Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Ittai Kidron – Oppenheimer & Co.
Ittai Kidron – Oppenheimer & Co.
I guess this is a question for everyone. I was trying to dig a little bit deeper into the gross margin performance. Great progress on that front, but Ed and Sanjay, could you be a little bit more specific on the progress you've made in the third quarter with handsets, just from a back of an envelope of getting to around three to four points of sequential improvement in gross margin in that unit? Can you comment if that's about right, and if so, what are the key drivers there?
And Sanjay, going forward into the next quarter, is it, at this point, less so about cost efficiencies and now it's more about the product mix and your smartphones that's going to drive that going forward?
Ed Fitzpatrick
A couple things, on the margin improvement, you're in the right ballpark there. The favorability in the margins were given by a few different things, mix driving a piece of it as well as supply chain efficiencies that Sanjay had mentioned. So improvements in the sales and operations planning process leading to less excess and obsolete inventory and other savings driving those results.
Sanjay Jha
Ittai, I think those comments apply to mobile devices also. I think mix as we go from feature phones to smartphones makes a big difference. We have really focused on supply chain efficiency in mobile devices in our cash turn and managing our cash flow.
With respect to going forward, I think you're right that while we will definitely focus on further cost reductions, most likely we will look to reassign those savings in such a way that we drive our product portfolio in high – our smartphone revenue. So from here on, I think you're right in saying that our smartphone traction is the quickest driver of our financial performance.
Operator
Your next question comes from Mark Sue – RBC Capital Markets.
Mark Sue – RBC Capital Markets
Sanjay, can we get a sense of when we might celebrate mobile devices turning breakeven? Will it be mid next year or will it be later? And if for some unseeable reason we don't get the reception of the subsequent units for the DROID phones next year, will you consider further right sizing the business?
Sanjay Jha
Mark, let me maybe lay out a framework for thinking about this business in 2010. I think about our portfolio in three segments. There's the smartphone segment, then what I call the feature phone segment in mature marketplaces, and then I would call feature phone or phone devices in emerging marketplaces.
- To read the full transcript on Seeking Alpha, click here »
