Question-and-Answer Session
Operator
(Operator Instructions). Our first question is from the line of Adele Mao with OLP Global.
Adele Mao - OLP Global
Hi. My first question is related to your guidance for the fourth quarter. If we exclude Actions Beijing's contribution in the third quarter, it still seems that you're factoring nearly 20% sequential decline in revenue. Could you just quantify your expectations for ASP erosion, and maybe discuss how you see the volume trending into the fourth quarter and in 2010?
Patricia Chou
Hi Adele, very good question; first of all as I mentioned in earlier that big difference between third quarter and the fourth quarter is that sales amount is a result of two factors, number one the deconsolidation of Actions Beijing whose impact is about $2 million; and the number two, the demand [that pull in] from early October to late September whose impact was about $0.5 million to $0.8 million. So if we back out these two factors impact, the third quarter's number and the fourth quarter's number are close to each other.
Adele Mao - OLP Global
Okay, so? I am sorry, go ahead.
Patricia Chou
So, for fourth quarter we do expect a further ASP erosion because of the volume reduced from the previous two factors. That’s why the fourth quarter’s top line guidance does look like a big gap from third quarter.
Adele Mao - OLP Global
Okay, so it’s a little bit fast forward, its sort of, you are getting the orders earlier in the third quarter. Could you comment on what (inaudible) as how this volume trend will develop into 2010?
Patricia Chou
In 2010, we believe the volume will continue to grow, but in different segments, and the faster growing segments will be in the automotive and low end products, and also the [advanced] product segments (inaudible) the MP4, specially in [D1] and high definition.
Adele Mao - OLP Global
Okay. You guys mentioned a couple of times about the challenging competitive environment. Could you just provide a little bit more details around that, what type of challenges you are seeing and maybe give us an update regarding the competitive landscape in the PMP market?
Patricia Chou
Sure. Well, the competition is always a issue in consumer electronics world, and that we continue to discuss this key factors for our gross margin and also those dollar amounts.
First of all, the ASP continues to decline as a sort of a result of the severe competition, especially in the low end. After the financial crisis, a lot of design houses in China or worldwide have been looking for new topics to work on, and MP3, especially the low end MP3 has been identified as a sizable and a profitable items for smaller sized design houses.
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