Question-and-Answer Session
Operator
(Operator instructions) Your first question comes from the line of Chris Danely with J.P. Morgan.
Chris Danely – J.P. Morgan
Guys, can you just talk a little bit about general OpEx and gross margin trends going into next year?
Keith Jackson
So, on the OpEx trends, we would expect them in raw dollars to come down as we enter next year, you know, kind of reflecting the lower run rates that we’ve had since Q3, and so again we will keep that prudent and continue to manage that in a downward fashion. On the gross margins we’re going to have less capacity utilization in Q1. We will be doing the appropriate factory closures for the appropriate amount of time. We will be accelerating the factory exits that we announced last year and taking other measures to try and preserve as much as the gross margin as can be. So Donald, I don’t know if you have other things to add.
Donald Colvin
Sure. Obviously we’re in a challenging environment as we cannot rely on historical backlog numbers et cetera for projecting the future. I tried to explain in our notes, in our observations, that the month of October has been very atypical and indeed if you look at companies announcing towards the end, their guidance was much more negative sequentially then those who announced at the beginning. So clearly our business conditions are deteriorating and that gives a big uncertainty on the outlook for next year. So it is very much – it is really too early to tell the gross margin is going to be a function of the revenue, but we’re taking all necessary actions to ensure that we don’t grow our inventories, and you probably noticed last quarter that we didn’t – we reduced our inventories. Our distribution inventory is well at the low end of the range. Our internal inventories came down by around 3 days and so we’re continuing to manage our business in a tight way. And so that I think will allow us to have the best gross margin profile going forward and as I said on concluding remarks, we still believe that they will generate a very healthy the cash flow both in the fourth quarter and also in the first quarter, but we cannot quite put a finger on what the revenue will be in the first quarter. And that is going to be the biggest variable in determining the gross margin Chris.
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