Question-and-Answer Session
We'll now open it up for Q&A, which Dave will moderate. Operator, you can poll the audience for questions.
Operator
Certainly. (Operator's Instructions) The first question comes from Mark Sue, RBC Capital Markets. Your line is open.
Jill Hanar - RBC Capital Markets
Hi. This is Jill Hanar for Mark Sue. In your guidance for the first quarter you stated because of product mix you expect gross profits to be down, is that sequentially and what can be modeled going forward?
David G. Cote
Justin, you want to take that?
Justin Spencer
Sure thing. So as I mentioned, our EPS guidance of $0.01-$0.06 does represent a sequentially down quarter from this quarter as well as year over year. That's primarily attributable to two factors. The first is the cable strength that we had in the first quarter of 2009 had a very significant impact in our first quarter '09 results, which was largely a reflection of the pent-up demand that we had exiting 2008. We don't expect that revenue — just to give you some perspective, our cable product margins are reasonably high and when we have a large mix of cable revenue, that has a significant impact on our overall margin structure.
We don't have that kind of pent-up demand because we're now able to meet the demand through our production capability.
The other thing that is going on is we have had some strength recently in our OEM and services revenue product lines. And these products tend to have slightly lower margins, and so that's one of the drivers of mix, which will result in lower gross margins in the first quarter of 2010.
What your model should likely reflect is a fairly significant amount of seasonality with less than the majority of revenues in the first half and even less waiting to profit in the first half, and then much more revenue in the second half. And given that revenue stream in the second half, more profit.
We also have some additional cost reductions which we announced, but have yet to fully realize, which will kick in, in the second half of fiscal 2010, and that will also drive a higher level of earnings in the back half of the year.
Jill Hanar - RBC Capital Markets
Okay. And if you can give us some color on what you are hearing from MSOs on CapEx?
Dan Madden
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