Question-and-Answer Session
Operator
(Operator instructions) We’ll pause for a moment to compile the queue in a roster. Your first question is from the line of Vivek Arya. Sir, your line is open.
Vivek Arya – Merrill Lynch
Hi. Can you hear me now?
Kevin Rauckman
Yes, Vivek. Go ahead.
Vivek Arya – Merrill Lynch
Okay. Good morning. As we go later in the year and auto becomes a bigger part of the mix, do you see pressure on the gross margins? For example, last year's gross margins peaked in Q1, and then they were almost down 700 bits by the fourth quarter.
Kevin Rauckman
Yes. We would anticipate that margins in the fourth quarter at the end of the year would typically cycle down. However, in the near term in Q2 and Q3, we don’t anticipate as much movement there because of the – because we mentioned, we think ASPs will come up and rebound slightly in Q2 and Q3. That’s the typical seasonality that we see at the fourth quarter and down throughout the year.
Vivek Arya – Merrill Lynch
And secondly, how do we get a sense of channel inventory? I know that absolute inventory is coming down but sell through has not been that encouraging. So is it possible that the channel is actually well-stocked already? And what metrics do you actually use to measure where you are in channel? Is it weeks of forward inventory like – how do you measure where you are in the channel?
Kevin Rauckman
Well actually, let me clarify or correct one statement just to make sure everyone's clear. From a sell through basis, we actually have seen growth in the North American market on PND. So even though selling was disappointing because of the reduction of the channel inventory, sell through has increased.
So what we typically do is we measure from our major retailers consistent both inventory levels and sell-in versus sell through, as we have pretty good visibility there and we have seen a pretty significant reduction during the Q1 period. As many of these national retailers have cut their inventory, in some cases as much as in half during the period., so we believe – as we’ve said, we believe we’re at the low period and we should see sell-in and sell through track pretty closely the rest of the year.
Vivek Arya – Merrill Lynch
I see. And in the last year if you look, sales are down but OpEx is down only 6%. You’re obviously investing in R&D, but marketing spending is going down. So how do you draw the right balance between increasing R&D versus increasing marketing? And what metrics do you use to see if that's the right mix?
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