Question-and-Answer Session
Operator
Thank you, sir. (Operator instructions) Our first question comes from the line of Mathew Hoffman with Cowen & Company. Please go ahead.
Mathew Hoffman – Cowen & Company
Hi Peter, Ken. Like to just touch your guidance for real quick just to make sure I understand looks like revenue kind of flattish quarter-on-quarter, I guess reflecting some of the new product uptake. And you are saying that gross margins will improve I guess on a non-GAAP basis but the EPS is not going up a whole lot is not improving whole lot is that because you are anticipating higher R&D and SG&A cost, here in the first quarter in preparation to the MiFi ramp?.
Ken Leddon
Hi, Mathew, thanks for the question, this is Ken speaking. With regard to the first quarter, we believe right now it’s the 65 to 70 level we can partly exceed, the Q4 in revenue. The margins you see some recovery because we do not anticipate any of the inventory and asset charges, evaluation charges we took in Q1 and we have a pretty good idea of the revenue in gross margin makes in our business at this point, so we think that then, so you see the recovery that 22% range we believe. And the SG&A is also not going to benefit from some of the Q4 adjustments that we saw in Q4 again that there was we talked about an engineering reimbursement in the R&D cost categories as well as in adjustment to compensation charges of that was about a $2 million adjustment those will not repeat. So those cost categories will return to normal levels. In addition, that we do expect some increase in R&D as we launch new products in the coming next couple quarters. So there will be some impact on the earnings per share for those changes.
Mathew Hoffman – Cowen & Company
Okay. So, just to clarify the R&D should maybe pick up a little bit here in first quarter on the front side of these launches for MiFi and some of the new products?
Ken Leddon
Yes, actually, our attempt to transform the company and move the strategy away from just far we are into the services and the ecosystem were on MiFi we do expect to invest in some R&D going forward. So those costs will trend up a bit to accomplish our strategy, we believe.
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