Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from William Myers - Miller Asset Management.
William Myers - Miller Asset Management
In addition to the weak demand, was there any pricing pressure on unit prices?
David Hubbard
Yes, I think as you can see from the margin improvement, we didn't see undue pressure on pricing. Really the shortfall came from, as I mentioned, a delay in this program over in Europe, but the pricing seemed to be consistent with our overall ASP picture.
William Myers - Miller Asset Management
I'd like to get, if possible, a little bit better picture of how your products relate to data centers. Are they primarily used to connect the equipment, the servers and storage within a data center, or are they primarily used to connect the data center to the outside world?
David Hubbard
I think the answer is some of both, but the largest demand for connectivity in the data center application is fiber management systems, which are really patch panels within the data center to connect various equipment so they can connect and disconnect and reconfigure the data center.
Operator
Your next question comes from Manoj Nadkarni - ChipInvestor Group.
Manoj Nadkarni - ChipInvestor Group
Can you please give details on the factory expansion in China and how that will affect your output and your cost structure?
Peter Chang
Yes, we did expansion mainly due to two factors. One is current utilization of our old facility, and the other is based on going forward demand. So now we're factoring in that timing and the good year, okay. So one side we can see we do need more space for future expansion and the other side is that we're going to have more space or better facility, we can also be more [vertical] integrated manufacturing, okay.
We can make parts in-house instead of outsource when the demand keeps growing in the future. So for the short-term, we don't see that much cost impact, even though we double the size. Until now, probably you will see a gross margin probably in a similar level.
Operator
Your next question comes from [Charles Shirk] - Private Investor.
[Charles Shirk] - Private Investor
I'm just curious about your stock buyback feelings at this point.
Peter Chang
Yes, I think looking at the cash management, our priority over time to grow the business through R&D and also possible [MA] activities, okay? So both for shareholder value and the buyback or cash dividend always been rate and discussed in the board meeting. So if we find that a buyback or a cash dividend turns out to be bad for the company's long-term liability and also to maintain the shareholder's value, then we will [inaudible].
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