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#So on the buyback, we've secured a financing commitment from Credit Suisse for $400 million.
So we can move quickly.
But we will be very opportunistic in our buyback.
So what you'll see us doing is in the open market, buying shares when we think the stock is undervalued.
And I think you'll see that happen over multiple quarters here.
I'd like to reemphasize that same theme, both on buyback and on acquisition.
We're happy with where we are and we're not going to modify our behavior.
We're going to be measured in things we do in both arenas.
And then to answer your question on the automotive, so for this quarter, the industrial and automotive was 54% of total revenue and last quarter, it was 52%.
A year ago was 49%.
Thank you for the question.
Cypress and Spansion had different inventory policies when we came together.
Spansion had much larger inventory in both dollars and days than Cyprus.
During our discussions for a merger, we decided to maintain Cypress' inventory policy.
We have four methods of write down of inventory, and they all are intended not to let inventory balloon or stuff the channel.
So we did a write down of inventory at the merger.
We got rid of everything that was suspect, old enough that we might have to put more money into it to ship it, obsolescent, et cetera.
We went down to our inventory level of six months.
So basically at Cypress, if anything is six months old and one day, it goes away.
And it's a write-off in that period.
So all of our numbers always include that.
Therefore, the inventory we kept between the companies is the good stuff.
And therefore, we expect in terms of that value inventory, to sell all of it.
But we don't want six months of inventory.
Our entitled level for days of inventory is 68 days, 65 days to 68 days.
And that's a measured number that we've got from studying companies we consider to be best-in-class and Cypress history.
So let's call that two-thirds of a quarter.
We've got a little bit over a quarters worth of inventory burn off, so that we get down to the lean inventory that we believe is right.
We believe high velocity inventory, short lead times, high on-time delivery.
So old Cypress, for example, closely times the 4.3 weeks and delivers 99% on-time to that lead time of 4.3 weeks.
Internally, our inventory ---+ excuse me, our lead times internally are about 3.8 weeks.
So we're even better than that.
Spansion inventory is now coming down through the seven weeks.
It will come down to four weeks.
That will take us a year.
We're improving on-time delivery.
And that action is what will get our inventory down to where we want it to be.
So from your perspective, you won't see anything except for one thing.
We're running our fabs below the replacement rate for our sales at 60% utilization, and that utilization will take some points off of gross margin until the second half of next year.
That's correct.
Raji, let me clarify one thing.
There was $30 million of synergies in the quarter.
On an annualized basis, it was $120 million.
And the $21 million of COG synergies was an annualized number.
And with regard to overall synergies, let me give you the data.
Our total synergies since the beginning of the deal, as of the end of Q3 were $120 million annualized cost reduction.
And the number we've said we've actually raised one time, the number we said to the Street is that we plan to get to $160 million total when all is said and done.
We've been saying that we will achieve the $160 million total in Q4 of 2017.
That's been our position up to this point.
Today we believe we're going to pull that in by a year.
And we will get to $160 million total in synergies from the $120 million we have achieved so far by Q4 2016.
So Q1 is typically down for us, <UNK>.
And right now we have very little visibility into Q1.
We're struggling with the visibility into Q4.
So it's hard for us to make a commitment on Q1.
But I would expect us to at best be normal seasonality in Q1, at this point
It's typically down about 3%.
I'm sorry.
Let me clarify.
Q1 is typically down 6%.
So our dividend is sacred.
We've said that forever.
We're paying $0.11 dividend, which is yielding about 5% right now.
You'll see that continue.
Right now, we're going to be opportunistic with where our stock is.
If the stock continues to trade where we think is undervalued, then we'll be buying back.
If we think that there is an opportunity that we could increase the dividend long term, we may consider that.
But right now, our focus is going to be on the buyback.
Our normal seasonality for Q4 is down 3%.
At the midpoint of our guide, we've got it down 5%.
At the low end of the guide, it's about 8.5%.
And then I just said Q1 is typically down 6% to 7% from Q4.
They'd start to kick back up.
Q3 is typically up about 3%.
Q2 is up about 7% over Q1.
Sorry to do that in reverse order, but 7% in Q2, 3% in Q4 ---+ sorry, Q3.
This is <UNK> <UNK>.
The segments that we really see a lot of growth in right now are Automotive.
Even though the revenue is out in the future, but we're getting a lots of award wins now.
We've still see some opportunities in consumer, with wearables and whatnot, with our PSoc and our CapTouch.
And then Industrial has been off a little bit and Communication worldwide has been off a little bit.
Big picture, we're looking at the last quarter and we've got good data and good capability to analyze data.
And it's real hard to find a company, a market, or a geography where we're getting hammered.
It's like it's down a few percentage points across the board.
Sure.
This is T.
J.
When we first announced and we did a preliminary synergy plan, we announced $130 million.
And that was conservative.
We wanted to make our number, obviously.
We then did a synergy plan ---+ I'm looking here at a document called Rev 12.
So we beat the crap out of it and got a lot of detail in it.
We have a senior manager running, so it's run as if it were a department that has got tight management to it.
And then we thought $130 million, went to $160 million, and we were prepared to commit $160 million to the Street, which is where we're at now.
Having said that, in our plan, we were supposed to be at $90 million at the end of Q3.
And we're at $120 million.
That is $120 million annualized cost reduction cumulative since the beginning, or basically that dividend by four per quarter.
We were supposed to be at $90 million and we're at $120 million.
So we're ahead of plan.
There are reasons for it.
I will give you one example.
When the companies got together, there were 72 total sites, way too many buildings scattered all over, two pair of sales offices, et cetera.
We have a plan to close 27 buildings.
And typically, you've got to negotiate.
Sometimes you get hung with a building, you have to pay the rent for a while until you get rid of it, et cetera.
We've actually been able to close down 25 of those 27 sites, and we will close down the last one or two next quarter.
So we did a really good job on the real estate part, and that sets one of the reasons for the acceleration.
Also, in our synergy plan, we started out with 8,116 people together.
And the plan was by the second quarter of next year to go to 7,068 people, down 1,048 people.
And as we speak today, we're down 1,049.
So we've executed on the headcount reduction plan.
We're in effect, done.
And we've got that done by Q3 2015.
That said, we'll probably drift a little bit ahead of plan, but I don't have a quantification for that and it's not a huge number.
So we've been executing more quickly toward the $160 million total, which I now said will happen in Q4 of 2016 instead of Q4 of 2017.
Okay.
Well, I've been on the Board for 33 years, so I'll answer that question.
We borrowed money, emphasize that, borrowed money to buy back stock.
That's the purpose for the money.
That's what it's going for.
And we borrowed money because the stock is very undervalued.
You take any metric you want, you go look, and the stock is undervalued.
We will take that much stock out of the market.
The only variable is the execution of it.
And by that I mean our second goal is to get as many shares out of the market as we can for the budget that we have to spend.
And therefore we may slow down if the stock pops upward and speed up if the stock goes down.
But bottom line, we're undervalued.
We borrowed money to buy back stock.
We're going to take that stock and run it upward later and make a profit on that, and that's our goal.
And that is not going to be perturbed by other things that pass by.
So for example, if we get to a point where we have to stop doing managed purchases in the market, because of some, let's say, M&A activity, we will likely turn on a 10B5 program to plow through that barrier to keep our buyback going while we're working on that merger.
The buyback is a commitment.
The Board's behind it.
And we're going to execute on it.
And <UNK>, let me add that if you look at the gross leverage, we're going to go from 1.9 times to 2.8 times after taking down the $400 million.
And we drive that down very quickly.
And that's on an LTM basis as of Q3.
If you look forward into 2016 and 2017, we drive that down drastically with the strong cash flow that comes out with the synergies that we're going to recognize.
So we have plenty of capacity to go get additional debt, if we needed it.
Yes.
So DCD will be up quarter-on-quarter.
The other divisions will be down slightly.
Our emerging tech we expect will be up, as well.
But the DCD will be driven by strong growth in the USB and the Type-C adoption, as well, and the turn back on of the track pad business that we saw softness in Q3.
Let me go back and give a higher level abstraction of what <UNK> said.
We have start-ups, we call them emerging technology division, or ETD.
We have the Type-C, which is a small division within Cypress.
But in effect, Type-C plus our startup, as I mentioned earlier.
Both of those will move forward, because they're plowing new ground.
The bulk of the Company's revenue ---+ and by that I'm talking about 80% of it ---+ is in our other two divisions, Memory Products Division and Programmable Systems Division.
They're both roughly comparable, and also our geographies are roughly comparable.
So the comment I made earlier, it looks like a few percent nick across-the-board is really what applies.
There's nothing that stands out one way or the other.
<UNK> <UNK> runs manufacturing for the corporation.
He came from the Spansion side.
He is managing the transfer into fab 25, which is a world-class, low cost outfit.
<UNK>, where are we at on that transfer.
We currently are ramping into production, going through our customer quals.
Made silicon, made it work, working on reliability, giving it to customers, waiting for them to say go.
I expect them to be hyper growth.
They've been growing very nicely.
Our foundry business is ramping.
Deca and giga are both ramping, as well.
I think if you look forward, you should see 2X type growth on those divisions.
Now it's off a small number, but we're very excited about where that business is growing to.
And we've seen them ramping with their customers currently.
We're going to be looking, instead of 50%, at low 40s up to the second half of 2016.
With regard to OpEx, our model is 30%.
We're going to, during that period of time, probably beat that by 2 percentage points, get to 28%.
So that's where we'll be.
And then in the second half of 2016, we'll ramp our fabs and start moving the gross margin north, also based on the new products we'll start to ramp by that time, as well.
I will ask <UNK> <UNK>, the EVP of that division, to talk about fingerprint, which appears nowhere in our numbers.
Hello.
This is <UNK>.
So just a quick update on the fingerprint.
As you know, we are still working with IDEX as our partner to enter the fingerprint market.
Where we are in the market today, we have actually successfully sampled a few of the OEMs.
We're going through their side of the qual.
When I say sampled, it is to a first order, even retrofitted phones.
That's going into the qual.
And then we will ramp when they ramp, based on the next few months of design and activity.
But the solution is ready.
The customers know it.
And now we're going through the next steps in the funnel.
And that is upside.
We have chosen to prepare our plans and make our forecast assuming that's upside, because that is such a volatile market.
And the cell phone business, as you well know, you can get locked out when you didn't expect it, or you can get in and then have your prices go to the point you can't make any money.
But that product, which works well ---+ a couple of engineers trapped me outside my office the other day, and I stood in the hallway and rolled my fingerprint, three of my fingerprints into the phone, and watched it recognize my fingerprint.
At every weird angle I could put my finger at, it still worked.
We got a product and we'll see how it goes.
If it happens, it's upside.
You explain gross margin in terms of almost a chess game.
And you make this move and you get something, you make that move and you get something.
A lot of gross margin is more about training for a marathon.
You just run a lot of miles every day for a long time and it gets better.
To look at the components that don't warrant a discussion at our level is like a chess move.
Let me ask the division manager for the Memory Products Group, <UNK> <UNK>, to describe the components in your spreadsheet that you will beat on for the next three years to improve gross margin and flash.
So what T.
J.
---+ this is <UNK> <UNK>.
was referring to was a spreadsheet of literally hundreds of line items that we monitor.
If you look at what kind of categories they go into, first is pricing.
We set pricing strategies and we sell on value.
So there is many components related to that, whether it's to the end customer or the distribution partners or the contract manufacturers.
There's a large component of cost reduction.
And cost reduction takes many forms.
I'm not talking about headcount or labor.
I'm talking about reducing each and every component of the manufacturing cost, getting more efficient, getting higher yields, testing things and guaranteeing their quality more efficiently.
There are grassroots initiatives we call world-class costs that go down to the individual level deep into the organization, and there's literally hundreds of those.
And then, of course, another large component is new products.
So replacing old product revenue with higher, more valued products.
And they all weight pretty equally.
So to sit and talk about it, we could sit and talk for hours on that topic, when you get into the fine detail.
We have answered the last question.
We've had a good quarter, $0.17.
We're ahead of ourself, our plan on the integration.
And we thank you for calling in.
Good day.
