Question-and-Answer Session
Thank you. That question will come from Ross Seymore of Deutsche Bank.
Ross Seymore - Deutsche Bank Securities
Thanks guys, just a couple of questions; first in that first quarter revenues. You pointed to the Chinese markets slow down in February; was that really a surprise with the magnitude greater than expected and that's why you chose to bring down channel inventory?
Mark S. Thompson - President, Chief Executive Officer and Director
Ross, it wasn't a surprise, but the magnitude response was certainly a bit larger than we expected. The normal trend as we have tried to expand on in the past for Q1 is that fairly erratic demand profile that in very early January and then debt again around Chinese New Year; and then normally, it ramps pretty strongly in March, and so you are watching the recovery in March. So, the notch is particularly around Chinese New Year were deeper than they normally are. And while the ramp was also larger than it normally is in March, it wasn't enough to offset the debts of those trials. So, it's not... wasn't a radical effect, but cumulatively, that's a very large market for us, so that had an impact.
Ross Seymore - Deutsche Bank Securities
Okay, and then I guess the follow-up question will be more in the gross margin side. I was a little surprised that it's supposed to be down as much it is in the second quarter. I thought loadings were supposed to be relatively flat and mix was going to improve in the second quarter. Where am I wrong in those assumptions?
Mark S. Frey - Executive Vice President, Chief Financial Officer and Treasurer
Well, Ross, this is Mark Frey. Recall that the real financial effect of lower loadings happens... delayed by about one quarter because of the inventory value of what you are building is still in inventory at the end of any given quarter. And it ships out in the costs of good sold in the following quarters. So, you get that delayed offset effect of the accounting.
Ross Seymore - Deutsche Bank Securities
Right, but I thought the fourth quarter is where you brought loading down; you were going to keep them relatively flat in the first quarter, and therefore what you sold in the second. We have an incremental drop in your fixed costs coverage. So, did something change and you ended up bringing down loadings?
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