Question-and-Answer Session
Operator
(Operator Instructions) You do have a question from the line of [Ken Hock Lim] with Credit Suisse.
Ken Hock Lim - Credit Suisse
Could you just elaborate on your sales in the U.S.? What is happening such that the sales in the U.S. is actually so weak? Do you expect any change in the geographical mix actually going forward?
Craig McHugh
Thank you for the question. As we noted today, the sales from the U.S. were down as a percentage year over year. I also commented in our press release today that our revenues were lower because of lower sales in the U.S. market, particularly in our retail segment.
There are several factors that have impacted sales in the U.S., premiere among those that I would note is related to what I shared today in my presentation with regard to our focus on flash-based MP3 players. We are beginning the transition of our MP3 product line away from our hard drive players into flash-based. As we’ve talked over previous quarters, we believe that the low price of flash allows us to be very competitive in the market while also being able to achieve target margins.
Although our hard drive based players have always done very well in the marketplace, they’ve been our lowest margin products, and as such, even as they offer the higher capacities, we’ve decided to move away to and focus primarily on our flash-based players, the new Zen Stone and Zen Stone Plus, and our very successful Zen V Plus in the marketplace.
Those products, although they offer us greater opportunity for gross margins, do go at a lower selling price so our overall, our average selling price for MP3 in the period dipped and that impacted our overall revenues in the U.S. marketplace.
At the same time, it was a very difficult market in the quarter for us in U.S. retail. Several of our largest customers noted that this particular segment was down for them. Circuit City particularly, one of our largest customers in the Americas, noted that they actually encountered double-digit percentage store decreases in the portable audio categories, and in some of the other categories that we serve in the peripherals and electronics.
I think their highlighting that in particular was witness to what many of our customers faced, particularly in the first two months of the quarter with some rebound in June. It was a very difficult segment.
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