Linear Technology Earnings Call NUGGETS: Walking the Gross Margin Line, Booking Trends

On Wednesday, Linear Technology (NASDAQ:LLTC) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Walking the Gross Margin Line

Patrick Walsh – Credit Suisse: This is Patrick Walsh, I’m calling in for John Pitzer. I guess my first question would be on the gross margin line. I would’ve expected a little bit more leverage there given that revenues were up 6% sequentially and especially given that you guys have mixed away from the consumer markets over time. I was just wondering if you could kind of just talk about how should we think about gross margin going forward?

Paul Coghlan – VP of Finance and CFO: First of all as to why you may have expected higher gross margin I’m not sure, but we did continue to have shutdowns in the factories in the last quarter, and we did control the amount of inventory we built. So although we did grow gross margin, it didn’t grow as much as I guess you wished it would. Going forward we expect that gross margin can continue to improve and once we get closer to fuller capacity, can reach levels of gross margin as a percent of sales that we’ve attained in the past.

Patrick Walsh – Credit Suisse: I guess as a follow-up to that, could you give us the level of utilization for the quarter and kind of how we should think about that going forward?

Robert H. Swanson, Jr. – Executive Chairman: As we said in the past, the factories are sized from a capital equipment standpoint to support sales of over $400 million. So, from equipment standpoint, we’re about at 80% utilization. We’re staffed up presently to support about $380 million, so if we discontinue doing shutdowns, we could very quickly get back to $380 million.

Booking Trends

James Covello – Goldman Sachs: Appreciate you taking my question. First question would be on the networking business, you commented that the bookings were up in all areas, so that would obviously include networking, and that’s the one area in semis where we’ve seen some discrepancy with some companies having good results like yourself and other companies not as much. What product cycles or particular areas within networking allowed you to do well when some of the other companies in the – who sell different products in that market may not have?

Paul Coghlan – VP of Finance and CFO: It was up slightly and I honestly can’t tell you because there is no one customer that kind of dramatically ticked up. It’s basically the suite of networking customers we have just were up slightly. I don’t think there is any big trend there to call here.

James Covello – Goldman Sachs: If I could ask just my follow-up, relative to bookings trends, understanding that the booking again were up in every segment, was there any changes we went through the quarter or even in the month of July about how strong the bookings were?

Paul Coghlan – VP of Finance and CFO: Well, we told you our industrial bookings were up. We told you our computer bookings were up. We told you automotive was down slightly, military is down slightly, and we don’t really gather this end market data by month, Jim. We do it at the end of the quarter, so, because we do it mainly for this call. I don’t – but thinking back to July most of which is finished now, I don’t know if there has been any different distribution of our bookings.