Question-and-Answer Session
Operator
[Operator Instructions]. Srini Pajjuri from Merrill Lynch, you may ask your question.
Srini Pajjuri – Merrill Lynch
Thank you. Necip, you talked about R&D going up a little bit in Q4. Do you consider that a one-quarter trend or do you expect to continue to invest as you look out to 2008?
Necip Sayiner – President, Chief Executive Officer, Director
Well, as Bill described, there's a step function in Q4 because of the NXP service agreement expiring. But in general going forward, I would expect the R&D investment to increase, somewhat commensurate with the revenue increase we're going to see in the business.
Srini Pajjuri – Merrill Lynch
Okay, great. And then on the business side, you mentioned you are shipping for AM/FM product for revenue this quarter. Could you talk about, your outlook for that particular product as you look into the next few quarters and also what kind of end markets you are seeing traction in?
Necip Sayiner – President, Chief Executive Officer, Director
Sure. The AM/FM product is currently getting designed in a wide variety of applications, portable radios, MP3 accessories and so on. We also have a couple of handset OEMs actively looking at this product offering. I expect that our revenues from AM/FM will grow sequentially in the next several quarters. I expect the growth, sequential growth to be relatively slow in that the design cycles for those products are longer than they are in handsets, for example. Therefore, I expect the revenue ramp to be somewhat slow on AM/FM.
Srini Pajjuri – Merrill Lynch
Just one last question, Necip, as we look out into 2008 and look into your different business segments, could you give us from a high level where you see the most growth and, which group, which segments, do you expect kind of to stay flattish?
Necip Sayiner – President, Chief Executive Officer, Director
I think it's fair to say Srini that the businesses that are fueling our growth today in Q4 in particular, the broadcast business, the MCU business and the timing business are going to post year-over-year growth in 2008.
Srini Pajjuri – Merrill Lynch
Great, thank you.
Operator
Our next question comes from Arnab Chandra from Deutsche Bank.
Arnab Chanda – Deutsche Bank
Thank you. Couple of questions. First, [inaudible] if you could talk a little bit about roughly speaking what was the mix of what you call your foundation businesses versus your growth businesses in Q3 and if you look out, say, roughly a year later, how that mix change shift follow up is?.
Necip Sayiner – President, Chief Executive Officer, Director
Okay. Both foundation businesses grew in the single-digits sequentially, while the MCU timing and broadcast businesses all grew in double-digits. That's changing the overall mix of our business, and I would expect this mix change to continue into 2008, as the growth in those three businesses outpace the revenue in the foundation businesses.
Having said that, we were pleasantly surprised this quarter, in third quarter by the strength we’ve seen in embedded modems and as I indicated, the voice business also came back nicely, having recovered from the first half inventory issues in Europe. So we look at our foundations businesses also as very stable businesses going forward.
Arnab Chanda – Deutsche Bank
Thank you, and then a question on gross margins for Bill. If I look at your non-wireless as in the business you have today, seemed like the gross margins recorded last year were quite a bit higher, although they were coming down. And it seems like we're sort of towards the lower end of that sort of range. Is this a mix issue, or is this a volume issue, or is this something that you can kind of improve or stay the same? Just curious about. Thank you.
William G. Bock – Chief Financial Officer, Senior Vice President
Arnab, when you compare gross margins in 2007 to 2006 or before, you're really looking at a business that today has a much higher mix of revenue from our broadcast product lines and were the case in those prior periods. So mix does have an effect relative to prior years. I think that we're pleased with the gross margin performance this quarter at 60.7, relatively close to the mid of out point of our range and were looking to be able to sustain this range of gross margins in the fourth quarter and hopefully on into the future.
Arnab Chanda – Deutsche Bank
Thanks, Bill. Thanks, Necip.
Necip Sayiner – President, Chief Executive Officer, Director
Thank you.
Operator
Our next question comes from Jeremy Bunting from Thomas Weisel Partners.
Jeremy Bunting – Thomas Weisel Partners
Great, thanks very much. If you could just give us a broader perspective on the voice-over IP business in terms of what is your international distribution, what are the pockets of strengths and do you see any other areas where you may hit an inventory issue? And then I have a question for Bill.
Necip Sayiner – President, Chief Executive Officer, Director
Okay. The application base for our voice products are quite broad. We are obviously participating in residential gateways. We have significant share in DSL residential gateways in particular. Our customers are all in three regions, North America, Europe and Asia. We’re also participating in Fiber-to-the-Home applications here in North America and in Japan. We are participating in cable modem, residential gateway applications with our SLICs and voice DAAs and finally, we have some exposure to central office markets with our quad ProSLIC.
Jeremy Bunting – Thomas Weisel Partners
Continue to [inaudible] say your historic exposure to Vonnage for example. Are you still being held back there, or is that being able to move forward as Europe has done?
Necip Sayiner – President, Chief Executive Officer, Director
Yes, our demand from our customer who is serving Vonnage has been reduced in the first half and the demand remains low through the third quarter as well.
Jeremy Bunting – Thomas Weisel Partners
Okay, thanks, Bill. And I am sorry if I missed this in your prepared comments. Can you just give us an update on the status and the prospects of the stock buyback program?
William G. Bock – Chief Financial Officer, Senior Vice President
So the status of the program is that we repurchased $32.8 million worth of stock during the months of August and September. We actually had the program authorized in very late July, announced it in this call last quarter and then commenced execution against the plan on the first of August. We continue to be in the market repurchasing shares during the month of October, so the program is working to our expectations. We expect to be a repurchaser of shares during the fourth quarter and we'll report on our progress again at the next call, although we Jeremy, enjoy, a great deal of flexibility in terms of how we execute this plan in any given time period.
Jeremy Bunting – Thomas Weisel Partners
Is there any change to the $400 million cap and is there a timeframe to that?
William G. Bock – Chief Financial Officer, Senior Vice President
There is not. The cap was authorized bit board in July. It had a 24-month time period associated with it.
Jeremy Bunting – Thomas Weisel Partners
Great. Thanks very much, Bill.
Operator
Our next question comes from Sandy Harrison from Signal Hill.
William ?Sandy’ Harrison – Signal Hill
Thanks, guys. Necip, if you could spend a little bit of additional time with us on talking about sort of the investment in China, the 29 engineers, what are sort of their areas of expertise, and along with that had you mentioned that that would serve sort of as a beach head as you enter into some of these newer markets in Asia. And what do you see as some of those? If you could provide a little more color on that deal?
Necip Sayiner – President, Chief Executive Officer, Director
Sure. The motivation behind this acquisition is really two-fold. One is a team of application engineers who are, have been serving the local market in southern China who will give us additional scale in reaching out to a broader base of customers, with several of our products starting with the broadcast products in particular.
The design engineering talent in this company is our RF and mix signal related and we intend to deploy those resources on some organic developments we had ongoing and one of our businesses that will allow us to create products using our RF capability into new markets we are not currently addressing.
William ?Sandy’ Harrison – Signal Hill
Okay.
William G. Bock – Chief Financial Officer, Senior Vice President
And I would add that this is a transaction that very much follows the line that we have been discussing with you for the last couple of quarters. A small private company transaction, relatively limited impact on earnings and the opportunity to become accretive through expanded revenues in their geography within 12 months. I also think that we should point out that this is a critically strategic geography for our future and is a lower cost structure than we have here in the United States or in Europe and provides with us engineering resources in that environment.
William ?Sandy’ Harrison – Signal Hill
Okay, and if I could just take my follow-on. As you look at sort of what's going on in the microcontroller markets, you highlighted how you've been able to package perhaps your tuner with perhaps a remote control from some other products. Is there a paradigm shift, and I hate to use that word, but is there a paradigm shift in the microcontroller market today where companies like yourself and another one who has been successful are sort of over taking and changing what has traditionally been dominated by the microchips and the more generic providers of these products?
Necip Sayiner – President, Chief Executive Officer, Director
Sandy, I think it's fair to say that we don't compete solely on the MCU engine. While we have a high performance processor under the hood, what we are replacing in the applications we are targeting is more than the microcontroller. We are replacing in many cases one or more mixed signal peripheral ICs. So we are really providing a lower cost system solution that incorporates a high performance microcontroller with mixed signal peripherals.
William ?Sandy’ Harrison – Signal Hill
Great. Thanks, guys.
Operator
Our next question comes from Adam Benjamin from Jefferies.
Adam Benjamin – Jefferies
Thanks, guys. First up the second broadcast, I think last quarter the split between hand sets and portable audio was about 70/30. And you've talked about that business moving more toward the portable audio segment. It seemed as if greater than 40% mix in the, toward the portable audio in Q3 was probably maybe ahead of the expectations and I'm just curious if that was kind of a one-quarter blip or that's something we can continue to see the mix shifting over to portable audio off the base in Q3.
Necip Sayiner – President, Chief Executive Officer, Director
I think we are going to see an ongoing shift that's very consistent with the strategy we adopted a while ago in diversifying the revenue base. I indicated last time that we would hope to get closer to a 50/50 mix as we exit this year. And I think we are going to be able to get close to that in Q4, and I certainly believe that over time, the piece of the business that is being driven from non-handset applications is going to increase.
Adam Benjamin – Jefferies
Okay, thanks. And just to follow up on the gross margin side, obviously with broadcast becoming a bigger percentage of the mix going forward as is growing faster than your other businesses and you're a little bit below the midpoint of that 60%, 62 % range, can you help us understand how you're going to be able to either get that margin back to the midpoint or above, as that mix continues to kind of work unfavorably in that direction.
William G. Bock – Chief Financial Officer, Senior Vice President
We have a mix change occurring within the broadcast business unit itself that is aiding us in this regard. Certainly the product that is under the most ASP pressure is the stand-alone FM tuner. The shipping of the transmitter, which is a fundamentally unique part without direct competition, the introduction of the AM radio, which is a higher ASP part, and the transceiver products all give us a mix profile within the broadcast business itself that will improve the margin within that business unit. So it's the introduction of these new products that really don't have direct competition that will allow us to maintain the gross margins in that business and across the company in total.
Adam Benjamin – Jefferies
Got you. With respect to that mix being benefiting from the portable audio, can you give some percentage Delta between the margins without giving the exact margins for portable audio or the handset broadcast gross margin?
Necip Sayiner – President, Chief Executive Officer, Director
We wouldn't be able to provide the margin split, but I can give you a data point that might prove helpful and that is the blended ASP for our broadcast audio products remained essentially flat in the third quarter versus the second quarter and we expect that it to remain so in the fourth quarter also.
Adam Benjamin – Jefferies
Great. Thanks a lot, guys.
Operator
Our next question comes from Tayyib Shah from Longbow Research.
Tayyib Shah – Longbow Research
Hi, guys. Congratulations on the quarter. Necip, can you talk about the potential for your FM tuner business in the top two handset OEMs next year and what the competitive landscape looks like in that segment?
Necip Sayiner – President, Chief Executive Officer, Director
We're serving the handset market pretty broadly, Tayyib. Now, you have seen in 2007 with some of the market share shifts amongst those OEM, OEMs. We've still been able to increase our share because we are really serving many of those OEMs, either directly or through their OEMs. The, going forward, I remain positive about our current situation with all of these handset OEMs. In the third quarter, we have seen strength in Korea with the handsets and we expect Korea to remain strong for us in the fourth quarter. Also couple other, top 5 OEMs we expect to be up as well in the fourth quarter.
But I, I need to emphasize that the non-handset piece of our audio business, is growing faster and as we discussed in the prior question, becoming a larger portion of our growing business, and I would expect that trend to continue.
Tayyib Shah – Longbow Research
Thank you. And can you also update us on the ProSLIC adoption in the central office for traditional phone line infrastructure and when that revenue is likely to start ramping?
Necip Sayiner – President, Chief Executive Officer, Director
Well, we are driving revenue from our quad ProSLICs in central office applications today. And some of these design wins that we have won a while ago have started ramping. A couple of them have been delayed to 2008, so some of those programs with those customers will ramp in 2008.
Tayyib Shah – Longbow Research
Thank you.
Operator
Our last question comes from Romit Shaw from Lehman Brothers.
Romit Shaw – Lehman Brothers
Yes, thanks a lot. Necip, with the base band business out of the mix, would we still expect the March quarter to be seasonally down, or now gone and some of the new product momentum, is it fair to say that Silicon Labs should grow sequentially in every quarter in 2008?
Necip Sayiner – President, Chief Executive Officer, Director
No, I think first quarter you should expect to be seasonally lower. This would be most pronounced in our broadcast business, where we are serving not only the handset segment, but also the consumer segment and highly seasonal personal navigation device segment. Those end markets, as you well know, go through a very strong seasonality in double-digits over 4Q and we are not going to be immune to that seasonality.
Romit Shaw – Lehman Brothers
Okay, and thanks for that. Bill, the stock buyback program, is it agnostic to price, because if my math is correct at the current price, buying back the stock is not necessarily that accretive to earnings.
William G. Bock – Chief Financial Officer, Senior Vice President
Your analysis is essentially correct. The cross-over point between accretive and dilutive share repurchase is in the mid-40s. Our program does have flexibility to price and obviously we would be more aggressive buyers at lower prices, but the program has been purchasing during the last three months at current price levels. We expect to be in the market during 4Q.
Romit Shaw – Lehman Brothers
Okay. Thanks.
Shannon Pleasant – Director of Corporate Communications
All right. Thank you very much for joining us. This now concludes today's call.
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