Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Uche Orji – UBS.
Uche Orji – UBS
Can you give us any idea as to, when you describe the market going forward, are there any drivers that could influence gross margin if we look down for the rest of the year. Can you give us any guidance as to what are the factors that will influence gross margin.
Thomas Gay
The dominant factor in the most recent quarter was the customer mix as we saw an increase in our largest Set-Top box customers who because of their size get more aggressive pricing. But as we look forward, we feel that some of our cost reduction efforts will start to offset some of that and that is part of the reason for our guidance of feeling that we should see some increase in our margins going into the next quarter.
Uche Orji – UBS
If I look at your operating expenses, any insight as to if there is any room to take OpEx down? Most companies have been very active at doing that. How should we think about operating expenses with the environment as you've described.
Thomas Gay
We generally feel comfortable with the current levels. There may be some mild increases as we continue to invest in product development and efficiencies.
Uche Orji – UBS
Can you give us any updates on the new opportunities especially on cable TV? Any update on your qualification process and how much progress you're making in this market?
Kenneth Lowe
In general, each quarter we get a little bit further with the various cable operators that we're dealing with. We've spread out to reach quite a number in both North America and Asia and have touched base a little bit in Europe as well.
We feel that the planning process is moving ahead as expected and we believe that some of the more aggressive operators will be making their, moving into trial probably sometime in the first half of next year, and then hopefully if all goes well, moving into early deployments in the second half of next year.
Uche Orji – UBS
On the Set-Top box inventories, I'm not quite sure I understood why there was a spike in IPTV in the second quarter. Are there any comments in terms of what's happening on the inventory side? Can you give us any insight as to how to explain your inventory and also what insight into the China inventory?
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