Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from the line of Timothy Luke – Barclays Capital.
Timothy Luke – Barclays Capital
With respect to the cash from operations, how should we think about that trending in the February and I was also wondering if you can talk about some of the factors you see impacting the gross margin as you move into February and through the year? Then if you could give us some color on how you see the different segments performing in 2009 in terms of service, printers, desktop, etc. that would be very helpful.
Barry Zwarenstein
I’ll start with the cash flow. The operating cash flow is driven by the operating income and by the changes in working capital. Particularly, the sources of funds from the income statement ran in the mid single digits in terms of millions of dollars this quarter plus or minus one or two. That is fairly static and has been for the recent past. What is volatile, of course, is the working capital changes and that is certainly [existed] materially in this past quarter. While we don’t give a specific cash flow forecast or working capital forecast we continue to expect that the controls that we have over inventory, receivables and payables will allow us to gain further modest improvement in working capital and hence in operating cash flow.
Timothy Luke – Barclays Capital
So you are saying you will have improvement in your cash flow?
Barry Zwarenstein
That will depend on the timing of the deals during the quarter, the key things that happen in any business, the mix between the various types and repayment terms, receivable terms and others, but it could be positive. It could be slightly negative. We are not going to give a specific cash flow forecast though.
Iain MacKenzie
Of course the ASP outlook is at a very low level as you continue to report yourself so we are anticipating no correction during this quarter. We won’t be funding working capital up a hill. You asked a second question about gross margin and I continue to kind of indicate that normalized gross margins for this business have been 17-18%. Any other changes, you see them going up as the revenue in the ASP fall. If that corrects you see the gross margin percentage going down. So again, it is focused towards the gross profit dollars.
Brazil will be impacted, you asked for some color and flavor. Brazil will continue to be a growth engine. Of course there is the ASP reduction that impacts it equally at this moment in time so that is mostly desktop although we had some good server orders last quarter. This quarter or fiscal Q1 in particular. Printers should continue to decay and decline as I have said in the past 2-3 years. The interesting thing on servers was we had in the call last time I said this should normalize to 34% and indeed it did so 34% assumes the ASP declines equally in the server business to the desktop business.
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