Question-and-Answer Session
Operator
(Operator instructions) And our first question comes from the line of Tim Luke with Lehman Brothers. Please go ahead.
Tim Luke – Lehman Brothers
Thanks so much. Guys, congratulations on the new deal and the revenue for the quarter. With respect to the EPS guidance that you just outlined, could you just remind us what the assumptions are with respect to the closure of the acquisition? Does that assume that the deal is closed in the quarter, and what are the key variables I guess in saying that you think it’s going to be $0.11 but could be $0.12? And just in terms of the contribution from Star for the September quarter revenue, what should we be thinking about? And maybe some help on what it may be adding to the OpEx. And otherwise in guiding the OpEx to the $10.7 million level or thereabouts, is the upside primarily R&D, or is it SG&A as well? Thanks
Art Chadwick
Well, thanks, Tim. That is a lot of questions. Starting with the EPS guidance, if you take the guidance that we gave for sales, gross margins, and OpEx, it would be somewhere between $0.11 and $0.12, as I mentioned. However, the earlier we close the Star acquisition, the more it will be dilutive in Q3. As I mentioned, the Star acquisition, though we think it’s really a fantastic addition to the Cavium team, it will be $0.01 to $0.02 dilutive in the second half of 2008. So if we close it earlier in the quarter, it will be more dilutive, and the EPS will trend towards the lower end of our range.
Tim Luke – Lehman Brothers
And what’s the midpoint of your expectation there this coming month of July or August or–?
Art Chadwick
We didn’t get that precise. We expect to close it this quarter. Again, we’d rather close it earlier rather than later, but to the extent that we close it earlier, our EPS will be at the lower end of our range versus the higher end of the range. In terms of OpEx, the run rate there that we are going to assume is somewhere between $600,000 and $700,000 a quarter. So, again, the impact on Q3 has a lot to do with when that clock starts. But longer-term, starting in Q4 at least, it will be between $600,000 and $700,000 a quarter. In terms of the revenue that comes from Star, they are at very early stages of revenue, and it’s little literally just a few hundred thousand dollars a quarter. So, very little pickup in revenue. The real benefit of doing this acquisition, as Syed mentioned, is the product plans that we want to implement, and the new products that we want to get out sometime in 2009 that we think really can have a significant impact on our top and, of course, bottom line.
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