Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Ittai Kidron - Oppenheimer & Co.
Ittai Kidron - Oppenheimer & Co.
First on your services slow down comments, through fiscal 2008 on a quarterly basis you have seen sequential growth of low to very high single digit quarter-over-quarter in services. Do you still expect those services? Although it will slow down do you still expect it to remain positive growth from quarter-to-quarter through year-end?
John McAdam
Absolutely we do. The reason we were raising that is there has been a lot of discussion on our services business and clearly from a market perspective if your product growth is slowing over time that is going to affect the overall growth of your services business. As we look at fiscal 2009 it is certainly still going to be a sequential growth driver as well as a healthy year-over-year growth driver.
Ittai Kidron - Oppenheimer & Co.
Can you explain the increase in gross margin in the services business? It seems like you have had a record quarter this time around. What was different this quarter and how sustainable is that?
Andrew Reinland
Primarily the gross margin on the services side is driven by headcount. A lot of it is just timing of hiring. We had a pretty light hiring quarter as we talked about with the 15. We have also said many times that our target is more in the 73-74% range for service but I do think we are going to see a higher service margin over the next couple of quarters just related to headcount.
Ittai Kidron - Oppenheimer & Co.
Going back touching on the headcount comment is the 5-7% reduction in headcount will that help the gross margin as well and Andy can you put dollars on this? What is the quarterly opEx savings run rate you hope to achieve and will that be fully reflected in the June quarter?
Andrew Reinland
To answer the first part of the question we expect that to be a part of it. In terms of the exact dollars on opEx I don’t have that at hand but more from an operating margin perspective is really our focus. We do believe that will allow us to be at that 25% level and above as we go through the year.
Operator
The next question comes from Sanjiv Wadhwani – Stifel Nicolaus.
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