Question-and-Answer Session
Operator
(Operator Instructions) We have Ehud Gelblum; your line is open sir.
Ehud Gelblum - J.P. Morgan
Hello, can you hear me?
Jagdeep Singh
We can.
Ehud Gelblum - J.P. Morgan
Great, thank you. Duston, for a quick moment I thought you were about to give us Q3 guidance here?
Duston Williams
No, no, we just thought it was appropriate to share with you at least the generic feel for what we potentially see happening in Q3.
Ehud Gelblum - J.P. Morgan
All right. I’ll try and get a little bit more than just generic in a second, but just to clarify a couple of things that you and Jagdeep said earlier, when you are talking about having now three of the world’s top five carriers as customers, DT is clearly one of them. Does level 3 count is really top five?
Jagdeep Singh
We haven’t said any specifics about who they are; all we said on the call was that there are three of the top five. So if you look at who are top five carriers are worldwide, I think that will you give a sense for the kind of feel we’re talking about.
Ehud Gelblum - J.P. Morgan
But how do you judge? I mean, do you consider level 3 as top five? How do you measure that revenue traffic?
Jagdeep Singh
Yes, if you look at it by revenue for example that way, surely the top carriers in the world are all going to be Tier 1 kind of incumbent players’ right.
Ehud Gelblum - J.P. Morgan
Okay. So in that case Level 2 will not be one and it’s the carriers we’re talking about; we’re not talking about an internet service provider that would be in that category?
Jagdeep Singh
Yes, that’s right, and just to be more specific, Level 3 is not one of the world’s top five carriers; and internet content guys aren’t really carriers. This is really top carriers in worldwide right.
Ehud Gelblum - J.P. Morgan
Okay. I wouldn’t have thought they were either; I just wanted to make sure. The LCM that cost you 300 basis points of gross margin this quarter, what happened with that; was that a surprise to you versus your guidance before, that 300 basis points of your gross margin hit or was that something that was in the guidance normally.
I mean, it sounded like that extra lower cost inventory that was more than you expect to be. Why was that; was there more discounting than anticipated or were the costs of the goods higher than expected. Just why was that adjustment more than you thought to the tune of 300 basis points of gross margin?
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