Question-and-Answer Session
Operator
(Operator instructions) Our first question comes from the line of Mark Tobin with Roth Capital Partners. Please proceed, sir.
Mark Tobin – Roth Capital Partners
Hi Tony.
Tony Shen
Hi Mark.
Mark Tobin – Roth Capital Partners
First quickly, can you comment on guidance? You have that guidance out there as of the last conference call and there was no mention in the press release.
Tony Shen
We took a hard look at the rest of the year and we see that – we think that the stability is low. Apparently, based on calculation, it will be quite difficult for us to achieve the previously announced guidance. But we are also not sure how much the new guidance should be at this time. So, we chose not to mention anything.
Mark Tobin – Roth Capital Partners
Okay. And can you comment on that tier 1 notebook computer OEM? I know you had expected shipments no later – at least the previous announcement was no later than the third quarter timeframe. Have those shipments started yet?
Tony Shen
Not yet, the expectation is still the same. In the third quarter, shipment will start.
Mark Tobin – Roth Capital Partners
Okay. And then looking at the quarter, obviously much kind of a reversal from the improvement we’ve seen over the past few quarters. Can you give us a sense of – do you have a handle on what went wrong during the quarter and as a result, are you prepared to take steps to improve and specifically, I’m looking at cylindrical sales being down 50% Q1 to Q2 and then also, 7 – back single-digit gross margins? I’m just trying to understand what drove that.
Tony Shen
There are several forces in play this past quarter. The underlying macro situation is of course the global recession; especially the US is the – top of it, a hardest hit. So, that experienced the weakened demand in notebook computers and as a result, weaker demand for notebook batteries and battery sales, et cetera. We – fortunately, we still have the domestic market for cell phone, which of course is also down, but not down as severely.
Another reason is the seasonality factor. The March quarter is traditionally the weakest quarter of the year. Last year, we didn’t encounter that because cylindrical was on its strongest upswing. But this year, cylindrical was hit by the recession as mentioned. So, the seasonality factor is once again here. We saw some upticks in March. In fact, January and February combined, did about the same in terms of revenue generation as March. So, the trend is encouraging, to put it not as optimistic as we all hope, but we expect the June quarter should be more favorable.
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