Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Adam Benjamin - Jefferies & Co. Please proceed.
Adam Benjamin - Jefferies & Co.
Hi, guys. I was just curious about your RMI guidance as well as IDT, I know that includes some discount to the sell through of the inventory, but I just want to be clear Mike, as you look at that $6.8 million, that’s really just one month. So, how should I be thinking about that on a full quarter basis?
Mike Tate
Sure. RMI concluded Q1 with $17.1 million in revenues, and they have a pretty reasonable growth profile going through the year. So, our guidance for September reflects one month of a quarter at that run rate, with a slight reduction for the amount that they sell through distribution. They run generally about 50% of their revenues through distribution in a given quarter. Hopefully, that gives you enough color on that.
Adam Benjamin - Jefferies & Co.
Yeah, I was just trying to get a better sense of what it look like on full quarter basis because it seems a little bit higher, but obviously the business is doing a little bit better than it did in the first half. That’s fine.
Then in gross margin, I wonder if you could just break out the pieces and then the puts and takes there on the 66, you did higher in the quarter. You’ve been tracking a little bit better. Can you kind of break out the core business? The IDTI contribution, the RMI and how you get there and then talk a little bit about the 40-nanometer and how that could play into maybe more so next year?
Mike Tate
Okay. Yeah, so for Q2, we did 66.7 which is a little higher than our guidance of 66. So we’re entering Q3 with good, positive margin momentum. And this is being driven largely by increased shipments into the carrier space 3G and wireline and [Telco] really uses our most valuable products, so that that’s a good margin trend for NetLogic and that will continue in the second half.
As you look into Q3 specifically, the IDT business is a lower margin profile than NetLogic, partly because it’s a more enterprise-focused, but we look at the IDT products and it’s kind of similar to what we experienced with Cyprus. We see a lot of opportunities for cost reductions and we are already aggressively attacking those. So, we are hopeful of seeing margin improvement as the new owners of that business line.
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