Question-and-Answer Session
Operator
Operator instructions. Our first question comes from Tim Luke, Lehman Brothers.
Q - Tim Luke, Lehman Brothers
Thank you and we wish you very good luck, Kobi. With respect to the revenue guidance, I was wondering if you could give us some sense of how you see the mix there moving forward in terms of the customer set and who the primary customers were in terms of the fourth calendar quarter. It also looks as if your operating expenses were lower than one might have expected in Q4. Could you give us some color on that and how we should think about modeling some of your investments in R&D and SG&A going forward?
A - Igal Shany
As to the Q4 break up of revenues for license and services, as we mentioned on the licensing front, Qimonda, Spansion and Macronix were our top three licensing revenue contributors and on the service revenues, we had Qimonda, Spansion and SMIC. As we look forward to next year, obviously we do expect that Spansion will remain a significant service customer for us and also a licensing contributor for us. SMIC will need to go into production next year and therefore we do expect to start receiving royalties from them starting in 2007. As to the service components with SMIC, we have just signed up a new service arrangement with them, so going forward if you do expect that the service activity with SMIC would go up, I think it makes a lot of sense. As to Qimonda, obviously as we indicated in the past, we do not expect them to be any contributor on the service revenues starting 2007 and we do not expect to see from them any license revenues. As to the operating expenses, I think that if you look on the SG&A we remain pretty much the same level as we had in the previous quarter. As to the R&D expenses, if you combine both R&D and cost of services, you will see that we are pretty much keeping the same levels over the last few quarters. There is a plus or minus $200,000 but we are keeping the same level. I don't see any reason for this to go up significantly in the near future.
Q - Tim Luke, Lehman Brothers
Just to clarify then, with respect to Q1, we might expect the gross margin percentage to remain broadly where it has been in Q4 with a similar trajectory in R&D?
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