Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Ramesh Misra – Brigantine Advisors.
Ramesh Misra – Brigantine Advisors
Related to R&D, obviously it is much higher than last quarter. What are the key drivers in that? Is this related to gallium nitrate products or is it a more broader aspect?
Oleg Khaykin
It is a broader aspect. During the last quarter we have been running a very large number of new products through the engineering build so it is a lot of mask sets, a lot of the engineering wafers. That has pushed the R&D expenditures higher than the $25 million we are guiding. We did not really increase the R&D expense in terms of headcount or anything like that. We expect the last quarter probably over the next 1-2 quarters running slightly higher expenses due to the sheer number of new products and new technologies that will be coming up for launch. We embarked on a big portfolio refresher strategy about a year ago and now we are starting to see a lot of these products coming to fruition.
Ramesh Misra – Brigantine Advisors
In regard to the gallium nitride products, do we expect first products and first product revenue sometime in the middle of 2010 timeframe?
Oleg Khaykin
That is about right. We are already sampling products with our customers. We probably should see some revenue starting maybe first half of next calendar year. As I said a lot of that revenue will be fairly immaterial relative to overall IR revenue. It is kind of the early adopters that will start taking the initial product revenues.
Ramesh Misra – Brigantine Advisors
Your long-term investments declined from I guess $153 million to $121 million. Was that mostly because of the L2 assets coming down? Was there a write down affiliated with that? I missed some of the commentary on that.
Ilan Daskal
Most of it is the L2 that came down in Q3 it was about $84 million level and it came down to about $61-62 million. The write offs were the impairment of $2 million of level three the MBS and ABSs.
Ramesh Misra – Brigantine Advisors
So the decline was mostly because it got reclassified as some short-term, is that what happened?
Ilan Daskal
Some cash we used and some cash was reclassified.
Ramesh Misra – Brigantine Advisors
In terms of gross margins, the improvement in the mid 20’s level next quarter what are the key driving factors for that?
- To read the full transcript on Seeking Alpha, click here »
