Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Vernon Essi - Needham & Company.
Vernon Essi – Needham & Company
I wanted to dive in and on this presentation there was a lot of good detail here, but I wanted to just address the question on gross margin and get a little more of an understanding of the moving pieces to that.
Obviously, to some extent implying you’re going to have obviously a better revenue ramp into the back half of the year at least through the fiscal year rather and that’s another question I’ll ask, but before I get to that, what are you looking for in terms of the moving parts to improve the gross margin. It sounds like you’re going to continue the reduced inventory.
Can you give us an understanding of where you’re targeting sort of a days in inventory level relative to that, and then also any other levels in there that we should be aware of on the foundry side or however you’re going to address the cost metrics on gross margin?
Kris Sennesael
Well Vernon, first of all so, now in last quarter and this quarter and also next quarter, we are working on the inventory reduction program, which is not helping us on the gross margin, but we believe it’s the right thing to do. We have to go down to industry standard inventory levels, which are approximately in the range of four to five turns, but we see an improvement in the gross margin mainly coming from the increased revenue levels driving increased activity and improving our absorption.
Vernon Essi – Needham & Company
Okay, I mean obviously that’s the case, but are there any other elements of that that you feel, I mean in other words, design or anything you’re going to bring to market that would be a catalyst other than just better absorption on the top line; and in terms of the inventory, I mean that’s an aggressive move from here and it’s understandable. Do you foresee there being any charges to bring it down to that level?
Chris King
Vernon, first of all I think in addition to what Kris said, I think that more absorption is the main factor, but as we go through the year we will be making cost reductions and we have been working with our suppliers in on every front, in reduced pricing and that’s been very successful. In addition to that we are introducing some new products as we get to the back end of the year that will help us from a mixed standpoint.
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