Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Richard Kugele – Needham & Company.
Richard Kugele – Needham & Company
When you're talking about the gross margin potentially being hit by 50 basis points due to your reclassification, you're still expecting the 10% to 15% gross margin targeted range to remain in place?
Thomas Ligouri
Yes.
Richard Kugele – Needham & Company
Regardless of whatever customer you want to think about here, but the outlook from those customers, has there been any wavering given both corporate and consumer elements to their customer bases and the outlook they've provided to you or has it been somewhat skewed because of the products roll outs? Any sense on the feedback you're getting from those customers and is that why you're guiding to this level, or is it just what you're reading in the press?
Reza Meshgin
We do see a general softness in the demand for our product and we have factored that in and that's why actually we said that we're looking at a wider range of outlook and forecast for our Q1 at this point of time.
Richard Kugele – Needham & Company
In terms of your inventory levels, are you comfortable with those given this outlook or are you scaling back your manufacturing in any way?
Reza Meshgin
We had a slight increase of inventory. However, that's not due to any build up in the hubs or products that are sitting in the queue on the customer demand point of view. It was just because of the increase sales that we had in Q4.
Thomas Ligouri
The last conference call we did talk about that. If you look at today's inventory, it's still at 30 days. The last year or so, we've been in the 33 to 35 day of inventory. You can probably expect our inventory to increase to that level.
Richard Kugele – Needham & Company
In terms of the satellite facility that helped you meet this upside, can you expand that further if you need to, or should we assume that 220 is pretty much at least for the first half of '09 the most we can see?
Reza Meshgin
I wouldn't say first half of '09. If you remember we started this newest facility in Q3 and pretty much finished it within the early part of Q4. If we need to add capacity we can do that within a short period of time on the assembly side.
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