Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Advanced Energy Industries Earnings Conference Call. My name is Gina, and I will be your coordinator for today. [Operator Instructions] I will now turn the presentation over to your host for today's call, Ms. Annie Leschin, Investor Relations. Please go ahead.

Thank you, operator, and good morning. Thank you for joining us this morning for our fourth quarter 2010 earnings conference call. With me today are Hans Betz, Chief Executive Officer; and Danny Herron, Executive Vice President and CFO, both of them will present prepared remarks. By now you should have received a copy of the earnings press release that was issued last evening. For a copy of the release, please visit our website at www.advanced-energy.com or contact us at (970) 407-4670. As we announced in January, we will be hosting an Analyst Day in New York City on March 2, event will also be webcast. Advanced Energy will be participating in the Goldman Sachs Technology and Internet Conference tomorrow in San Francisco, and the Jefferies Global Clean Tech Conference in New York on February 24. As other events occur, we will make additional announcements. I would like to remind everyone that except for financial historical information contained herein, the matters discussed in this conference call contains forward looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Statements that include the terms believes, expects, plans, objectives, estimates, anticipates, intends, targets or the like, should be viewed as forward looking and uncertain. Such risks and uncertainties include, but are not limited to, the volatility and cyclicality of the industries we serve, the timing of orders received from our customers and unanticipated changes in our estimates, reserves or allowances. and other factors listed in our press release. These and other risks are described in Form 10-K and 10-Q and other reports filed with the SEC. In addition, we assume no obligation to update the information that we provide you during this conference call, including the first quarter guidance provided on this call and in our press release today. Guidance will not be updated after today's call or until our next scheduled quarterly financial release. I'll now turn the call over to Hans Betz, CEO of Advanced Energy.

Thank you, Annie, and welcome, everyone. Similar to the last quarter, we are going to refer to the set of earning slides that we have posted on the IR section of our website to help walk through the quarterly results and outlook of our markets. If you'll turn to Slide #4, I'll begin with some of the highlights of 2010. 2010 was a year of significant strategic and financial accomplishments for Advanced Energy. Having emerged from one of the most severe declines in the capital equipment industry has ever experienced, 2010 saw an equally unparalleled rebound. Advanced Energy demonstrated speed and flexibility in responding to the changing market conditions and needs of its customers generating nearly $460 million in total revenue and a $1.23 per share. 2010 will be a year remembered for its records setting pace and its market changing dynamics. The many milestones that we achieved in 2010, the most noteworthy came in form of a strategic endeavors. First, we expanded our Solar Inverter business with the acquisition of PV Powered. The distinctive combination of PV Powered exceptional line of products with our high-powered Solaron has afforded us a position among the leaders in one of the fastest-growing markets for inverters, the North American solar inverter markets. Inverter revenues contributed 23% to total revenues during the year, up from 5% in 2009. A clear indication of the success and timely nature of this acquisition. The transaction validated our strategy of expanding into adjacent markets, where our power conversion experience and technology can effectively leverage. We further focus these efforts by divesting our Mass Flow business thus far. Together, these strategic steps represent the critical building blocks from which we are furthering our vision to becoming the leader in power management. Capitalizing on our existing thin film offerings, we…

Thank you, Hans. As Hans discussed, we reported another record revenue quarter highlighted by sales in both our inverter product line and non-semiconductor thin film markets. Which combined, were greater in semiconductor sales for the first time ever. Turning to Slide #9, revenues for the fourth quarter were up 5.5% over the third quarter to $148.7 million from $141 million. On a year-over-year basis, revenues grew 156% from $58.1 million in the fourth quarter of 2009. The robust year-over-year growth was driven by two factors: The acquisition of PV Powered, which combined with our own growing Inverter business, solidified the breadth of our product offerings and established our presence in the U.S. market; and a considerable improvement in world economic conditions, which drove a recovery in all of the thin film markets we serve. Gross margin increased to 43.6% for the quarter. Operating income was $24 million or 16.1% of revenues. Net income, $19.7 million or 13.3% of revenue and EPS was $0.45 per share from continuing operations. For the full year 2010, sales were $459.4 million, up from $161.8 million in 2009. Our semiconductor market represented 38% of sales for 2010 versus 39% in 2009. Non-semiconductor thin film sales were 29% in 2010 compared to 33% a year ago. And our Inverter business represented 23% of sales compared to only 5% a year ago. In the fourth quarter, semiconductor revenues decreased 18.6% to $40.2 million, representing 27% of sales during the quarter. As Hans mentioned, this was due to the pause the industry is experiencing as it digests the aggressive capital investment of the last year and a half. More than offsetting this decline, inverter revenues increased 38.4% to $51.7 million or 34.8% of total sales during the quarter. Growth in our Inverter business was driven by strength in…

[Operator Instructions] And your first question is from the line of Colin Rusch from ThinkEquity.

Can you talk a little bit about the south expense trend and R&D investment you're expecting to see going forward. It seems like lowering that R&D investment, which some of the parts you've already done maybe something we see over time. But can you just confirm that and talk a little bit about the seasonality of the sales expense?

Our sales expense, what happened is obviously we had a very strong year and there were some accelerated commissions that kicked in at the last part of the year by meeting certain hurdles. And that's why you saw an increase year-over-year in the fourth quarter versus the third. As we look forward into 2011, we fully expect to leverage our operating expense. And as I've discussed before, we see a 10% increase in sales, we expect to only have a 5% increase in our op expense. And that will vary quarter-over-quarter, but on a long-term basis, that is our internal target. That's what we commit to our board about.

And then on the supply chain. I know there's a lot of folks that are a bit concerned of the deflationary pressures on components given that there's such a high portion of the cost of goods. Can you talk about how you're mitigating those risks and talk about some specific areas where you're seeing some supply-chain synergies with PV Powered?

I think, yes. Because the first thing which we try to unify was the PCV boards. And this is the pretty big portion of the inverter, which we buy material for. So therefore -- but there are others. But it takes time because in some cases, you have specific components which are directed to specific designs and in order to unify and align all these components for Solaron as well as for PV powered, I think in some way, you have to redesign, which is on the road map, anyhow. We would like to have the next platform as a unified platform between the PV Powered as well as the Solaron.

And just one final question, on the extended warranty. Can you tell us what percentage of inverter sales have extended warranties at this point?

I think, what we started off is to get into this extended warranty in those cases, in which we are being confronted by the performance guarantee, which is coming very, very strong. And we didn't do that at the beginning, at least not proactively, but it's getting more and more, and we are pretty solid in offering that proactively now in Europe. So in order to pave the way for European business more than we have done in U.S.

Your next question comes from the line of Weston Twigg with Pacific Crest Securities.

First of all just on the semiconductor revenue line, $40 million seemed a bit low to me and I'm just wondering, and I know you said you expected to pick back up in 2011. But can you give us an idea of the magnitude of the pickup?

I think it's hard to give you a magnitude, but what we have seen, and this was surprising for everybody, all these new announcements, starting from TSMC, Intel and GlobalFoundries, and I think what we expect is a significant pickup at least in the second half of this year as all of those announcements are materializing in new fabs.

Wes, we're already seeing some pickup in Q1. It looks like the pulse was a little bit less extended than we thought it would be.

Is it possible that revenue line gets back up above 50 this year?

I think that's possible. And part of the dent we have seen in Q4 was because of the fact that a lot of companies have been refurbishing their fab in order to build devices, which are most of the time power devices, analog devices, and those don't need 200 millimeter. And historically, AE was less strong in 200 millimeters than it is in 300 millimeter. But as you have seen from all these new announcements, all of those are 300 millimeters. So therefore, we are probably growing stronger in this kind of new semiconductor as maybe some of the competitors to which have been, let's say, benefiting from the 200 millimeter.

Can you give us your current inverter production capacity and then let us know if you're still on track with that capacity expansion schedule you presented last quarter?

We currently -- if I remember the chart correctly, have about 1.2 gigawatts of capacity. And we're still on track as the industry expands, we'll still meet that number if that number is required, obviously. We're going to throttle our capacity to what the industry demands are. But at this point, we see U.S. inverter demand to be pretty robust for 2011.

In addition to that, I think because of the contract manufacturers in Ontario and in China, I think the flexibility to adapt to increasing demand is pretty high.

Your next question comes from the line of Bill Ong with Merriman Capital. William Ong - Merriman Curhan Ford & Co.: I know that you're well positioned in your Inverter business in North America, but maybe you can talk about some other countries and regions where you're expecting meaningful growth this year, particularly in China. What percentage of inverter sales mix you can expect from China this year?

I think China is a very interesting situation because just recently the government has been postponing how they can structure the incentive. And nobody knows exactly what kind of pathway is China has been following, either the RPS like in the U.S. or the feed-in-tariffs. And what we are seeing in China at this point in time is, I think, the announcement of big projects. But this announcement is not necessarily immediately turning into some kind of projects which are being issued for us. On the other side, in China we are entering a new market for us in terms of the new product because as you know, we have been concentrating at the beginning of North America, and North America has 60 hertz. China has 50 hertz. And we just have one product on the 50 hertz, but we are working very, very hard to get in the middle of the year the rest of the line on 50 hertz as well into it, this is kind of in-line. As much as China is a bit shifting out their solar investments, we are able to have those products online if they are really at the end to decide which kind of incentives they put in place. William Ong - Merriman Curhan Ford & Co.: Bookings were down 30% sequentially, and what was the bookings mix between inverters and non-inverters? And my understanding is that you think your bookings qualitatively should be up in the first half, unless I got that wrong?

Bill, the major decline was primarily inverters. We don't give the specifics on it. But let me explain what happened in inverters. You had a very strong fourth quarter due to the uncertainty of the tax incentives. In the U.S., obviously, we're more focused on the U.S. and the European market, but the European market had the feed-in-tariffs uncertainty. As you remember, we've had the tax legislation the last couple of weeks of the year. So you've seen a fall off of orders in the first quarter because everybody was really trying hard to get those in into the fourth quarter. And we've had an usually tough winter, as most of the people in back east know. You've had storm after storm and that has had some impact on the market. So most of the drop was in inverters. We're not concerned on a full year basis. We still see the same projects in the pipeline. The activity is very robust. We just have a seasonal policy in Q1.

And I think another contributor to that was, we have been very strong in entering Europe in Czech Republic. And as everybody knows, Czech Republic was just imploding. And Czech, interesting enough, was one of the first country which was moving toward the [[central inverter. And remember Europe, mostly, in particular Germany is still on the low-power side in which we are not playing into. So the more of the feed-in-tariff is being reduced, and we see that already, the more the people go into the more cost effective standard inverter. But the set back on the Czech Republic, of course, hit us in Q1.

Your next question comes from the line of CJ Muse with Barclay Capital.

This is Srini calling in for CJ Muse. On the 2011 year, what is your view on the total year inverter revenues?

Srini, we don't give an absolute number on that. But if you look for the fourth quarter and you look at what our revenues were and what we expect, is growth. And we're primarily focused in the U.S. and there's lots of growth projections out there ranging from 50% to 100%. We certainly believe we'll get our share of it. And if you took our fourth quarter numbers and annualized and put a growth factor on there, you'll get very comfortable. We think you 2011 has a lot of upside opportunity. We're in on the major projects. We're making key wins as Hans went through several of the wins in the quarter. And we're really getting traction on the lowest cost of energy over the lifetime of the project, as some of the project ownership shifts to the end user that will own this property from 20 or 30 years and really focused the lowest cost of energy. And we provide a great solution there with our central inverters.

For IMS, you are the top market shareholder in the U.S. in the first half. Do you have some ideas as to whether you're still the top market shareholder for the whole year of 2011 in inverters.

You know those numbers keep moving around. The latest day that we saw shows that it's a very close race between the top three contenders. As Hans mentioned, as these projects get larger and larger, the lumpiness is going to be there. So if you have a win on a project in one quarter, you're going to see marketshare bounce back and forth. What we do know is that we're right there neck and neck with the top three players in the U.S. inverter market in three phase.

And I think, generally speaking, if you would like to define a marketshare, you have to have a certain number of projects which are distributed evenly over the year. If you had huge project coming on line, lumpiness is something which is hard to define in any kind of marketshare. The first three could jump immediately from number three to number one position and vice versa. So what we think in the second half in which we have a much higher number of projects, it's much more sensible to define the marketshare, which is very hard at this time.

Can you give me a semiconductor to the inverter revenue mix in the first quarter and the first half of 2011?

We haven't wrote that out. We do expect a decline in the first quarter in inverters, that's where the softness is coming. So it will be a decline slightly, the 35% will drop somewhat. But for the full year, we still expect both markets to be very robust as Hans mentioned.

Your next question comes from the line of Krish Sankar with Bank of America Merril Lynch.

Danny or Hans, the first quarter decline in Water business, is it being driven in by seasonality or pricing?

It's driven by seasonality. And as I mentioned just earlier, by the Czech Republic downfall. It's not driven by the pricing side at this point.

Can you help us quantify in 2010, and what do you expect in 2011, the megawatts of inverters you ship and where do you expect to ship?

That's actually a product mix question and we really haven't disclosed that level of detail. At our Analyst Day coming up in a couple of weeks, I'm sure Greg will have a little bit better color around that. And we'll try to address that for you.

And then in terms of the Semiconductor business, clearly, I mean, it seems like Q4 was probably a floor for you guys. Should we expect, given all the CapEx announcements, your semi revenues to grow sequentially through the year?

Yes.

And what about the Flat Panel business for 2011. You guys did say that probably back half of the year or middle of the year you'll see a pick up, but year-over-year do you think flat panel will be up or down or flat?

I think it's -- I would-- kind of flattish. So that is what we see. Even though we had a very, very nice increase in the flat-panel investment in 2010. But I think, there are a couple of new technologies coming on line and the question is, when the new fabs are being built in order to satisfy the demand of that. But it's for sure, it's going to be in 2011. But it's probably spilling over to 2012.

Just wanted your thoughts around, what is your confidence in talking about a potential inventory glut for the inverters and the channel. I just want to know what your guys views on it.

On the inventory, I know there's been a lot made recently about the inventory, and I think the thing to consider is that inventory is primarily-- European inventory is primarily string inverters, low-power inverters. And where we play, obviously, our strongest suit is in the commercial and utility scale. And those are build to order, you design those into your project, so there's not a glut of inventory. I mean, these products are upwards of a $100,000 and you just don't build them to sit around on the shelf. The low-power inverters, yes, there's some inventory in Europe in those, and we're not worried about them coming to the U.S. because of the different technical specifications of those products.

Not only the technical specification, but the drivers and the market dynamics in the U.S. is not favoring in any way the low-power stuff. It has to do with a different kind of incentive. Feed-in-tariff in Europe always has been preferring the low power. The RPS in U.S., has from the very beginning, has been driving towards the center inverter because this is the most cost effective element. So the inventory which has been built up in Europe will remain in Europe, and will be consumed in Europe at the first place. But just a few things in U.S., so the effect in U.S. is minimal, probably very minor.

What kind of pricing dynamics are you baking in for your Inverter business for 2011?

We haven't disclosed that, obviously, for competitive reasons. What we're seeing on the pricing is obviously the total cost of energy over the life of the project. And that's an ongoing negotiation with each customer. While we expect to see some pricing pressures or becomes more and more focused on the U.S. market, as we mentioned, we do have some supply-chain opportunities as we consolidate the businesses into one and are able to leverage our supply chain more effectively.

Your next question comes from the line of Steve Sanders with Stephen Corporation (sic) [Stephen Research].

Just to follow up on the inverters, can you talk a little bit more about the competitive landscape? I think on the prior call, you said it's essentially U.S. demand Satcon that you're seeing for most of these large projects. Is that still the case? Are you seeing some of the bigger industrials and some of the other companies start to show up more consistently?

Generally speaking, the landscape hasn't been changed dramatically from the last year. And exactly those, you had just name those companies. We see and then we bid on bigger projects. Of course, Siemens and ADB, they are still trying to get into. But the degree in which they have won projects, bigger projects, is still pretty low.

And then on the semi side, just to be clear, are you still thinking for the year it will be flattish? Just heavily weighted on the second half, is that the way I should interpret that?

No. I think on the semi side, we are more optimistic now to have an up. And it's of course more towards the second half as opposed to the first half.

And then last question, I know you talked about the Czech Republic and some issues there. Can you talk a little bit more about the markets in Europe where you're seeing good growth opportunities on the central side?

The interesting point is, I mean, the more the feed-in-tariff is being reduced, the better our opportunities are, because we have and we went into this Inverter business from the very beginning with the high-power stuff. And as soon as the feed-in-tariff is very generous, you don't need the most cost-effective inverter. But what we see right now there are two trends, which I think are very much in favor of our offering. The first thing is people getting more and more on the leverage cost of energy, that means the harvesting of the energy over the life time. Which means you have to have something which is not only a cost-effective inverter at the first place, but also you have to give up time guaranteed, performance guarantee and stuff like that. So that means all of a sudden, it plays in our strength in the service side. And interesting enough, a lot of people are coming up, building up services and we recognize service is going to be a very important thing. But as I mentioned in my script, it's not easy to build from scratch a very powerful service organization. It is a lot of experience, a lot of know-how, and this is what we already have. The second thing is, with the reduction in the feed-in-tariffs, the cost pressure goes up. And we see that very clearly. So that means there's a trend from the low power, very costly to the high power, much more cost-effective elements. And this is where we play in. So I think, for us, Europe was not extremely attractive at the beginning, but it's getting more and more attractive.

And last question for Danny. Can you give us a sense under the new segment reporting that you're going to start in the first quarter of how the segment margins would have been in the fourth quarter?

We haven't disclosed the gross margins. What I would suggest to you is that our business is run in the neighborhood of the 15% to 16% OP income. They just get there in different ways. It's pretty interesting when you go through the real details.

So effectively, at least for the fourth quarter, there weren't dramatic differences at the operating line between the segments that you'll reported going forward?

That's correct.

Your next question comes from the line of Timothy Arcuri with Citigroup.

This is Wenge Yang for Tim. Just continuing on the inverter side. If some of your competitors saw the weakness in Europe and with some inventory issues, do think they might turn around and to try to enter U.S. market and bring more competition to the U.S. side?

I think they will and we see it already. And as you remember last year, the second half of last year, both SMA and Power-One has been launching high-power inverters. But this is very, very new. And this means you have a product portfolio which is heavily towards the low power side. And as I mentioned before, low power is not a sweet spot in U.S. U.S. is very clearly preferring the high power. And I think the biggest or the best slate of products in the high-power stuff is in our portfolio, and as well in the Satcon portfolio. What is the difference between the Satcon portfolio? It's, pretty much the same but we are extremely strong in the service side of the business and the service side and their contract to repeat that again and again. The service side of the business becomes much, much more important because of the uptime guarantee. And there's another factor which plays more and more an important role which has to do with the balance sheet, because uptime guarantee extended warranties it is fine. But all of a sudden you have to be sure that this company is around in 20 years from now. Otherwise it doesn't make any sense.

So with the dynamics, what do you see as the pricing outlook for 2011? And I would assume that with all those competitions and the inventory issues, the pricing will be under more pressure for 2011.

I think we will see some pricing pressure in the U.S., but I wouldn't drive it by the inventory. The inventory issues that we're having in the industry are not based in the U.S. and they are not based in the, at least, in the markets that we play in the most, which is commercial and utility scales. So I don't think you're going to see the European inventory pressure in the U.S. market pricing. And I think the U.S. market that we are focused on, those customers are willing to pay us for the lowest cost of energy that we provide over the life cycle of the project. So while we will see pricing pressure, we don't think it will be as severe as some might think.

It's a very clear trend getting from the upfront investment costs to the LCOE or the ROI over the lifetime of the inflation. So therefore, if you have something which mitigates their risk if they put a lot of money upfront as an investment and are coming back to the uptime guarantee, you have some kind of ancillary elements which may to a certain degree defend against to high of price erosion.

What have you seen on the pricing for 4Q, and what do you expect for Q1 at this point?

I think we haven't seen too much of price drop at this point in time, slightly of course. But remind -- every industry which is starting has to have some kind of price reduction over the time. And particularly in the solar business, this is something which I would call a life blood that the prices are steadily going down and the question is, are you prepared in order to reduce the costs or having ancillary offerings in order to keep it at bay or not? And I think we have.

Just one last question on the semi side. So your revenue for Q4 on the semi is down about 20%.But most of the OEMs or kind of makers, they actually reported their shipment up 10% to 15%. So I just want to understand, you mentioned about a pause in increment spending. Is this the pause at the stat side or the pause at the increment makers' side?

I think I mentioned it before that the key contributor that we have gone down and the equipment manufacturer have not is because the trends from -- at least the temporary trend from 300 millimeter, because all the 300-millimeter fabs which have been announced last year are running now. And all of a sudden, there was a huge and still is a huge demand on having these kinds of power components and we have this kind of shortage. And the automotive industry has picked up again, and people don't need a 300-millimeter fab in order to produce those devices. And we, at AE, are very strong at the 300-millimeter side, but not a strong on the 200 millimeter. So what you see as a pattern, even if some of our competitors or the OEMs are increasing we are not. But these patterns do change dramatically with the announcement of all the new fabs and program in nearly all of them are 300 millimeter.

So when you see the orders coming in Q4, the semi orders are actually moving up, right? If I understand the trend correctly.

In Q1, we would expect an increase in Q1 and we see it continuing to the balance of the year. As Hans mentioned, we expect 2011 to be flat to up for the semi side. Which is a little bit different than we saw 90 days ago.

Your next question comes from the line Edwin Mok, Needham & Company. Edwin Mok - Needham & Company, LLC: So first question in on the thin film renewable energy or renewable equipment piece of business. If I take look at that and if I annualize your 4Q number, I get to like a 50% higher than what you did in 2010. Do you expect that run rate to be sustainable in the first quarter and going through to 2011?

The thing in the first quarter and maybe in the second quarter, it seems to be sustainable because pretty interesting projects are coming in on the thin films renewables, in particular on the crystalline side. And this is being fueled, at this point in time, primarily by the Chinese. But it's hard to predict what happens until the second half of the year because what we see, what the industry sees, is some kind of oversupply on the panel side too. So I would expect that the second half we will see some kind of softness on the renewable thin film side. Edwin Mok - Needham & Company, LLC: On the inverter side. On the fourth quarter, can you remind us what was your shipment or that is roughly in terms of percentage, was shipped to Europe in the fourth quarter. And you mentioned that there was a big project in Czech that obviously is not going to stay there in 2011. So should we expect, at least in the fourth quarter or at least in the first half, that Europe will be a smaller percentage just because of the change there? And how do can kind of think about that European business going forward as we believe that's one of the areas that you're driving growth?

Obviously, the fourth quarter, European shipments were down versus the third. And that was driven, as Hans mentioned, by the Czeck Republic and their reverse tax. And it caused the market to decline there. We're making inroads in Q1 but we would expect it still be relatively small as a percent of our total business. But where we're really gaining traction in Europe is as they shift to more central inverters and focusing on the lowest cost of energy, we're getting very good design and lead-in times on projects over there that we think will start coming at fruition in the second and third quarter. So we're still bullish on Europe for all of 2011, but the first quarter will certainly be probably as soft as the fourth quarter was.

But interesting enough, most people are looking at the U.S. because of the softening of the European market. But there is one European market which is still growing fast. Nobody knows how long that's going to be, which is Italy. So the new battlefield is more Italy rather than North America. And we have some kind of, as you know, some pipeline projects which are in Italy as well. And it's interesting what Italy is doing during 2011, nobody knows exactly what's going to be in 2012 in Italy. Edwin Mok - Needham & Company, LLC: Last question on the SiteGuard service offering that you guys are going after. I remember last quarter, Hans, you mentioned that you have around 22 contracts and you're going to design more contacts in that end. Anyway, you can update us if that number grew in the fourth quarter and how do you kind of think about that in '11 and if there's some revenue opportunity?

I think 22 was in Q3. 44 or 48 is in Q4. And as I mentioned in the script, we have already a pipeline for 68 megawatts for 2011. So the question is, but this is now, I mean, I would assume this is an ongoing element and it's gaining traction more and more. And if you look at the growth rate from Q3 to Q4, I wouldn't be that optimistic to keep that growth rate during the entire 2011. But even if it's slows down a bit, which I don't believe by the way, then we have a very, very interesting new revenue stream.

And you will notice, we did shift to the number of megawatts that we're servicing. Actually in hindsight, the number of contracts is not that relevant but the number of megawatts that we service are.

Your next question comes from the line of Jim Covello with Goldman Sachs.

This is Kate Kotlarsky for Jim Covello. I wanted to ask you about the opportunity in China, I mean, on the inverter side that you had alluded to. And you mentioned having a new product for the Chinese market. When should we expect revenues for that product to start coming in?

I think there are two drivers, one is we have at this point in time just one product for China. As I mentioned earlier, we are working in order to turn -- most of our products are high-power products into the 50 hertz as well. So this is one delaying effect. The other delaying effect is when China is coming finally in clarify what kind of the incentives they are going to put in place. So I think you will have a much, much better view in let's say six months from now or the second half of this year. But I think, remember, we have been in China for a long, long time. We have most of the renewable thin film business in China. So from that point, I think our relationship within China and there may be some trends which may emerge going forward, that some of the panel manufacturers are trying to integrate vertically and getting into the inverter or in the field or in the EPC or integrator business, and then our relationship with those guys may help us a lot.

You talked about still having some synergies that you can realize from the PV Powered acquisition. Can you quantify how much in synergies we're yet to see over the next couple of quarters?

We've not quantified it in dollar terms. The PV Powered acquisition was more about rounding out product portfolio. Being able to meet the needs of our customers. However, we know leverage in the AE supply chain, our purchasing power across AE and getting to some common suppliers will reap benefits, but we haven't put a number out there.

Your next question comes from the line of Joe Maxa with Dougherty & Company. Joseph Maxa - Dougherty & Company LLC: I just wanted to confirm, did you indicate the order intake on the inverter side would it expect it to be similar in Q1 as Q4?

The order intake or the -- the shipments are expected to be down a little bit, Joe. But most of our decline in orders for the quarter were due to inverters. And that was really driven by the tax legislation change at the end of year. Really forced people to try to get everything in, in their Q4. So we've seen a little bit of softening and then, obviously, the weather in the first quarter has caused it to be a little bit softer. Joseph Maxa - Dougherty & Company LLC: So, when we're looking at Q1 or we're looking at your order book for inverters, are we expecting that to be north of Q4's orders or roughly the same?

It will probably pickup towards the end of the quarter. We had a pause in the early part of the first quarter. Once again, the inverter market to the lead times, as everybody has got their supply chain in order. The lead times have really dropped to a four- to six- week lead time. So we don't have as much out front visibility as we had in terms orders. But we still have the project activity in the long lead time project we're working on. Joseph Maxa - Dougherty & Company LLC: And then, Dan, I just want to one ask, you mentioned your figure in the shipments would drop just a little bit in Q1. So that would suggest not a significant down tick in revenue. Or is that there may be 10%, we should be thinking 20%.

Probably the 10% is a reasonable number. Joseph Maxa - Dougherty & Company LLC: And then gross margin comments of I -- I know you got 41% to 43% in Q1. Should we be thinking of that number for the year. Is that a pretty good range to model?

We're driving more to an op income number for this year, Joe, and we'll have more highlights on that in our Analyst Day in terms of updating on our model. But as a total company, we're going to focus op income and, obviously, it's different in each business. But they generally arrive at about the same number.

Your next question comes from the line of Rafi Hassan from Susquehanna.

With bookings down for inverters, did you reduce utilization rate? Where is it now?

The utilization rates really stay in the same. While the bookings went down in terms of the forward look, we don't expect, but as I just mentioned earlier, maybe a 10% decline in shipments quarter-over-quarter. So the utilization has been a big factor in Q1.

Slight differential between central and residential, where do you see it going? I mean, you mentioned $0.20 to $0.22 before, and if I divide 170 megawatt with your inverter, revenue it comes to about $0.30. And I'm trying to think where is the difference between the residential and central inverter now?

Obviously, that difference would be driven by the lower power inverters have a higher price point per kilowatt. And that would drive the number up on a mix basis. We do think, longer term, our business will grow more in the central inverters, which is the utility and commercial scale. So on an overall basis, you'll see the price per watt go down.

Where you see the tax rates going from fourth quarter of 2010 to exiting this year?

The major change in our tax rate, our guidance of 24% to 26% is simply the overall difference year-over-year, in our U.S. shipments versus our non-U.S. shipments. As our Inverter business grows, and if you look at it as percentage it is now, it was 35% of our total company in Q4. And we expect that number will probably grow in 2011. So we'll have more U.S. tax liability and that's the cause for our tax rate going up.

Your last question is from the line of Jesse Pichel for Jefferies. Jesse Pichel - Jefferies & Company, Inc.: Some housekeeping, do you provide a geographic break out of your inverter business?

We have not, Jesse. Jesse Pichel - Jefferies & Company, Inc.: And then what about providing us a break out of string versus central inverters. I think you did that on the last call.

I think what we referred you on the last call was less than 20% of our volume was in the low power string inverters and about 80% or more was central. And that is still a good number for this quarter. But over time, we expect that central inverter to increase as a percent of the total. Jesse Pichel - Jefferies & Company, Inc.: And Hans, how long do you think the low-power inventory issue will last in Europe?

It's really hard to say and to be frank, this is not in our focus anyhow, because it doesn't affect us very much. The point is, as how fast are in Europe the trend charts the central inverter and the more the trends go to central inverter, it may take a longer time to get rid of the inventory. But it's hard for me at least from this vantage point to give you see some kind of flavor on that. Jesse Pichel - Jefferies & Company, Inc.: And can you comment on how the power station skids are doing? I mean, are you seeing increased traction in that larger format?

Yes, we do. And I think interesting enough, and this is part of the reason why we postponed our one-meg inverter development in favor of other things, which are for the European market more important. Because this kind of power box or probably a substation gains a lot of traction. And I think as soon as the big projects like the 170 megawatt comes online or it's getting more and more the trend, I think the one-megawatt single engine becomes a game changer. But this is something, which I would say is during the course of the year, so we have still time. Jesse Pichel - Jefferies & Company, Inc.: Was the bookings decline you're seeing on seasonality more pronounced in the central or string?

Of course, more in the central because this is by far the biggest portion of our inverter business. Jesse Pichel - Jefferies & Company, Inc.: Do you have any reference module companies that you work with? It seems like when I look at Fab Con, they are very close with Sun Power and when I look at Siemens, they're very close with First Solar. Do you have any kind of reference module customers that you are partnering with to go in to some of these projects with a kind of a unified bid?

Yes, I think we do. And we have a very, very good and strong relationship to Sun Edison for example. Jesse Pichel - Jefferies & Company, Inc.: So you're partnering more with the EPC side. And the service ability that you have, does some of that stem from your legacy business and equipment, or is it a completely a new offering?

I wouldn't say from the legacy business. I would say from the Semiconductor business. And because of the fact that the drivers which are emerging more and more on the renewable side, are the same as we have already seen in the Semi business. For example, the semi business has been driven dramatically by the cost of the fabs. You have to have a perfect service organization in order to keep the downtime in the fab as short as possible. And the same holds true going forward if you would like to performance guarantee. You have to keep the downtime as short as possible. So what we are leveraging from is the experience and I can't just emphasis, it's not just the people match up with the infrastructure, it's the know-how, how to come very close and fast from the symptoms of failures to the remedy or that means the root cause and how to fix that. Jesse Pichel - Jefferies & Company, Inc.: And do you envision a certain attach rate? I don't know if you covered this on the call. A certain attach rate of this recurring revenue stream to your central inverters? So in other words I mean if you attach 90% service contracts to your inverter sales, I mean, is that going to be a significant revenue stream for you in the future?

I think our SiteGuard was created out of our Inverter business, but it's now getting into some kind of separate stream if you want, so. Because what we are doing here is we are serving entire fields, and interesting enough, in some cases, even those fields have competitive inverters. So of course, it's fostering our Inverter business dramatically, because not only that customers which have a success of the SiteGuard service offering, but also we gather a lot of additional information, how the interaction with this field, what the rate is going to be, and this is future anyhow because of going forward the next generation beyond the inverters is energy management with a twist.

And there are some third parties out there that are suggesting fourfold to fivefold increase in service demand for inverters over the next five years. And we certainly think our current infrastructure and capabilities will allow us to play in that very well.

That concludes our Q&A session. I'd like to turn it over to management for closing.

Well, we would like to thank all of you for joining us today. We look forward to seeing hopefully a lot of you at our analyst day in a couple of weeks. And thank you very much.