Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Greg Reid - Wellington West Capital Markets Inc.
Greg Reid - Wellington West Capital Markets Inc.
I missed the comment when you were giving the segmented breakdown, can you give me the hard numbers for services business and the satellite equipment business?
Susan Parsons
What I said is that the satellite equipment business increased by 68% and the broadcast services decreased by 2%.
Greg Reid - Wellington West Capital Markets Inc.
In terms of the gross margins there’s some commentary in the release that talked about you’ll adjust the pricing in the future. You don’t mean that you’re able to re make up margins with the current large customer, do you? You’re just saying that you’re going to charge more for it in the future because the costs turned out to be higher?
Ron Clifton
The core technology has gone into another new product we mentioned which is for another customer. When we originally set this pricing it was about a year ago for the large order and it’s also before we had the finalized designs so there were some surprises. We went into production, we managed to control those and we now know and we set our pricing going forward and we always give volume discounts for large orders. That is sometime a flexible item but going forward we set our prices so we get the margins we prefer to have.
Greg Reid - Wellington West Capital Markets Inc.
Is it reasonable to expect that we can see margins back north of 45% within a quarter or two?
Ron Clifton
Well we’ve said every year we’re trying to improve our overall gross margins on an annual basis. We’ve done it for the last three or four years improving by at least 1% every year, and we were down a little bit in the second quarter. We had a good first quarter and looking forward we hope to return back to our annual plan. There’s always variability in every quarter but we are optimistic we will improve and get back on our annual objective plan.
Greg Reid - Wellington West Capital Markets Inc.
The defense contractor win, is the first time I’ve heard you mention a customer like that, can you talk about what the type of application is that they’re using it for?
Ron Clifton
It’s a heavy route high speed data application with lots of encryption and it’s the kind of thing we couldn’t put a press release out on because the timing and also because of the nature of the project.
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