Question-and-Answer Session
Operator
Yes. [Operator Instructions]. Your first question comes from the line of Jim Suva.
Jim Suva - Citigroup
Great, thank you very much. Can we come back to the gross margin issue? I believe last quarter you had mentioned that you expected gross margins to improve or re-bounce somewhat. And I know you had mentioned that there were some inventory adjustments on your end this quarter. But I believe inventory corrections for the most part within Vishay is kind of under your control. So kind of help us triangulate around really what happened this quarter to profitability as sales are going up and margins are going down?
Dr. Gerald Paul - President and Chief Executive Officer
Okay. Well we did not guide for gross margin actually. And it was clear that we would continue to reduce inventory. In fact it's a target of the year to generate a strong cash flow, which we are doing. As it relates to the inventory reduction, you understand a reduction like that doesn't impact on the P&L which we show and Dr. Zandman pointed out without this impact we would have exceeded the street expectation. In the fourth quarter, we will stop to reduce the inventory of... to reduce the inventory in different finished goods and we will continue to reduce on the other hand the inventory and raw materials.
We also had in Siliconix a negative shift of the product mix, which contributed to the negative gross margin development vis-à-vis the prior quarter. But mostly it came from the inventory reduction.
Jim Suva - Citigroup
Okay, thank you.
Operator
Your next question comes from the line of Matt Sheerin.
Matthew Sheerin - Thomas Weisel Partners
Yes, thank you. It's Thomas Weisel Partners. Just a follow up on Jim's question on the margins, Siliconix gross margin was I guess the lowest number in three years. I know you talked about mix, you talked about inventory. Could you be more specific about the mix issue there and how you see that playing out in the next couple of quarters?
Dr. Gerald Paul - President and Chief Executive Officer
Well, we had... there was a replacement of sales volume to the handsets by volume for the desktops which was at lower variable margins. We are working on cost reduction quite heavily and we see a normalization of the mix going forward, but it will not come overnight. But we work heavily on the cost reductions.
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