Jim:      Mr. Aldrich welcome back to Mad Money...

David:    Thank you, Jim, thanks for having me.

Jim:      Congratulations on the great quarter. Lets get right to it… it is right in my face, it is in our viewers faces… “In Major Shift, Apple Builds Its Own Team to Design Chips”, you are a very important supplier to Apple… is this the kind of thing that will now keep you up at night?

David:    Well, not in that case. Because the fact is that the phones, and the smart phones and so on, have become so complex the analog component that you talk about, it has got to operate on the multiple frequencies. It has got to consume very little power. It has got to be able to roam from location to location, and provide all of these wonderful multi-media services. So at the end of the day, our customer set, in general, has been overwhelmingly outsourcing more, doing less of the analog complexity internally.

Jim:      Okay, that brings me to a second point, a lot of people feel that almost all of these part makers are interchangeable… and the reason that they feel that way, is a lot of people feel that well I could have a LG phone or I could have a Nokia phone, a Motorola phone… it does not matter… how can you explain to your viewers why Skyworks may not be as much of a commodity as they might think.

David:    Well, that is a great question. A question that we get fairly frequently. At the end of the day what we provide is all of the transmit and receive functionality to interact and make these phones small, lightweight, high speed data. And what has happened in the last couple of years, that we just love, is that these products have become much, much more complex. They have gone to high resolution screens, cameras, web browsing, so on. That means that the analog signal has to be very pure, and has to not consume a lot of power. So if anything, the dollar content has been increasing because the complexity is higher. So what that has translated into in the last couple of years is far fewer competitors than we had a couple of years ago. And higher dollar content.

Jim:      Okay, given that the case… there was an analyst who, Raymond James, who recently downgraded the stock saying didn’t think that you should get a higher price to earnings multiple… meaning that he did not think, that business as he said, without tangible evidence of a snap back in demand, and because, frankly, you shouldn’t necessarily for a company that is just getting a little bit of a share… some would say taking from other customers, zero sum… that you should not pay up for the stock… is it true that there isn’t a tangible evidence of snap back?

David:    Well, cell phones… there is… because the first thing that needs to happen is that you need visibility, as you mentioned in your comments. And visibility happens because inventory, whenever there is a downturn and face it, December was a dousy. Well all of a sudden this inventory backs up in the channel and guys like us wake up and we have no order flow. That is pretty unsettling. Well in February, March time frame that began to turn around. Inventory burned out and we began to get a more natural situation from our sell to our customers and their sellout to consumers. It is the first step, and we have seen that. So we guided up cautiously in June, but we are very comfortable with it. But back into the year I think that the inventory problem is gone. So at the end of the day what you will have then is what is the natural demand, how much seasonality will there be, and that is the $60,000 question. But visibility is up. And one thing that we are pretty proud of, is that in the March quarter which we believe is the absolute trough, we still delivered 40% gross margin and ?

Jim:      See, I have been emphasizing to people that if you see how well a company can do in the worst of circumstances, just think about what could happen when you get big order flow. And I think that that is the case. Now, one of the things that you also did that I think you should be proud of is the cash. It is just building and building. What are you going to do with it?

David:    Well, you are right. We added almost $150m in our net cash position over 4 quarters. Because we are making money. We are making money and we brought down more than half of our convert. So our debt position has dropped. We just want to continue to run our company, we are going to continue to generate cash. We will look at options as to what to do with that cash. But at the end, if we can support our customers the way we think we believe we know how, we ought to be able to generate high operating income and be able to continue to generate cash.

Jim:      I see a lot of new devices, I was at the ball game the other night, unfortunately it was a Met game… and the guy ahead of me had a cell phone that I swear it looked like it was HD… are we going to where the cell phone screen is going to be exactly like my HD TV at phone… and will that mean more Skyworks intellectual property?

David:    Well, the challenge really as more multi media content delivery. People blogging on cell phones. The whole web experience…

Jim:      I still carry my PC around because I have a wireless card… but most cell phones are now ahead of PC.

David:    And I am a 50 year old guy, I can’t read the screen if it gets too small and I am looking at a power point slide. So what has happened, the idea is creating higher and higher resolution screens. Now that consumes a lot of battery talk time. So think about this, you have got 4, 5, up to 8 frequencies so that you can roam with a phone from one network to another. You are doing high speed camera access, you are doing mobile access to the web, you have got this wonderful screen, that is all consuming power. So the analog complexity is to play traffic cop with all of those frequencies, and to do it by allowing that battery to stay small. And that is what we do well.

Jim:      Let me circle back to one point, because I know people are going to say this… why would anyone, Apple included, why would anyone get rid of Skyworks? I would think that what you would want to do is get rid of the stuff, people… no I do not want to say get rid of people, you know what I mean… get rid of the division that actually makes the stuff that can’t be made as cheap as Skyworks makes.

David:    Well, we have seen that, because some of our customers, Motorola, Nokia and others, they used to design.. Circuitry around the analog component and the trend has been… well, if you have got a phone that you are only going to talk on, you are going to get a single or dual band. You can get pretty good at signalizing that and then picking components. This is no longer a component business. This is a transmit solution analog business. Our customers are pushing that out to the supply chain. And we love it. We are trying to be there to take it on.