Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Satya Kumar – Credit Suisse.
Vis Vellore – Credit Suisse
The first question is regarding OpEx. If revenues are coming back, first thing how do we model OpEx going into the second quarter and if revenues are back to the $500 million level, what level of OpEx should we expect?
Joanne Solomon
With respect to modeling OpEx going forward, we always described that materials was the only variable cost in that direct forecast. With the magnitude of the cost reduction efforts that we’ve gone through, we’ve shown that both labor and other cost of goods sold are also variable in this downturn.
We continue to monitor the environment and continue to scale our cost structure in line with demand. Specifically answering your question, I would expect to see that from backwards upon the balance sheet, that R&D and SG&A maybe down a couple million dollars from the Q1 level, and then we could see some increasing with respect to other cost of goods sold, starting at that model, that’s how we do it.
Vis Vellore – Credit Suisse
Okay, and also you mentioned in the first quarter the ASP decline was in the 1% to 2% range. What is your outlook on this? Do you expect it to be 1% to 2% or now that with revenues kind of coming back, do you see if your peers getting more aggressive on pricing?
Kenneth Joyce
Over the past three quarters, it’s remained relatively stable and that’s our position. As we said during the call, we’re not going to just drop prices to fill the factory. We don’t think that’s a sound strategy, so we’re going to continue to work with our customers, part of our business model on a regular basis is to reduce cost and pass the savings on to our customers and we do that, but we think the 1% to 2% is the appropriate range from what we can see at this time.
Operator
Your next question comes from Timothy Arcuri – Citi.
Junaid Ahmed - Citigroup
Hi, this is Junaid Ahmed calling for Tim, Citi. My question is regarding end demand and production levels, given that the restocking is helping the utilization rates right now, once that restocking is complete and if we assume end demand to migrate from there at moderate levels, how do your production levels line up relative to the end demand; would you think it’s below or above and would it be correct to assume that the revenues could roll back once that restocking is complete?
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