Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from Richard Shannon with Northland Securities. Your line is open.
Richard Shannon - Northland Securities
Hi, guys. How are you?
Jim Boyd
Pretty good. Thank you.
Richard Shannon - Northland Securities
Good, Bing, I want to follow-up on one of your statements in your opening script regarding gross margins. I just want to make sure I caught the exact statement and maybe a couple of quick follow-ups on that.
You were you talking about gross margins over the next couple of quarters, next few quarters declining, I want to make sure I understood whether that includes or does not include the effective licensing and whether that includes the effective transition towards 120 nanometer manufacturing?
Bing Yeh
Okay. We are talking about the total gross margin. Because we expect our memory portion of business, the margin of that is going to decline because of the current market environment, and also, which is not really going to grow. So, it is not having a bigger contribution to the total revenue mix. So, as a result, we expect our total gross margin to decline.
Richard Shannon - Northland Securities
Okay. And did you mention that within your revenue guidance for the third quarter that you're expecting licensing to come down modestly? Is that what I heard?
Bing Yeh
Yes.
Richard Shannon - Northland Securities
Okay.
Bing Yeh
In flat to moderate decline because it is very difficult to predict that. Our licensees don't give us projection. So, it’s very hard to look into that.
Richard Shannon - Northland Securities
Sure. And as I look at what’s you commented about last quarter, and I believe I asked the question on your conference call, you mentioned you thought licensing would be flat perhaps down and obviously you had a very good quarter and even if you back out the upfront fees, your royalties were up quite nicely. Does the environment suggest that you could have a similar difference from your opinion right now that you did last quarter?
Bing Yeh
As I said, it is very difficult to make that, I know we don't have visibility. That's the main issue. Because our licensees normally does not give us a projection and also, last quarter I commented on that, based on the judgment that our royalty revenue typically is out one quarter and after that our customer ship their product. So, the product should be in the first quarter, then we should expect the second quarter.
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