time. And most importantly, our embedded revenues are up roughly 16% and we saw a market share improvement by approximately 8 points compared to Q1 2010 levels.

Our share also continued to improve quarter-to-quarter as we experience strong design win momentum, in addition with our new products, we see positive ASP trends.

Slide 4, the deck you have online, details our revenue breakdown by segment and region for the quarter. Our new product engine is starting to drive positive margins. In Q1, we successfully launched the Spansion GL-S and DSR product families. And we have already received positive feedback in ordering momentum from customers across both product families. Our GL-S flash memory delivers breakthrough performance for automotive, consumer electronics, gaming and TelNet applications. This family of products enables electronic devices to start or turn on nearly instantly and provided real-time feedback for the fastest interactive user experience. We are now entering mass production with the 1-gigabit and the 512-megabit products and right away, we see new opportunities.

For example, automaker specifications for next-generation digital instrument clusters and navigation displays are reducing boot time requirements in half, increasing the need for high performance memory. And because Spansion's Flash memory offers a 45% increase in read performance over all other competing solutions, we can guarantee faster system boot for optimal system performance. And obviously, this increases customer satisfaction, as well as the user experience for all of us, the end-users.

Another application we're addressing with our new technology is set-top boxes. Here, support for high-densities is critical and as an example, retaining electronic program guides that reside in all of our set-top boxes. In the event of a power loss, it is increasingly critical to our customers to prevent any loss of end-user's guide capability.

Today, recovering from a set-top box power loss offer results in a 24-hour window to fully restore a 2-week electronics program guide that has been stored in other memory solutions, such as DRAM. With our new products, we've been able to mitigate that risk for our customers and as the risk, to all of us, the end-users, goes away.

Finally, I want to mention that our NAND development remains on track. We plan to deliver NAND products in the second half of the year.

Now turning to our design win momentum, we saw new design wins in gaining with our new 2-gigabit product, which delivers a high-quality interactive video experience. With our 1-gigabit and 512-megabit, going in to production, we are optimistic about continued design wins with this new product line across automotive, gaming, Telnet and many other consumer applications. One example on our Consumer segment is the Set-top Box market where we achieved over 25 design wins. Here, customers value of density, reliability, performance and in growing importance the ease of our products offer through our software, and in enabling faster and easier designing capabilities into their own very quickly expanding electronic product portfolios.

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