Question-and-Answer Session
Operator
Thank you, gentlemen. The question-and-answer session will be conducted electronically at this time. (Instructions). We’ll take our first question from Tim Arcuri with Citi.
Brian Lee - Citigroup
Hi guys, this is actually Brian Lee calling in for Tim. Thanks for taking my question. I had a couple of things—first off for Sean, how should we be looking at the breakeven levels here in Q3 ’08. I think last call you mentioned that it’ll be going to about $108. Is that still the view, and would you expect that to go up again in Q4?
Sean T. Smith
Our breakeven level in Q2 was actually a little bit higher than that. Looking at the operating income line, it would have been about $108 or $107. Our breakeven point for the third quarter, at the operating income line, would be in the range of anywhere from $115 to $116 as a result of the additional depreciation coming on with the NanoFab being fully ramped for a full quarter.
Brian Lee - Citigroup
Okay, and would you expect that to go up again in Q4?
Sean T. Smith
No, I would not, Brian. We expect to plateau with respect to our operating costs in Q3, and we look to additionally pull some costs down – some additional costs – but with respect to depreciation which is the key driver to such costs, that will plateau in Q3.
Brian Lee - Citigroup
Okay, great! On the business mix, it looks like, on the last call, you guys were talking about semis and flat panel both being up in Q2 – it looks like flat panel came in better than expected, and otherwise you would have been closer to the low end of guide on revenue, so all in all, it looks like you’re ahead of expectations on flat panel. Can you talk about what drove the better revenue trends there and what sort of trajectory we can expect in that business in the second half?
Michael J. Luttati
Sure, Brian. It’s Mike. As I mentioned in my prepared remarks, there was a big drive obviously in the high-end TV market and also a conversion of the display market from Gen 5 to Gen 7, so we saw a lot of new designs pop out as a result of that. Our best indicator is that that will continue at least through June, maybe more into the summer, and that Olympic Games is driving a lot of the CD demand, but there’s a lot of new improvements in resolution, scan speed, viewing angle, brightness – a number of tweaks that are being made in designs that are driving these applications, and so fortunately because of the strength of our position in the high-end FPD business, we’ve been able to take advantage of that, and the timing of having our facility and additional rider in Taiwan really allowed to capture share that we might not have had had we not had that tool in place, so we really benefited from that. We think not only did we ride the market, but we also gained share as a result. In the IC side, as Sean mentioned, in his prepared remarks, we had a nice uptick in high-end IC sales, and the thing that really took the hit on the IC piece was that the decline in ASPs over in the mainstream business, although unit volumes continued to be up – we had strength in unit volumes in every region.
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