Question-and-Answer Session
Operator
(Operator instructions)
Your first question comes from Chris Danely with J.P. Morgan.
Scott Jones (for Chris Danely - J.P. Morgan)
This is Scott Jones calling in for Chris. I have a first question on OpEx trends in gross margin going over the course of the year. How do you expect it to take down given the cost reductions in the out quarters? And then on a gross margin, could you tell me how you expect that to trend up to the target of 45% with the plans now of the fab closure help you get there over time?
Donald Colvin
Operating expense and the other is on gross margin. I think it’s obvious the industry has seen a dramatic form in its revenue and we are currently shipping under consumption. So gross margins for us is very much predicated of one the level of revenues. The faster the recovery of the revenue, the faster the recovery of the gross margin. And so, right now I think we’re in a bit of a holding. We don’t want to start projected rosy numbers and so with the relatively modest outlook we gave, we think we can probably grow our gross margin in the mid-single digit range, but we don’t have enough certainty on the exit revenue for the year to give any more color to that and as a company we always just give gross margin and revenue guidance one quarter at a time and especially in these most uncertain times, we don’t think it’s appropriate to stick our necks out any further than normal.
As far as operating expense is concerned, we’ve taken a lot of actions on operating expense. Salary reductions, bonus cancellations, headcount reductions, discretionary expense reductions, etc. and we would like to make some of these salary reductions only temporarily. So again, a lot depends on the outlook for our business. As I stated and Keith stated, we are constantly reviewing our P&L structure. So again, I can’t give you a specific answer. I think the number, if you look, in the first quarter for operating expense. If you look at that compared to the third quarter of last year, it is down on an apples to apples basis by more than $20 million in a quarter. So when I look at other companies, that cash OpEx expense saving and I think there we are certainly taking strong actions. If we are required to take additional actions, we will not hesitate to take them.
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