Question-and-Answer Session
Operator
(Operator Instructions) Our first question is coming from the line of Rich Valera with Needham & Company. Please go ahead.
Richard Valera – Needham & Company
Thanks, good afternoon. Just wanting to focus in on the gross margin, if I could -- if the main -- actually it hit the low end of your guidance it would appear that you need probably something approaching 100 basis points of gross margin improvement always depending on the revenue and it sounds like the one thing you have identified where you taking from immediate steps is sort of on the shipping costs. Is there anything else going on, that’s gone unless -- few weeks or that’s going to go on during the quarter to help that gross margin?
Harald Braun
Yes, absolutely. As I mentioned before we have some problems in place and we have not only deliver freight cost and I think that was discussed earlier with the previous management, but we kicked off -- Sally and I kicked off some initiatives and this efficient is going into operations, where we need absolutely more efficiencies. We have in this bucket also a location strategy concept and of course we are looking also at the near-term costs savings -- in R&D, what we do in our labs, what we do with our contractors and so on and so forth. So -- and there is another area in IT where I see untapped potential to use more tool basis to be much, much more efficient. So, we have picked out from a nice project and to team we have one person responsible for that and Sally and I have weekly reviews to see how we can come to an improvement in this quarter and as you know there are only two months and a couple of days left, so that’s the challenge, but what the team brought back to me a last week, actually in the end of last week, looks very encouraging. So -- and I will be on that and as I said I will be -- urge them for discipline and get this savings, which identified a captured in this quarter.
Richard Valera – Needham & Company
Great and sort of along the same chain -- train of thought, one of the attractive aspects of the merger were the substantial costs saving to synergies to be realize between by merging the two companies and I believe it was $35 million, roughly half of which was expected to come out of cogs and half of which was expected to come out of OpEx. Just I want to understand, where we stand with respect to those initiatives to track those synergies, particularly on the COGS line, it seems that basically all the synergies are being absorbed by margin compression perhaps due to mix shifts in other thing and just kind of wanted to understand what are the dynamics that play with the costs savings versus, the sort of flat margins.
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