Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Charlie Strauzer – CJS Securities.
Charlie Strauzer – CJS Securities
A couple questions, they’re pretty straight forward, one is as you’re looking at Q4 how should we think about the segments and kind of the expected growth by segment there and any real big changes on the gross margin line by segments?
John S. Marr, Jr.
I think Q4 by segment would look very much like Q3 which would mean financial systems continuing to be a strong contributor and of course the justice area having come on line more meaningfully in the third quarter continuing generally at that level.
Charlie Strauzer – CJS Securities
Then if you look at the gross margins by reporting segment should we see much difference there too?
John S. Marr, Jr.
Not particularly. The biggest change is obviously that the gross margin on the license line varies pretty significantly depending on the revenues because the cost of licenses are relatively thick but otherwise there’s nothing that would point to anything other than the kind of changes in margins you get with volume changes.
Charlie Strauzer – CJS Securities
Then looking out especially on the Microsoft Agreement, Brian if you can highlight what has changed since the last amendment to the agreement? How is this new amendment different from the last one?
John S. Marr, Jr.
The last one has really the spirit of an arrangement in place which was that development we were doing for the public sector system that had value to their commercial or horizontal system that they would have an ability to contract with us to get IP rights to that and pay for it now and move it over there. So, that’s still the basis of our arrangement.
But, what really it didn’t address was looking over any reasonable period of time trying to quantify that and come up with an arrangement that was a little more consistent and had better visibility. So, since then we’ve looked at really the balance of the development projects through the first release to manufacturing and quantified that and quantified how much of that has value to them and they choose to include in their commercial system and come up with a much more predictable model so we will have relatively flat reimbursement through general release really through the end of 2010.
So that was the major change was trying to look out, quantify it and put in an arrangement in place where they knew what their cost was quarter-to-quarter and we knew what we could expect from a reimbursement standpoint. So, it’s only if we were to see a very material change in the product that that reimbursement would change and we don’t expect that to happen.
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