Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Clint Morrison - Feltl & Co.
Clint Morrison - Feltl & Co.
I will start-off with a detailed financial question. The big thing that jumps out obviously was there was a significant increase in R&D expense over the last quarter, as well as the very high R&D costs. Can you just talk a little bit about that? I am assuming the R&D has to do with stuff you threw at the LG application and didn’t get paid for, but what should we be looking at in terms of R&D moving forward? Was some of the tape out expense built into this quarter?
Jim Cruckshank
We would expect to tape out the next version of the chip in March and tape out costs should be about $2 million. Part of the blip, or the big chunk of the blip, was about $700,000 we paid for applications, including work on H.264 encoder and decoder in the fourth quarter.
Clint Morrison - Feltl & Co.
The question is how much is recurring? Is this a baseline that we ought to be going forward at $4 million a quarter and consequently assume a much higher burn rate than we thought before? Where is R&D going to be over the next couple quarters?
Jim Cruckshank
It should be about third quarter – third quarter levels we do not expect a bump, except for the tape out. We are basically planning on a flat R&D budget for 2008.
Operator
Your next question comes from Joel Achramowicz - MDB Capital Group.
Joel Achramowicz - MDB Capital Group
It sounds like you’ve already shipped some of these production units to your distributor in Asia. Is there any potential for upside to that $300,000 guidance number in the first quarter?
Douglas M. Pihl
We don’t really think so. There is some chance, but when we look at the schedule so far, their build schedule, the next order of production chips most likely will fall probably early second quarter and not be reportable in the first quarter.
Joel Achramowicz - MDB Capital Group
But do you have enough visibility to see that -- you did mention maybe a ramping. Are you beginning to see that maybe in the second quarter and then from there?
Douglas M. Pihl
We are starting to see it although we don’t have any hard numbers on it yet. LodgeNet is really in the early stages of their marketing the product to their customer base and haven’t really shared a longer term forecast with us yet. But we would also comment that we are also starting to get the feeling that this is going to be a longer term project in terms of production than we had originally thought.
- To read the full transcript on Seeking Alpha, click here »
