May 9, 2008
Executives
Alex Wellins - The Blueshirt Group - IR Francis Lee - President and CEO Russ Knittel - CFO
Analysts
Daniel Amir - Lazard Capital Markets Heidi Poon - Thomas Weisel Partners Rob Stone - Cowen and Company Yair Reiner - Oppenheimer and Company Anthony Stoss - Craig-Hallum
Operator
Ladies and gentlemen, thank you for standing by. And welcome to the Synaptics third quarter fiscal 2008 Earnings Call.
(Operator Instructions). This conference is being recorded today, Thursday, April 24, 2008.
I would now like to turn the conference over to Mr. Alex Wellins with the Blueshirt Group.
Please go ahead.
Alex Wellins
Good afternoon and thanks for joining us today on Synaptics's third quarter conference call for fiscal 2008. This call is also being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at synaptics.com.
With me on today's call are Francis Lee, President and CEO of Synaptics, and Russ Knittel, the Company's Chief Financial Officer. We would like to remind you that during the course of this conference call, Synaptics will make forward-looking statements, including predictions and estimates that involve a number of risks and uncertainties.
Actual results may differ materially from any future performance suggested in the company's forward-looking statements. We refer you to the company's SEC filings, including Form 10K for the fiscal year ended June 30, 2007, for important risk factors that could cause actual results to differ materially from those contained in any forward-looking statement.
We expressly disclaim any obligation to update this forward-looking information. Now I'd like to turn the call over to Francis Lee.
Francis?
Francis Lee
Thanks, Alex. And thanks, everyone, for joining us on the call today.
I would like to begin with a high-level summary of our results for the third fiscal quarter. I will then turn the call over to Russ, who will provide more details on the financials and talk about our near-term outlook.
I will then reveal the progress we have made across our markets over the past few months, followed by a discussion of the current business environment. We will then open up the call to your questions.
We are very pleased with our performance during the seasonally weakest quarter of the year and with uncertainty in today's macroeconomic climate. Revenue for the quarter of $78.9 million grew 23% year-over-year.
Non-GAAP net income for the third quarter, which excludes the impact of non-cash share-based compensation and other than temporary impairment of auction rate securities mentioned in our press release, was up 9% over the comparable '07 period at $8.8 million, or $0.35 per diluted share. Revenue from PC and non-PC applications grew approximately 20% and 34%, respectively, compared with same period last year.
Our PC revenue growth reflect a solid demand for notebooks coupled with ongoing adoption of our multimedia control modules in notebooks and increased demand for our PC peripheral applications. The growth in non-PC revenue resulted from increased penetration in mobile phones, which more than offset expected reduced demand from MP3 applications.
In fact, revenue from mobile phone applications approached 10% of total revenue. We are pleased that this is trending according to plan, as we move into the second half of the calendar year.
It's an area, where we continue to experience strong design activity and it's expected to be a key growth driver for the company moving forward. I will now turn the call over to Russ for a detailed discussion regarding our third quarter results.
Russ Knittel Thanks, Francis. In addition to our GAAP results, I will also provide supplementary results on a non-GAAP basis, which excludes non-cash share-based compensation costs accounted for in accordance with FAS 123R and non-cash other than temporary impairment charges related to our investments in auction rate securities.
Revenue for our third fiscal quarter of 2008 came in at the midpoint of our guidance at $78.9 million. The split between PC and non-PC applications was 81.5% and 18.5%, respectively.
On a year-over-year basis, our PC-based revenue increased $10.8 million, representing approximately 74% of our total revenue growth. This solid revenue growth primarily reflects continued migration from desktops to notebooks by consumers, further aided by the increased revenue content from the growing adoption of our multimedia control solutions in notebooks.
The attach rate for multimedia controls in the current quarter was more than 25%. Revenue from our non-PC applications grew $3.7 million year-over-year, representing approximately 26% of total revenue growth.
This growth was driven solely by the increased penetration of our interface solutions in mobile phones, as we experienced a decline in demand for MP3 applications, as expected. Gross margin was 40.8% in the March quarter, compared with 41.6% in the December quarter.
Our non-GAAP gross margin, which excludes non-cash share-based compensation charges, was 41.3%, compared with 42% in the December quarter. This was inline with our expectations for the quarter and is primarily a function of product mix.
Total operating expenses were approximately $25.7 million in the third fiscal quarter, which includes non-cash share-based compensation charges of $4.5 million. This compares with operating expenses of $23.1 million in the preceding quarter, which included non-cash share-based compensation charges of $4.1 million.
Excluding the impact of non-cash share-based compensation in the March quarter, non-GAAP operating expenses were approximately $21.3 million, a sequential increase of $2.3 million. This primarily reflects higher compensation costs related to our ongoing recruiting initiatives, increased product development costs, and higher legal fees related to our ongoing patent litigation.
Total headcount at the end of March was 392, an increase of 31 employees compared to the end of the December quarter. We have increased our headcount approximately 26% year-to-date, and plan to continue to grow our global employee base, as we make the necessary investments to meet the opportunities ahead.
Net interest income was $1.8 million, compared to $2.6 million in the prior quarter, primarily reflecting a reduction in our average invested cash balance during the quarter as we used approximately $109 million for our stock repurchase program. We currently hold $48.6 million of auction rate securities, of which $43.6 million have failed auctions.
None of the failed auction rate securities, we own have defaulted. All of them are paying interest at the contractual rates and there is no indication of credit problems with the underlying collateral.
We performed a fair-value analysis in accordance with US GAAP and have accounted for a non-cash impairment of $7.3 million, of which $5.1 million is temporary and $2.2 million is other than temporary. Of our auction rate securities, $30.1 million in par value is included as short-term investments on our balance sheet, offset by a $1.1 million temporary impairment.
$18.5 million par value is included as a non-current investment on our balance sheet, offset by $4 million of temporary and $2.2 million of other-than-temporary impairment. We believe that our current cash balance and demonstrated ability to generate strong cash flow from operations will allow us to hold our failed auction rate securities until such time as the liquidity issues surrounding these investments are resolved and we can recover the principal value.
We will continue to monitor these investments in light of the current debt market environment. Our GAAP and non-GAAP tax rates for the quarter were 50.2% and 32.6%, respectively.
The significant increase in our GAAP tax rate relative to prior quarter is primarily the result of no tax benefit on the other-than-temporary impairment of our auction rate securities, which would generate a capital loss if disposed at this time. We currently anticipate that our non-GAAP tax rate for the fourth quarter of fiscal 2008 will be similar to the March quarter.
Net income for the March quarter was $3 million, or $0.12 per diluted share, compared with $5.6 million, or $0.20 per diluted share, in the comparable quarter last year. Excluding the impact of $4.9 million of non-cash share-based compensation charges and the associated tax benefit of $1.3 million and the non-cash, other-than-temporary write-down of $2.2 million for certain auction rate securities, our non-GAAP net income in the March quarter was $8.8 million, or $0.35 per diluted share, which was above the midpoint of our guidance.
Non-GAAP net income for the March quarter of 2007, which excluded $3.4 million of non-cash compensation charges and the associated tax benefit of $900,000, was $8.1 million, or $0.28 per diluted share. Now, few comments on our balance sheet.
We ended the March quarter with total cash and short-term investments of $185.7 million, a decrease of $100.6 million compared with the prior quarter. Cash flow from operations during the quarter was approximately $24.6 million and stock option and employee stock purchase plan activity contributed approximately $2.1 million.
As I mentioned earlier, we used $109.4 million during the quarter to buyback 4 million shares, which leaves us with $39.3 million remaining under our board-authorized stock repurchase plan. Decrease in our cash and short-term investment balance also reflects the reclassification of $18.5 million par value of certain auction rate securities from short-term into long-term investments.
Capital expenditures in the quarter were $2.5 million, primarily reflecting additional investment in infrastructure and test equipment. Capital depreciation was approximately $1 million for the quarter.
Receivables at the end of March were $57.8 million, compared with $66.9 million at the end of December, primarily reflecting the impact of the sequentially lower revenue level. DSOs at the end of the quarter increased to 66 days, compared with 61 days at the end of the prior quarter, reflecting the non-linear revenue pattern in the March quarter.
Inventories at the end of March were relatively flat at $20.3 million, compared with $20.1 million at the end of December. Inventory turns in the quarter declined to 9 times, compared with 11 times in the prior quarter, primarily as a result of the reshipment levels.
Now, I'd like to make a few comments regarding our business outlook. Based on our March quarter-ending backlog of $48.1 million, which increased by approximately 28% compared to the prior quarter end, and other current indicators, we anticipate revenue for the fourth fiscal quarter to be in the range of $90 to $95 million, a 26% to 33% increase compared with the same period last year.
This strong growth is expected to result from a significant increase in revenue from mobile phone applications in addition to higher revenue from PC-based applications. Looking out into the September quarter, current visibility suggests sequential revenue growth in the range of 8% to 14% relative to the midpoint of our anticipated June quarter revenue level.
Based on the anticipated product mix for the fourth quarter, we expect our non-GAAP gross margin to be around 40%. We expect our operating expenses to continue to increase, reflecting the impact of our ongoing staffing initiatives, the growing pipeline of design opportunities, and additional legal expenses related to our current patent litigation.
For the June quarter, we expect the impact of FAS 123R on our operating margin to be approximately $4.9 million, unchanged from the March quarter. Non-GAAP net income per diluted share for the June quarter is expect to be in the range of $0.38 to $0.43.
On our upcoming fiscal 2008 fourth quarter earnings call, we intend to provide our revenue outlook for fiscal 2009 and guidance for the first fiscal quarter, but will no longer provide out-quarter view. We have decided to make this change based on feedback from a number of our investors.
The overwhelming consensus from these discussions was that estimating six months out is both impractical and atypical of guidance provided by most public companies at this time. This view is based on the ever-increasing complexity of the global economy and its impact on the general business environment; the interdependencies of the rapidly changing landscape of the global supply chain and its impact on specific vertical markets; and the fluid competitive dynamics among the OEMs and the competitors we face in the markets in which we participate.
In closing, fiscal 2008 will mark another year of solid execution, with both revenue and non-GAAP net income up more than 33% compared to fiscal year 2007. We believe that our long-term business fundamentals continue to strengthen with the ongoing trends towards mobility and wireless connectivity.
We expect to close fiscal 2008 with a very solid quarter and anticipate a strong start to fiscal 2009. I will now turn the call back over to Francis.
Francis Lee
Thanks, Russ. Our results clearly demonstrate the strengths of our business fundamentals, as we capitalize on the expanding market for touch-based interface solutions.
Now, let's move on to a discussion of our recent product developments. Last quarter, we introduced new additions to our gesture portfolio as well as Boomerang, our buttonless and keyless universal remote control concept.
We also highlighted new products using Synaptics technology in areas including MP3 players, keyboards, remote controls, and all-in-one PCs. Design activity continues to be strong across our target markets.
And I would like to make a few comments about specific progress we have made over the past few months. This week, we issued a press release regarding our ClearTouch family of transparent touch sensors, which is an extension of our TouchPad technology in notebook PCs.
ClearTouch products ClearArray and ClearPad provide robust and high-performing touchscreen interfaces that can be customized to enhance the user experience. ClearPad can be placed over an LCD, giving the device a dynamic user interface, where the site and location of controls can change according to application or [more] of use.
ClearArray can also be placed over an LCD, when only fixed buttons and scrolling are required. Last quarter, we introduced new additions to our advanced gesture portfolio, Pinch and Momentum, which provide improved usability of the touch pad in notebook PCs.
Continuing this trend, this quarter we announced our EGR or Enhanced Gesture Recognition technology for our ClearPad solution. This combination is ideal for dynamic touchscreen interfaces.
Going forward, Synaptics will enable all new ClearPad solutions with EGR technology, where all of the decoding for gesture recognition occurs in our ClearPad and not the host processor. This can lower the demand on host processor resources, allowing customers to activate gestures, including Tap, Double-Tap, Pinch, Press, Flick, and Scroll directly from our FirmWare.
Now, I would like to highlight some of our customers' newly shipping products. First, the Samsung Soul U900 touchscreen phone, announced at Mobile World Congress '08, features Synaptics's ClearArray solution.
With an LCD benefit, the ClearArray sensors allow users to navigate smoothly through the main button menu with the navigation controls changing according to the application being used. For example, when in music mode, music-related icons such as Playback and Track will appear on the navigation controls.
When in camera mode, camera-related icons such as Zoom and Brightness will appear. The Soul is currently shipping in Europe and will be launched in Asia later this month.
In addition, the LG Secret phone features both Synaptics's ClearPad and ClearArray transparent touch solutions to provide advanced touchscreen interface with this multimedia slider phone. ClearPad provides advanced gesture recognition for the main touchscreen display, while ClearArray powers the navigation control buttons below it, giving the user intuitive control of all of the phone's features.
This phone will ship in Europe later this month, and in the US and Asia in the fall. Lastly, we have another one-touch design win with Samsung T10 Media Player, currently shipping in Europe and North America.
With the T10, Synaptics's capacitive buttons enable the user to intuitively access, manage, and manipulate their music, video, and vocal content as well as providing the controls for the FM radio. This design wins reflect emerging trends for next-generation digital lifestyle products, as we continue to see increasing levels of interest and activity in our ClearTouch solution.
I would like to point out that the capacitive sensors in Synaptics's ClearTouch solutions are solid state, highly durable, require no end-user calibration, and provide enhanced gesture features for multi-touch capability. The multi-gesture features offer superior user interface, supporting the growing number of applications available in mobile devices, which ultimately translate into higher ARPU for carriers.
All ClearTouch solutions can operate under glass or plastic, resulting in robust devices with slim form factors and sleek industrial design. By contrast, the mechanical movement of a resistive sensor reduces its durability and the two-layer stackup quickly reduces optical quality.
Resistive interfaces have design limitation, are limited to single finger input, and require frequent end-user calibration. So, while there are several ways to implement touch on today's hand-held devices, we believe the superior benefits of capacitive sensing technology will continue to become more evident over time.
In addition, Synaptics's solutions, both custom modules and Synaptics's OneTouch, offer several advantages over capacitive solutions from more general purpose chip alternatives. With Synaptics solutions, device designers can use or integrate and adjust gesture recognition, LED illumination, and sensitivity for highly customized sensors.
I would now like to take a moment to talk a little bit about our intellectual property situation. I am sure you are all familiar with our recent 8-K filing related to ongoing patent dispute with Elantech.
I just want to reiterate, that we do not believe the court's ruling will have a material impact to our business. Having said that, we have appealed the court's ruling and will continue to vigorously defend our patents and pursue our counterclaims in our patent infringement suit.
Now, I would like to make a few comments regarding our current business environment. Despite uncertainly in today's economy, our ongoing design activity remains robust and we are particularly encouraged by increased momentum within the mobile phone market.
We expect this trend to continue and to generate incremental revenue from mobile phone applications in the second half of the calendar year. We continue to face competition on all fronts and if interest in capacitive-based interface solutions continues to grow, I believe we remain well positioned to take advantage of the significant opportunities to leverage our technology with an emerging digital lifestyle trend.
We understand that you may hear chatter from time to time regarding market share shifts. But as we have said in the past, this is a normal part of our ongoing business dynamic.
Everyday, we are making proactive decisions to assign our resources in order to optimize opportunities within the multiple markets we are addressing today. We continue to invest in our company, adding essential personnel and resources to support our growing pipeline of design opportunities and to continue to provide first-rate service to OEM and ODM customers around the world by expanding our global footprint with design and support centers close to their facilities.
I trust that our aggressive execution of our stock buyback program during the past quarter is another indication of our confidence in Synaptics's prospects and our future cash-generating abilities as well as our commitment to enhancing shareholder value. In closing, while we can't predict what general economy is ultimately going to do, we feel reasonably comfortable with our business fundamentals and current visibility we have into our near-term opportunities.
Our diversification within the non-PC segment is beginning to materialize according to expectations and we believe the macro shift towards providing intuitive interfaces to manage increasingly complex devices leave us well positioned within our target markets. Coupled with continued solid trends in the PC market, Synaptics remains on course to continue our long-term growth trajectory.
We are pleased with the way our business is trending and expect to carry that momentum into fiscal '09. That concludes our formal remarks and we will now turn the call over to the operator to start the Q&A session.
Operator
Ladies and gentlemen at this time, we will conduct question-and-answer session. (Operator Instructions).
Our first question comes from the line of Daniel Amir with Lazard Capital Markets. Please go ahead.
Daniel Amir - Lazard Capital Markets
Thanks a lot. Thanks for taking my question.
A couple of questions. First of all, on the mobile phone segment, can you a bit expand whether -- going forward, do you expect this to be a business, on the margins front, below corporate margins, above corporate gross margins?
In addition, as kind of your best estimate, what do you think the overall segment; the mobile phones will be in part of your revenues by yearend?
Russ Knittel
Well, as we've said in the past, gross margins for us really are independent of the end vertical; gross margins are dependent on the designs, specifically, that we take to market. So, our view is we have this horizontal-based core capability that we apply to solve problems for various OEMs, and those devices sell into different vertical-end applications.
But the gross margins are really dependent at the time we're competing for the design and are not based on the end-market application at all. So, again, if you were to look at all the different custom module solutions that we shipped during the March quarter, the gross margin range between those products can be as much as 30 percentage points.
And as we've indicated in the past, in any one quarter, 15% to 25% of our revenue is coming from designs that didn't ship in the prior quarter. So, in any new quarter, you have the impact of the design churn from quarter to quarter and it's just simply the weighted average impact of all those designs.
In terms of go-forward revenue contributions from mobile, we can -- as we've said in the past, we believe mobile will represent a very material percent of our business as we move forward, but we haven't pegged a target contribution level. Our goal as a company is to continue to diversify across multiple vertical segments.
And over time, we'd like to see the revenue contribution spread fairly evenly among those various segments.
Daniel Amir - Lazard Capital Markets
Okay. And the follow-up question -- can you comment on kind of the current notebook environment and kind of your position there as -- of course, there's always a lot of shift between customers during the quarter.
And what's kind of your best visibility into the June and September quarters, based on your guidance?
Francis Lee
Well, I think the notebook segment here, Daniel, remains to be very robust in our minds, Okay. I think it is -- within the PC sector, it actually is -- the notebook continues, in my mind, to offer a lot of features at the right price point and the right value, especially for the consumer segment.
So, we are very bullish in terms of what IDC have forecasted in terms of the growth. And we continue to see the balance of the year to turn out that way.
Another indication, frankly, Daniel, is when you look around in the inventory side of the business -- there is really not much what I would call fire sales or inventory shortage, which suggest to me is pretty well balanced. So, I believe the business dynamic will be good, and I expect to be pretty optimistic about the notebook growth into the balance of the calendar year.
Daniel Amir - Lazard Capital Markets
Okay; thanks a lot.
Operator
Thank you. Our next question comes from the line of Heidi Poon with Thomas Weisel Partners.
Please go ahead.
Heidi Poon - Thomas Weisel Partners
Thanks. Great execution.
I just want to follow-up on the design activities you were talking about. Can you also expand on perhaps multi-touch adoption into both notebook as well as handset opportunities and the design activities going on?
Francis Lee
Okay. I mean, Heidi, as we have said, that design activity has been strong.
And by the way, Heidi, we have been iterating that for some quarters now. The challenge that we have is how to really couple the design activities in the revenue and as you know, there is a number of factors that govern that.
But getting back to your question here, I mean, we have increasingly a number of competitions coming to each of the OEMs as well incrementally a lot more applications, downloading (Inaudible) kind devices. We believe the gestures and the multi-touch as from the gesture is the way how you manipulate content and how you interact with the devices, right?
So, when we talk about the enhanced gesture portfolio, the technology we're talked about in the prepared text here, certainly we are seeing very good acceptance and interest across the board -- across a number of sectors. And we believe we are in a position, we can offer those gestures as a differentiation to our OEMs.
So, we are pretty excited about the adoption there. We certainly will tell you more about it in out quarters.
Heidi Poon - Thomas Weisel Partners
Great. Secondly, I’d like to just dive deeper on the gross margin front.
When you mention that its mix driven -- and I understand the dynamics of competing in terms of designs and pricing, but is LightTouch having a higher attachment rate also an issue? And also previously, just roughly given the target of 40 to 45, could you give us a sense of, given how the mix is trending with these products increasing in the mix, how should we think about that?
Russ Knittel
Okay. Well, as I've indicated in the past, LightTouch is an area today, where it does put pressure on margins for us because it does have relatively higher third party content as a percent of the bond.
So, wherever we have designs, where third party content expands, generally that, as I've said in the past, does have an impact on our ability to price. We continue today to model on a blended basis gross margins in the range of 40% to 45% and we haven't changed that range.
Heidi Poon - Thomas Weisel Partners
Great. And my last question is regarding the digital music player business.
I think it's fairly within seasonal patterns, what you guys are guiding. But as we head into the stronger season for consumer electronics, how do we think about that?
Russ Knittel
Again, that's a business where we've indicated in the past, where we do have less visibility, and it's much more opportunistic for us. We're expecting, really, very little demand for MP3 applications in the June quarter and really don't have a lot of visibility beyond the June quarter.
So, we'll just have to wait and see how that business develops.
Heidi Poon - Thomas Weisel Partners
Great. Thank you.
Operator
Thank you. Our next question comes from the line of Rob Stone with Cowen and Company.
Please go ahead.
Rob Stone - Cowen and Company
Hi, guys. I wonder if you could just give a little more granularity on the handset business in terms of how many models, approximately, are in revenue.
And some sense of how that breaks out between full custom design versus OneTouch design?
Francis Lee
Okay. I think the numbers, in terms of product productions, are approximately 16 models, okay Rob.
And I think within the one that I talked about in the prepared text that utilized the OneTouch is the Samsung T10 -- music media players. So, we have not broken out a number of design wins on a continuance basis on the OneTouch.
But when you look at OneTouch in general, the design activity and acceptance remains to be very robust, Rob.
Rob Stone - Cowen and Company
I was actually more focused on whether you're seeing an increasing number of what you might characterize as a high-end full custom design. You mentioned one phone, for instance, that had both ClearPad and a navigation area as well, so that seems like a phone model that has a fair amount of fixed content on it.
Francis Lee
Well, Rob, as we have said before, we believe the full module solution and OneTouch methodology really complements well in each other in the sense that, when there is a newly adopted application of our technology, chances are customers really will like to have a one-stop shop, which is a module way of implementing it because, there's a lot of moving parts and new parts (Inaudible) top. And as those markets are -- I will use the word mature in terms of how you design it -- and this is kind of how we hand it off to the OneTouch model, right?
So, another scenario, and just like what we expected, most of the ClearTouch solutions are actually in a module form. That's just as we expected.
So, most of the stuff that have talked about either in the design or have been released to production, I would say that a high percentage of it is actually in modules.
Rob Stone - Cowen and Company
So, gestures, for instance, are not supported on OneTouch?
Francis Lee
Gesture has got no relationship with OneTouch or module. It's how we deliver the values.
Rob Stone - Cowen and Company
But I just wanted to understand, whether the Gesture capability is available in the OneTouch format?
Francis Lee
Well, currently on the ClearTouch solution, most of the stuff is being shipped in a module format, Rob. So as such, we are not designing actively on the OneTouch solution on the ClearTouch modules.
Rob Stone - Cowen and Company
Okay. A question for Russ regarding the litigation expense -- can you give us a sense of how much that contributed to OpEx this quarter?
And I know that's always hard to predict, but shall we be thinking about that as an ongoing level for several quarters?
Russ Knittel
Well, for obvious reasons, we're not interested -- or inclined to disclose the actual amount of money we're spending there, but it's a meaningful amount of cost for us. But we think it's a necessarily expenditure and it's something that will be in our run rate until such time as I think we can bring settlement to the current dispute.
Rob Stone - Cowen and Company
Okay. I was really trying to get a sense of the pace of OpEx growth versus revenue growth in the coming quarters, as you had revenue that was very much inline with what I was thinking, but operating expenses were a good bit more, and it seems like litigation probably accounted for a chunk of that.
So, can you give us a sense of whether you expect to continue investing in personnel ahead of revenue growth to build the next layer or should we see some catch-up on revenue, where the expense ratio might drop again?
Russ Knittel
Well, we are definitely investing in growing our global employee skill sets and headcount. If you look at the sequential increase in revenue or in expenses, a major portion of that clearly comes from our staffing initiatives.
As we've said in the past, if you look at our total OpEx, generally people-related costs represent 50% to 55% of what we're spending. We added 34 people to our headcount in the December quarter; an additional 31 in the current quarter, bringing our fiscal year-to-date headcount increase to 26%.
We are aggressively recruiting and would expect to see another meaningful increase in our headcount in the current quarter. So, the reason, though, if you look -- the relative percents that got out of whack this last quarter is revenue was actually down right, and at the same time, we're making investments in the future.
So, as we go forward, I’d expect to see that come back into alignment, but in the current quarter, you certainly did see the impact of that because of the declining revenue. But we are going to continue to grow our OpEx as we invest in increasing our capabilities and our ability to support our customers on a global basis.
We do have legal costs in our run rate, and that was part of the up-tick quarter to quarter. And it was a little bit higher than what I had expected.
But those are really kind of hard to predict, but the bulk of the increase, quarter to quarter has to do with our staffing.
Rob Stone - Cowen and Company
Okay. I know you're not ready to give fiscal '09 guidance yet, but do you think about operating expenses over the long term -- let's say on an annual basis -- in terms of some target range?
Russ Knittel
Well, we do have our stated business model, which we provided to you guys. And we do think about the business that way -- on a longer-term sustainable basis.
But in any one specific period of time, obviously, we're making investments based on the visibility we have for that specific period. But as I said, I mean, if you look at our business historically, and going forward, I think that generally you'll see that revenue growth and OpEx growth pretty much align.
And we will have, in any one quarter, dislocations between that because of the direction that revenue maybe going relative to our continuing investments in the future. But in the longer period of time, those things should be in alignment.
Rob Stone - Cowen and Company
Great, thanks very much.
Operator
Thank you. (Operator Instructions).
Our next question comes from the line of Yair Reiner with Oppenheimer and Company. Please go ahead.
Yair Reiner - Oppenheimer and Company
Hi, and congrats on the strong quarter and the guidance.
Francis Lee
Yes.
Yair Reiner - Oppenheimer and Company
For comparative purposes, can you give us what the percent of revenue was from mobile last quarter?
Russ Knittel
Well, we didn't break that out last quarter. Last quarter, most of our non-PC revenue was, came from MP3 applications.
When you mean last quarter, you mean the December quarter?
Yair Reiner - Oppenheimer and Company
Yes, that's right.
Russ Knittel
That was primarily MP3.
Yair Reiner - Oppenheimer and Company
Okay. So less than 5%; would that be fair?
Russ Knittel
That's probably fair.
Yair Reiner - Oppenheimer and Company
Okay. When you look at your guidance, is a lot of that growth coming from any new customers in the mobile area, or is it the same customers you've been able to announce potentially adding new models or ramping on a current models?
Russ Knittel
It's a function of both.
Yair Reiner - Oppenheimer and Company
Are there any large mobile handset makers that you have added and haven't been able to announce?
Russ Knittel
We've announced all the ones that we can talk about.
Yair Reiner - Oppenheimer and Company
Okay. In terms of the type of applications we're currently seeing, we have yet, besides the iPhones, seen -- yet to see any kind of full-screen touch phone using capacitive as far as I've seen; maybe there's a few exceptions.
When do you think that the market will start to have some full-screen touch mobile phones besides the iPhones? Do you think that's a second half of '08 event?
Do you think that's more the first half of 2009?
Francis Lee
I think that's a good question, Yair, but you know what it is, right? A lot of the capability in terms of being so called full-screen multi-touch phones, really to a large extent is going to depended up on the applications are underlying human interface or I should say man-machine interface protocols that (Inaudible) together.
So, my guess, to answer your question, is it depends on how the applications are coming out. If the applicants coming out are going to demand a lot of full-screen phones, you're going to see a wide adoption of it.
Today, my impression is a lot of those phones aren't coming out here is because obviously, all the OEM guys want to kind of carve out space in this emerging global market and say that, “I also have one of them. I also have produced” -- a lot of those phones even use resistive screen technologies, as you know.
So, when you look across to the market, I don't -- I think the answer to the question is, when you have compelling applications, that are driving full-screen manipulation and action of a data, and that's when a strong adoption is going to happen.
Yair Reiner - Oppenheimer and Company
If your best guess as to when that is?
Francis Lee
I have no idea about what's people's application on the OEM is going to come out yet. But I think it's going to happen, for sure.
Yair Reiner - Oppenheimer and Company
Okay. A quick question on the PC side -- looking out now over, let's say, the next 12 months, should we expect the PC revenue to more or less track the kind of growth rate of the end market -- that is to say, the notebook market?
Or do you think there is a possibility for either relative gains or losses compared to the growth rate of the market in general?
Russ Knittel
Well, we certainly expect that we're going to be able to maintain our leadership position in the notebook market. As we've said in the past, though, we don't target market share as a key metric here.
We really try to manage the business based on share of wallet. And again, remember, with a horizontal-based technology, at any point in time what we're trying to do is apply our resources to those design opportunities -- and that's independent of the vertical market that the end device may serve.
But we allocate our resources based on what we perceive to have the highest longer-term value for us as a company in growing our business going forward.
Yair Reiner - Oppenheimer and Company
Thank you.
Francis Lee
Thank you.
Operator
Thank you. (Operator Instructions).
Our next question comes from the line of Anthony Stoss with Craig and Hallum. Please go ahead.
Anthony Stoss - Craig-Hallum
Hi; that's Craig-Hallum. Russ, if I'm -- I just wanted to make sure I heard you clearly.
You're operating expense for the June quarter; you expect them to be up a similar amount, up say $2.3 million or thereabouts? Is that what you were indicating?
Russ Knittel
We didn't quality it.
Anthony Stoss - Craig-Hallum
Okay. Also, can you give me any sense if there has been any kind of shifts in your notebook market share or if there has been any unusual pricing in that environment?
Russ Knittel
Well, I think the market continues to reflect fairly rational competitive environment. As we said before, share shifts at any point in time, we believe, are a function of how we're allocating our resources across the multiple OEMs that we serve.
And those OEMs sell devices into specific vertical markets. So again, we're not managing the business with a stated objective as it relates to unit market share; we're really looking at share of wallet and, again, trying to manage the opportunities in a way that we're assigning resources to those designs that we believe have the greatest longer-term return.
Anthony Stoss - Craig-Hallum
Okay. I mean, is it fair to say that there hasn't been any significant change in the pricing environment for that business?
Russ Knittel
We continue to believe that business reflects rational pricing; rational competitive behavior.
Anthony Stoss - Craig-Hallum
Okay. Also, give us a sense of visibility.
Is it similar to where you were at the beginning of the quarter? Any views on that would be helpful.
Russ Knittel
Well, I mean, just relative to our guidance and the increase in the backlog we saw, visibility this quarter is better. The order patterns we've seen moving out of March into June are much more robust than we saw coming out of December into March.
So generally, I feel today that our confidence level and visibility for the June quarter is better than what we had in March.
Francis Lee
I mean, Anthony, just to reiterate what Russ said, the backlog increased by 28% over the previous quarter's. And we close at a little bit more than $48 million.
And we have said in the past, backlog in our business typically represents 40% to 60%s of our revenues going into the quarter.
Anthony Stoss - Craig-Hallum
Okay, great. Thanks, guys.
Operator
Thank you. There are no further questions.
I'd like to turn it back over to management for closing remarks.
Francis Lee
Well, thank you, everyone, for being on the call today. And we look forward to update you again next quarter.
Bye-bye.
Operator
Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation, and for using ACT.
You may now disconnect.