ERShares Entrepreneur ETF
Q1 2014 Earnings Call Transcript

Published: 2 May 2014

[Operator:]

Good day, ladies and gentlemen, and welcome to the Entropic's First Quarter 2014 Earnings Conference Call. My name is Kim, and I will be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today. Ms. Debbie Hart, Senior Director, Investor Relations. Please proceed.

[Debra Hart:]

Thank you, Kim, and good afternoon, everyone. Participating on today's call are Patrick Henry, President and CEO; and Dave Lyle, our Chief Financial Officer. During the call, Patrick and Dave will present our first quarter 2014 results and our short-term outlook, and then we'll open it up for questions. Throughout this call, we will be discussing certain non-GAAP financial measures. Today's earnings release and the related report on Form 8-K describe the differences between our non-GAAP and GAAP reporting and present a reconciliation between the 2 for the periods reported in the release. We've also posted a schedule on the Investors section of our website, which includes our quarterly reconciliation of our GAAP to non-GAAP gross margin, operating expenses and taxes. During this call, we will make forward-looking statements regarding future events and anticipated operating or financial results of the company. Actual events or results could differ materially from those projected in the forward-looking statements. Please refer to our SEC filings, including our most recent 10-K, which contain important factors that could cause actual results to differ materially from the forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances. Finally, please be aware that we are located in the flight path of the Marine Corps air station in Miramar and cannot predict the timing of flights. If we do have a flight coming overhead, we will just pause and then continue once the jet noise has passed. And now I'll turn the call over to Patrick Henry.

[Patrick C. Henry:]

Thank you, Debbie, and thanks to everyone for joining the call today. In Q1, revenue was $55.7 million, down about 4% from Q4 and consistent with the guidance range we provided in February. Our non-GAAP net loss for the quarter was $0.17 per share. Dave will take us through the Q1 numbers and discuss guidance for the current quarter a little later in the call. But first, I'd like to provide a general update on our business and our long-term objectives. We continue to drive innovation across our core business while we transform the company. Our near-term priorities are to drive our existing design wins into revenue-generating deployments, commercialize our new product introductions, secure new designs based on these new product introductions and return the company to profitability while maintaining the proper level of investment in new product development, product commercialization, design win support and general customer support. With respect to conversion of our existing design wins into revenue, we believe we're making good progress with technical field trials by operators, and we are now seeing a firming up of deployment timelines where we had previously seen delays. On previous earnings calls, we highlighted several key design wins, which include multiple Tier 1 engagements supporting the shift to IP video delivery and a deployment of advanced services. For example, at Comcast, we have design wins supporting their deployment of X1 and X2 advanced services. Although we have seen a narrowing of the window for some box-level deployments, which reduced volumes and the longevity of the near-term opportunity, we have growing confidence that we will see a revenue ramp from this deployment in Q4 of this year and a more significant and material ramp in 2015. We're also seeing continued momentum with the Reference Design Kit, or RDK, platform deployments as cable operators move to IP video delivery. The 2 most notable examples are Comcast and Time Warner Cable, and other MSOs in North America and around the globe continue to look closely at RDK platforms for their next generation of deployments. Specifically in mid-April, Time Warner Cable announced its first IP set-top box using the RDK platform and featuring Time Warner Cable's cloud-based navigator. Time Warner has selected Humax as the set-top box OEM. And this Humax RDK-based IP client is powered by Entropic's SoC plus MoCA silicon and software and leverages the leading-edge work we have done for RDK. Time Warner Cable expects to deploy the RDK-based IP client in selected markets by the end of this year. We expect to see modest revenue contribution for the Time Warner Cable Humax-based IP set-top box design win to begin in Q4 this year and contribute more materially in 2015. In addition, as we discussed in our previous earnings call, we expect at least one other Tier 1 U.S. service provider who'll also begin to deploy our bundled solutions in the second half of this year with additional service provider deployments throughout 2015. We're seeing strong progress on this front but are unable to talk specifics about the service provider at this time. On the MoCA discrete side, we're pleased to announce that Entropic's focus is being deployed in DIRECTV's new wireless video bridge. The wireless video bridge creates a private, separate local network that Genie Mini clients can connect to wirelessly. This wireless video bridge delivers the Genie HD DVR experience seamlessly to the wireless Genie Mini and is a perfect example of how service providers can leverage a MoCA backbone to improve the Wi-Fi experience in a home. In general, we see interest from service providers around the world to have MoCA act as the primary backbone network for video distribution throughout the home with Wi-Fi use as a complementary technology. On the discrete SoC side, we're seeing a sustained resurgence in demand for HD-DTAs across the number of North America cable operators as bandwidth reclamation proceeds in earnest. This growth is slow but steady, and we expect MSOs to continue using DTAs for analog reclamation for the next several years. As such, we are working with our OEM partners to bring a second-generation of HD-DTA products to their portfolio to provide the industry's most competitive alternative to meet this need. Internationally, we continue to gain design win traction across our product lines. Our Ethernet-over-Coax, or EoC, solution was selected by 3 major broadband access OEMs, Jetnet, Guangda and Yitong in support of their advanced triple play and multi-screen services in China. We also secured our first MoCA design win in China during the quarter with our partnership with leading cable triple-play OEM, BigWhite Networks. Chinese MSOs are recognizing the value of a reliable home network backbone to connect multiple devices, both wired and wirelessly. And finally, for the DBS OU market, our third-generation analog CSS solution is being deployed by a major DBS operator in the Middle East as part of microelectronics technology, or MTIs, LNB dish antenna. From a track development perspective, we're sampling and have secured a number of design commits for our first 28-nanometer integrated set-top box SoC with integrated MoCA 2 HEVC decoding and full-band capture front-end capabilities. This is a major milestone for Entropic as it marks the next stage of the company's transition to one of only a few platform players in the connected home entertainment market. This initial product serves as the platform for additional highly competitive, cost-effective and power-efficient derivative products that will address the growing market opportunity in both cable and satellite in North America and globally. We expect to see early volume ramps from this initial integrated SoC in the second half of 2015. In MoCA, our market leadership continues as we demonstrated our latest MoCA 2 Home Networking solutions, including USB-powered adapters that is the smallest, most powerful MoCA device to extend connectivity throughout the home, including support for ultrahigh-def streaming. While others are still working towards delivering their first-generation MoCA 2 solutions, our low-power, second-generation MoCA 2 solution provides maximum throughput, critical power management features and enhanced network dependability to meet service providers' stringent Quality of Service requirement. We have also sampled our second-generation of digital channel stacking switch or digital CSS products, further solidifying our market-lead position in both analog and digital single-wire technologies for satellite. Entropic has the industry's lowest power, smallest size, most feature-rich and highest performance digital CSS solutions. This is our fifth generation of DBS Outdoor Unit technology and our second-generation of digital CSS silicon. Our intimate understanding of total system requirements and market timing has allowed us to bring a product of superior performance and power to our customers that is unmatched by our competitors. Based on both OEM and service provider feedback, we are highly confident that we'll continue our market leadership position in DBS ODU for years to come. We've already begun shipments of our first-generation digital CSS solutions. And we expect initial revenue ramps from our second generation of digital CSS products to begin in earnest in mid-2015 with more material contribution in 2016, when we believe the market will start to adopt digital CSS technology on a larger scale. In the interim, we will continue to service the global direct broadcast satellite market with our industry-leading analog and digital CSS solutions, which continue to gain traction in the international markets as Latin America, India, Africa and Europe continue to deploy. Looking forward, we're confident we'll see initial deployments of our products at the end of this year and expect those deployments to ramp throughout 2015. With new deployments, coupled with continued execution on our product roadmap and recent strong design win activity, this will allow us to transition the company to the next stage of growth and into a global platform semiconductor company in connected home entertainment. Now Dave will review the first quarter results and provide Q2 outlook, and I'll make some closing remarks before we open the call for your questions. Dave?

[David Lyle:]

Thanks, Patrick. First quarter revenue was $55.7 million, a 4% sequential decline, which was consistent with the midpoint of guidance we gave last quarter. We saw revenue declines from legacy SoC and MoCA discrete business, as well as typical Q1 seasonal softness, somewhat offset by set-top box SoC revenue growth in HD-DTAs. We had 5 customers who accounted for greater than 10% of our revenue during the quarter

[Patrick C. Henry:]

Thanks, Dave. In summary, we continue to drive innovation in product development while we're in the transformation stage of the company. We have now successfully brought to market several new products that are building the pipeline of design wins to drive longer-term growth and focus on operational and engineering execution and efficiency and driving our next set of service provider deployments. Despite the delays to the deployment schedules, we're confident in our strategy, our product roadmap, our customer relationships and our business opportunity. And we're committed to successfully completing the transformation of Entropic, and we'll continue to report our ongoing progress in the quarters ahead. That concludes our prepared remarks. Now Dave and I will take your questions.

[Operator:]

[Operator Instructions] Your first question comes from the line of Rajvindra Gill from Needham & Company.

[Rajvindra S. Gill:]

Yes. Just a question on the Comcast rollout saying that it's going to ramp in Q4 and then kind of a material ramp in 2015. I'm just trying to reconcile that with Comcast's bullish commentary around the X1 and X2 platform and -- as well as other set-top box vendors. For example, ARRIS that are seeing very strong numbers from that rollout. I'm just trying to reconcile why aren't you seeing that rollout as well affect the numbers.

[Patrick C. Henry:]

Most of the, if not nearly all, of the current deployment on X1 and X2 is based on legacy hardware, xu1-based gateways and RNG150N set-top boxes being used as clients. So the next-generation hardware is what we're integrated into in a variety of different set-top box forms.

[Rajvindra S. Gill:]

Okay. So the next-generation platform that you're working on, why does that continue to be kind of pushed out by Comcast? I mean, are you losing share, or is it continued push out from Comcast -- I mean, the big provider and why?

[Patrick C. Henry:]

Well, we're not really losing share because we don't have current business there. So any increase in volume that we get would be gains in share. So if you look at the timing for most of that stuff that we're seeing, we had trials going on at a variety of different platforms, and Q4 is when we would expect to see any material contribution to our revenue for Comcast-based deployments.

[Operator:]

Your next question comes from the line of Gary Mobley from Benchmark.

[Gary W. Mobley:]

Regarding the 28-nanometer integrated SoC, if I'm not mistaken, you were going to sample -- start sampling the product in the just-concluded March quarter. I'm just curious to get an update on how those -- how the sampling went and also the milestones achieved in the quarter.

[Patrick C. Henry:]

Yes. So we're winning designs. We already had customers lined up for these products when we were in the development stage. We started the sampling process. We're in product bring up, and we have some substantial new design wins that we're going to drive into production. We'd really see production level shipments and volumes of those products in the second half of 2015, but we're making very good progress on the design win side with those -- the initial product and then we'll get some additional derivatives off that product throughout this year.

[Gary W. Mobley:]

Okay. And with Actiontec being a greater-than-10% customer in the quarter, if I'm not mistaken, that's a signal that you had some resurgence in Verizon-related business. Could you explain that?

[Patrick C. Henry:]

I think it's more related to the level of top line that we're doing. And as a result, Actiontec is now a greater-than-10% customer. So really, that business has continued to be reasonable run rate business for us, primarily in BHR at Verizon. But that's more of the reason than there's a resurgence in Verizon business per se.

[Gary W. Mobley:]

Okay, all right. Just a numbers game. All right. Now on the digital ODU business that you collect some contribution, I believe you mentioned perhaps some point in the 2015 timeframe. If you listen to a number of your competitors on that front, I think they're all sort of talking about an initial design win ramp for revenue in the latter part of this calendar year and then perhaps even the mid-part of 2014. So -- and they all sort of boast the superior technical metrics, just as you are. So I'm wondering how you see the split of the business looking forward, not only at DIRECTV, the main customer, but as well in the other satellite providers internationally.

[Patrick C. Henry:]

No, Gary. I mean, we're the market leader in DBS ODU. We've shipped over 100 million units to date. We have the dominant position in the market, and we plan to maintain that. We're already shipping production volumes of our first generation of digital CSS, and that's been going on for several months. As far as second-generation digital CSS, which I think it drives more substantial volume, we'll see maybe some initial volume very latter part of this year, but it's going to be tiny. The typical deployment timing for these types of opportunities takes several quarters. And we feel like we have very -- a very strong relationship with the end customers, not only DIRECTV, but DISH Network with the international operators like BSkyB, SKY Italia, Multichoice and a variety of others. We are -- we feel like we have a strong incumbency position. Our second-generation of digital CSS, I think we were a little bit later than some of the competitors that were out there. But based on the market timing, I think we're in very good shape with a superior solution that's the lowest power, highest performance and highest level of integration in the industry. And that's not based on our opinion. It's based on feedback from the OEM ODU-end customers, as well as the pay-TV service providers. So we have a very good feeling about how we're going to do in that business long term, and we'll see how it plays out.

[Operator:]

Your next question comes from the line of Tore Svanberg from Stifel.

[Erik Rasmussen:]

It's Erik calling in for Tore. Maybe I want to get to the visibility that you guys -- in the past, that's been kind of very challenging especially with the service provider market. But in your prepared remarks, it seems like the tone changed just a little bit where you might have a little bit more visibility and feeling more comfortable with the -- some of those deployment plans. Can you just kind of talk about why you feel a little bit more comfortable on those opportunities, especially as it relates to the IP-enabled devices?

[Patrick C. Henry:]

Well, the biggest area where there's been delays for us has really been related to Comcast, and I think that is definitely going to narrow the window and shorten the overall volume that we're going to get an this generation of hardware. But we are seeing field trials now of the next set of hardware. That gives a little more confidence than the deployment timing, assuming they get through that cleanly, which we expect that they will. So in terms of the magnitude, how big the ramp is going to be in Q4, there are still uncertainty around that. Relative to the other operator-based deployments, those are pretty much in alignment with what we've always thought, which is second half this year with a more material contribution in Q4. And those deployments are more straightforward in terms of their more evolutionary versus revolutionary, in terms of what's being done from a deployment architecture. The one exception to that is Time Warner Cable, but they're drafting heavily off of what Comcast has done with RDK. And there's been a lot of progress on hosted navigation as well. So that gives a little bit more confidence on the timing of Time Warner as well. But the big one is Comcast in terms of where the major delays have been for us specifically. And we do think that Q4, we'll start seeing some material contribution from that.

[Erik Rasmussen:]

Great, that's helpful. And maybe for David. On the OpEx, it looks like you kind of gone through this investment period, and OpEx is going to be coming down next quarter. How should we be thinking about OpEx going through the remainder of the year? Is there any other big step-ups and -- that we should be thinking about?

[David Lyle:]

Yes. At this point, we don't see any big step-ups in OpEx from this point. We'll have to see how it plays out on future products. But at this point, I think we're kind of going to be in this 37 to 38-ish kind of range.

[Erik Rasmussen:]

Great. And then one last question. It looks like your HD-DTA business, you feel a little bit more comfortable. Are you seeing a little bit more activity there? Do you expect any further pickups in the remainder of the year? And I know expectations in the past were not to really see this as a growth opportunity for you, but has that changed a little bit based on recent strength?

[David Lyle:]

Well, I think the changes that we're seeing, more volume in general on HD-DTAs from some of the bigger guys, but we're also seeing additional opportunities with other smaller guys. And I think that's where we're seeing a little more confidence, and that revenue stream will continue.

[Operator:]

Your next question comes from the line of Alex Gauna from JMP Securities.

[Alex Gauna:]

I was wondering -- you described June quarter. I believe you said it's somewhat normal seasonality. What would you think about normal seasonality in the September quarter? And you described, Patrick, a number of things that you expect to be hitting towards year end. But is there anything hitting in the September quarter that would vary us one way or the other from seasonality?

[Patrick C. Henry:]

Yes. I don't think we're going to see a major ramp in any of the new stuff, and we still have a little bit of drop-off in legacy probably in that timeframe. Hard to break it out more than that from a quantitative standpoint because we only give quarterly guidance, but I would expect a huge uptick in Q3 to stay somewhere we sit today.

[Alex Gauna:]

Okay. And you described -- with NETGEAR getting some of your MoCA 2.0 into retail. Where are we in terms of the service providers deploying 2.0? Can you name either who they are or the numbers or how close we are to getting there?

[Patrick C. Henry:]

The -- I don't know how much they operate. As I've talked about it, we see kind of broad-based new designs in cable that -- especially U.S. Cable driving MoCA 2. Don't see too much MoCA 1 activity anymore in terms of new designs. Same way with Verizon. And then DIRECTV, I think, probably will be a little bit later than the rest of the industry on MoCA 2, but I think we'll start seeing them deploying in the latter part of '15.

[Alex Gauna:]

And does that, at least at present, should that have an accretive effect to your gross margins as that starts phasing in?

[Patrick C. Henry:]

Significant power among the MoCA volume is really in the set-top box, where it's integrated into the SoC for that kind of next generation. I mean, we do have discrete MoCA opportunities as well that we're pursuing. The wireless video bridge from DIRECTV is an example of that, kind of next-generation stuff for Verizon. But I think a big part of the overall contribution, it's going to be more in the integrated stuff for -- with SoC.

[Alex Gauna:]

Okay. And one more if I could. I know you stepped up your investments in 28 nanometer. Right now, how are those tapeouts doing in first of -- in terms of your first or second spend success? And what do you think, overall, the 28-nanometer generation of products can do for your gross margins?

[Patrick C. Henry:]

I think they -- I mean, we're going to be growing more substantially in SoC with integrated MoCA and without integrated MoCA over the next few years. So those generally have a little bit lower gross margins than connectivity. But I think the fact that we have very cost-effective solutions will allow us to stay in that kind of 50% to 52% gross margin range, which is our long-term goal. As far as progress on 28 nanometers, it's gone extremely well. We had first silicon sample success on both MoCA, as well as SoC. The next generation -- second generation of digital CSS is the 40 nanometer, and we'll have very good success with that as well. So generally, the engineering execution has been really good. And we got this new wave of products, and we're gaining pretty significant design win traction across DBS ODU, SoC and next-generation MoCA.

[Operator:]

Your next question comes from the line of Blayne Curtis from Barclays.

[Blayne Curtis:]

Maybe Patrick or Dave, the outlook for June, it seemed to indicate that connectivity was down. Does that mean set-top box is up? And then I was wondering if you just square that with the gross margin guidance. You are guiding it up a little bit. What's the driver there?

[David Lyle:]

Yes. The -- it's -- I think it's deeper under the top line, in that we're getting a favorable mix in general in Q2 by just a little bit. We're getting certain -- within set-top box, we're getting growth out of, obviously, HD-DTAs. But at the same time, we are going to -- we are seeing some legacy SoCs fall off. So there -- I can't point to any one item in Q2.

[Blayne Curtis:]

Got you. And then maybe sort of a harder question. The connectivity business has been down 6 quarters. And I guess, Patrick, you indicated maybe a seventh in September. I guess what I'm trying to figure out is that it seems like your growth sectors for the end of this year and next year are all integrated SoCs. Why should this business really find a bottom? And when you talk about seasonality, I guess when I look, I haven't really seen a trend, really, for June being weak. I think it's been up as much as it's been down in June. So just trying to figure out your confidence level that connectivity can eventually find a bottom.

[Patrick C. Henry:]

Well, I think the overall DBS OU is a growth opportunity for us. I mean, we'll see a little more competition there. So we'll have some little bit of share loss probably in '16 and '17. But I think the overall market opportunity is going to continue to expand for DBS ODU internationally. As far as MoCA goes, 75% of the MoCA business is in set-top boxes. So we don't break that out separately. There's connectivity, but there's, effectively, MoCA market share gains as we're shipping bundled solutions and then, eventually, integrated solutions in MoCA. The discrete MoCA opportunity, I think, eventually becomes really a much bigger opportunity for us, especially with the move to ultrahigh-def and the ultrahigh-def TVs acting as set-top boxes. So from a connectivity standpoint, I think there's elements of that, but we'll see growth in as well. I mean, right now, I mean, if you look at where we're at from a MoCA standpoint, most of the share that we're going to lose has been lost to integrated solutions. And basically, it's a growth opportunity from there. But to really grow it, we need to start shipping initially these bundled solutions and, eventually, integrated solutions.

[Blayne Curtis:]

Got you. And then just any sort of update on the thoughts -- you've been continuing the buyback. Is this something you're going to continue to pursue here? Obviously, your forecast will push to the right a little bit. Just your thoughts there.

[David Lyle:]

Yes. We'll give an update on what we're going to do in this quarter in the next call, which will be the end of July or early August. But until then, we can't comment.

[Operator:]

Your next question comes from the line of Hamed Khorsand from BWS Financial.

[Hamed Khorsand:]

Just trying to figure out where you guys stand now competitively. I mean, just given that you guys have hit this air pocket and you're coming out of it eventually, do you think when you -- when those products are accepted, where do you stand competitively? Are you still trying to catch up to competition? Are you just equal, ahead?

[Patrick C. Henry:]

Well, I think it varies by segment and product line. I think from a product feature leadership standpoint in DBS U -- DBS ODU, we're, by far, the superior competitor there. So I think this next generation of gen -- what we call gen 2 of digital CSS, I think we have a far superior solution to competition, both in terms of features and power consumption, kind of across the industry. MoCA, I think we're -- we definitely have an industry-leading feature there in discrete MoCA, especially in terms of power consumption and performance. On SoC, we're basically competitive. So if you look at -- we have one competitor out there, the big competitor up the street that has integrated MoCA solutions today. I think that we have in the portions of that market where we're focused, because we're not looking at the overall SoC business, we've been, up to this point, focused primarily on clients and on DVR set-top boxes, I think we have very competitive products. From our 28 nanometer, we have HEVC, we have integrated MoCA 2. So I think we have very competitive products there as well.

[Hamed Khorsand:]

How are you going to play in a role as far as RDK with more European carriers expected to come online towards the end of the year? Is that going to benefit you, or is that a risk that it's still going to be legacy SoCs?

[Patrick C. Henry:]

I think there's an opportunity for us in RDK globally. Liberty Global, which owns UPC, they own Unity, we have established business there in MoCA. So I think there's follow-on business, especially for RDK-based clients for us in some of those markets. Those markets, too, I think -- the general trend that we're seeing is that HEVC, as a requirement, is gaining significant momentum and traction, whereas 4K ultrahigh-def, there's a lot of buzz around it, but I think we're pretty far away from having volume. So the fact that we already have HEVC in an integrated MoCA 2 solution is a very strong competitive position to be in. We don't have ultrahigh-def 4K decode today. We have upscale, but we don't have decode. But I think that portion of the market is going to be relatively small, probably until like 2017. So I think we have a strong position there to support Japan, support Europe. In the event that Latin America cable goes with RDK-based solutions, I think we'll have strong solutions there as well, in addition to the stuff we've got going in North America.

[Operator:]

Your final question comes from the line of Harlan Sur from JPMorgan.

[Saqib Jalil:]

This is Saqib Jalil for Harlan Sur. My first question is basically building one of the last questions that's been asked. Regarding the second half demand environment, I would think that you would have forecast visibility, perhaps not the orders, but forecast visibility at this point as we sit in May, only 2 months away from 3Q. And then also if you can talk a little bit about one of the SoC opportunities you guys have at one of the largest satellite provider that could provide growth in the second half.

[Patrick C. Henry:]

Yes. So, Dave, you want to take the Q3 question? I guess you take Q3 question.

[David Lyle:]

Yes. The -- we guide one quarter out because we have pretty good visibility in the current quarter. Historically, that's always been the case. In the quarter out from that, it gets a little more cloudy, but we still have some indication. What's going to happen after that, it's, well, we'll have to see. That being said, the way we've described our business and the transition we're in right now, we're seeing the falloff on a lot of our legacy SoC plus MoCA products and waiting for the deployment, the new deployments on several different fronts, all of which we think are going to happen in the back half of the year. And then it's a question of how big and fast those ramp into 2015.

[Patrick C. Henry:]

And as far as stuff that we're pursuing in satellite set-top boxes with integrated MoCA or bundled MoCA, I mean, clearly, DIRECTV has been a key target for us. We don't have any designs to announce there today, but that's something we've been focused on most of the North America and Latin America market. So when we have something to announce there, we'll make sure that we do that.

[Saqib Jalil:]

Okay, great. And then also with the recent design wins in China particularly, could you just talk a little bit more about international opportunities, specifically from the emerging markets, India, China, becoming a significant part of your revenue contribution at some point? And how large could this opportunity be?

[Patrick C. Henry:]

Well, in India, we had kind of a transient opportunity around the analog turnoff. So we did get some initial additional volume there around standard app, SoCs or legacy SoCs we got in the Trident acquisition. We don't really see India as a major growth opportunity for us. We have some initial opportunities there in our broadband access products, but it's kind of in a nascent stage of the market. In China, we see pretty decent opportunities for us, especially around connectivity, broadband access being the most significant driver and then a little bit of an emerging opportunity with MoCA. And we do have some SoC business there as well, although a lot of the SoC business we do in China is for export to other geographies, including Eastern Europe. So it is an important geography for us. We continue to invest in that area, and we are winning designs. Whether it's our most significant growth engine, that's a little bit of the last question. But I think our more significant growth engine for us over the next several quarters is really going to be MoCA and SoC and North America around service provider deployments and, potentially, a little bit of stuff in retail.

[Operator:]

This concludes our question-and-answer session. I will now turn the call back to Ms. Debbie Hart.

[Debra Hart:]

Thank you, and we'd like to thank you all for your participation today. Feel free to call me if you have any additional questions, and we hope you have a good night. Thank you.

[Operator:]

This concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.