Ceragon Networks Ltd (CRNT) 2008 Q3 法說會逐字稿

Good day, everyone. Welcome to the Ceragon Networks limited third-quarter 2008 results conference call. Today's call is being recorded and will be hosted by Mr. Ira Palti, President and CEO of Ceragon Networks, and Mr. Tali Idan, CFO of Ceragon Networks.

Today's presentation will include forward-looking statements under the Private Securities Legislation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause Ceragon's actual results to be materially different from those expressed or implied by such statements. For additional information regarding the risks associated with Ceragon's business, please refer to Ceragon's annual report on Form 20-F and Ceragon's report filed with the SEC.

Web users can visit Ceragon at www.Ceragon.com to read the complete forward-looking statement language. I

I will now turn the conference over to Mr. Ira Palti, President and CEO of Ceragon. Please go ahead sir.

Thank you for joining us today. With me on the call is Tali Idan, our CFO. Since we had a call ten days ago, we will try to keep it short.

Our final Q3 results are within the range of preliminary results we announced on October 16. Revenue are up 31% from Q3 of 2007, in line with guidance. A less favorable mix cause gross margins to decline. Operating expenses held steady and net income reflected the impact of lower gross margin.

A few major points bear repeating. Our business is doing fine. There has been no major changes in demand, competition or pricing. We are pleased with the initial market penetration of our cost reduced next-generation platform. Booking continued to be strong with book-to-bill of 1. We still have good visibility and the feedback from the field is positive.

Still, as we look beyond this year we are still a little cautious due to growing macroeconomic concerns and negative sentiment, not because we see any change happening in our own business. High-capacity backhaul remarries a major bottleneck in Ceragon Networks and the rationale of immigration to IP is unaffected.

We assume that spending plans will receive additional scrutiny in the current environment. This could result in decisions taking a bit longer and sales cycles lengthening a little. Meanwhile, we expect the underlying demand to remain strong and we expect Ceragon to continue to grow in 2009.

Now, I would like to turn the call over to Tali.

Thank you, Ira. I will start with the second press release we had today announcing the program to repurchase our shares. Our Board of Directors has authorized us to repurchase Ceragon shares using up to $20 million. Based on current share price, this program would represent over 10% of our outstanding shares.

Now, I will quickly go through the final Q3 numbers and various breakouts. In Q3, revenues grew 31% to a new record of $58.1 million, compared to $44.5 million in Q3 of 2007. GAAP net income was $3.5 million or $0.09 per diluted share. Excluding stock-based compensation, non-GAAP net income in Q3 was $4.1 million, about the same as in Q3 of 2007. Non-GAAP EPS was $0.11 compared to $0.13 in Q3 last year and a much higher share count.

Turning to the revenue breakdown, the Service Provider category accounted for 89% of total revenues in Q3, about the same as in Q2. Private Networks represented the remaining 11%. IP revenues in Q3 were 30% of total revenues.

Asia-Pacific continued to be a source of strength, accounting for 54% of total revenues. EMEA accounted for 32% of revenues and Latin America returned to a more normal 7% of revenues, while North America accounted for the remaining 7%.

We had one 10% customer in the third quarter, our OEM partner, Nokia Siemens Networks. OEMs accounted for over 43% of total revenues in Q3, which put pressure on our gross margin. In Q4, we expect that revenues from OEMs will return to the 25% to 35% range.

Sales of our cost-reduced next-generation platform helped to offset the lower gross margin for OEMs with the net impact about 100 basis points. The balance of the declining gross margin related to non-Ceragon products such as antenna, accessories and other products we buy from third parties mainly for long-distance or indoor solutions. Some of these long-distance projects continue into Q4, so we will continue to have some impact from this factor.

We expect gross margin to gradually return to the mid 30s as our mix of OEM business returns to normal and our new products account for a higher proportion of total revenues.

The dollar strengthened during Q4 -- Q3 versus the Israeli shekel, which lessens the impact of currency versus our original expectations. The negative impact in Q3 was about $750,000, compared with about $600,000 in Q2. In line with our indication last quarter, our net tax expense was $250,000 or 6% of revenues.

Turning to the balance sheet, total cash and cash investments were $112 million at the end of Q3, compared to $108 million at the end of Q2, indicating positive cash flow of $4 million. DSOs were 95 days. Inventory dollar increased but inventory days decline.

Q3 bookings remain strong. Book-to-bill was 1.

We expect to Q4 revenues to be in the range of $56 million to $60 million, bringing the full year of 2008 revenue to the $216 million to $220 million range. As Ira mentioned, we are inclined to take a conservative view of the future due to the widespread economic concerns and negative sentiments. But at this point, we do not see any change in the underlying demand.

Now, we will be happy to take your questions.

(Operator Instructions). Amir Rozwadowski, Barclays Capital.

Thank you very much and good morning, Ira and Tali. I just wanted to touch base on the direct sales, Ira, and how we should attribute the year-over-year decline in direct sales. Was that due to some of the softening or the ongoing softening in the Private Networks business or how we should think about that and then going forward where you think that could be?

Okay. I think that what you are seeing is, first, direct sales did decline. We had, in this quarter, from the booking perspective very good direct sales. They increase quarter-over-quarter from the last two quarters. What you saw is, in Q2 mainly of this year and beginning Q3, were a lot of OEM orders which were shipped this quarter. If you remember, Q2, we said where a book-to-bill which was much higher than 1, a lot of it coming from the OEM sales. So in our mix overall, we don't see the direct sales declining at all.

Okay, so from a bookings perspective --.

And we expect them as we gave guidance into next quarter, we expect them account for a much larger share if OEM was returned to the normal range of 25% to 35%.

Great. That is very helpful. In terms of your DSOs, it seems as though they have been creeping up a bit and I wanted to understand. Is that sort of based on the geographic mix?

Yes. DSO is indeed related to geographic mix and customers in Asia do tend to demand and eventually get a little bit longer (inaudible) terms.

Okay. That's helpful. The last question, if I may? It seems as though you folks have plenty to do very well in Asia and the underlying strength they are. Ira, can you give us a little bit of color in terms of the longevity of that purchasing cycle or perhaps better put, the visibility in to the purchasing cycle. Do you anticipate any slowing down from that perspective?

What we see on a day-to-day basis, we don't see any slowdown in the APAC region. All the customers we talk with at this point continue what their plans. Now, their plans are not short-range and the customers in the other locations in the APAC regions do have plans in the market there with a number of subscribers (inaudible) will continue to grow. On top of that, I read the newspapers like all of us and I need to take a more cautionary note on top of that event where there might be the effect by some of the economic turmoil around what we are hearing directly from the customers but at this point, I have not seen any changes in the customer plans.

Great. That is very helpful. Thank you very much.

Tim Long, Banc of America.

Thank you. Two questions if I could? Number one, could you just talk a little bit? Obviously you had the spike in OEM business this quarter. Could you just review with us the margin impact when that obviously it takes down your gross margin a little bit? What can be done there if OEM remains a decent-sized piece of your business? I know it goes down a little next quarter but is it just cost reduction or could there ever be some repricing? That's number one.

Then number two, if you could just update us on the 10% operating margin goal? It is pushed out a little bit. Obviously, with the top line coming in a little bit I think that is going to be a little more challenging. Could you update us on timing of 10% op margin and also how you think you get there, be it more topline gross margin, OpEx? That would be great. Thank you.

I will take the first half in which you referred to the OEM part of it. We are on continuous cost reduction activities mainly for introducing either cost-reduced products or new generation of products. I think Tali said on the call that the effect this quarter was about 100 basis points from having more OEMs being offset by our new generation of products. We will increase -- we started shipping the new generation of products this quarter in quantities, but this will increase over time as we move into Q4 and the first quarter of next year, where I believe that by sometime middle to end of the year, the majority of our products we will ship will be from the next and the new generation. This offsets in many ways the more business we had from OEMs. While we expect the business from the OEMs to return to the normal range of 25% to 35% within the quarters and our gross margins with those two affects to return to the mid 30s range gradually over the next few quarters.

Just following up on that before the 10% question, is it safe to assume that the sales and marketing percentage of sales on the OEM business is going to be lower to make up some of the weaker gross margin on it?

Yes, because when we a lot more OEM, we have less headcount to deal with that, although we work closely with the OEM to make sure the deals are happening.

Okay, great.

Regarding the 10% operating margin which was our target, no doubt that it's because of the decline of the gross margin, achievement of the goal has been delayed. We believe that gross margin will improve as we said and therefore we believe that we will be able to achieve the 10% operating margin in the second half of next year.

Do you think it is largely gross margin that gets you to that level?

Yes, we do reduce our operating expenses as a percentage of revenues all of the time but this is usually a small, gradual decline. A lit of it is coming from the gross margin.

Okay, thank you.

Ittai Kidron, Oppenheimer.

Hi, guys. Tali, first, with regards to the buyback, do you need to go through the Israeli courts or is this something you can implement tomorrow?

No. I don't need to go through the court and I can start it very soon.

Okay, that is good. Ira, with regards your commentary that you have not seen a change in your business but you are more cautious, if you had to look at the profile of your customers, their geographical location, their network deployment phase, if there would be a macro impact to your customers, where would you expect to see it first, either on a geographic or size-wise type of customers? Where would you look first for those signs with your customers?

Okay. First, I think to be fair to the statement, we did see changes this year. The beginning of first quarter of this year, we saw a significant slowdown in North America.

Okay, let's remember, moving backward for the statement of what I'm not saying, I'm not seeing a change in the patterns. We did see, in the beginning of the year, a change in the patterns. I don't see further changes at this point.

If you ask me where I would look at, usually the first changes would be my expectation is looking at our smaller customer and not the larger ones, mainly around WiMAX probably deployment where are those new networks highly dependent on external financing. I would expect the slowdown to happen there first because most of the customers that we work with are very well-financed or part of a very large group which are well-financed and which I think will continue the deployment plans.

Okay, so most of the Indian customers you have are likely to be unimpacted right now. WiMAX seems to be a very small part of your business if at all at this point. Is that a fair estimate?

That is a fair estimate.

Tali, if the dollar continues to strengthen against the Israeli shekel, how far into the future do you hedge yourself and on what exchange rate are you going to benefit from it or near-term you're not going to see the benefit because you are already fully hedged? Also, if you will see a benefit, would you be more inclined to rehire again or to give the shareholders the upside?

Yes, we have been doing some additional hedges in the last few months. Right now, we are estimating that Q4 will have a negative impact but lower than in prior quarters. So the negative impact that I'm expecting in Q4 is around $0.5 million, versus $750,000 and Q3.

As far as hiring, yes, we did hire employees in Q3, mainly in Asia, in a rate which was higher than let's say the Q1 and Q2 hiring rate, but we will continue and keep our expenses in line.

As you go into '09, when does the exchange rate of the 3.8 to 3.9 the dollar is at right now, we do you start fully benefiting from that? Is that more of a late '09 or you are also somewhat hedged for the first half of '08 at the current or previous exchange rates?

I believe it will start from Q2 '09.

Q2, okay.

Yes, the benefit.

Okay. Good luck guys.

Daniel Meron, RBC Capital Markets.

Thank you. Ira, I think, on the last call, you said something to the tune that you expect growth of 25% or so in 2009. You sound a little bit more cautious this time around. Can you give us a sense of what kind of growth we should be looking for?

On the last call, you are probably talking about a quarter ago. Right now, we are more cautious on the outlook for 2009. We are assuming a more wider range of 10% to 20% for a range for next year. This is very, very preliminary. We are currently in our budgeting cycles and doing the analysis and we will probably have a more updated figure by the time we will talk about Q4 results or year-end results.

As far as the cost base, I understand that FX is no longer a headwind but any plans on the cost base that you will be doing to realign yourself?

I think that, when we talked about the cost basis, we had an effect on first from the product cost, which will increase the gross margin as we head into the mid 30s again. I think we gave an indication on this call that we are still targeting to reach our 10% operating margin by the second half of next year, so we will have to adjust a cost basis and operating expenses to match that target.

Then can you give us a sense, on the buyback? Maybe, Tali, you can address that. What are your parameters for that? Is there a certain price range that you will take, how aggressive you're going to be with the buyback?

No, there is no range set up but there is a discussion and we can make decisions from time to time as we go. I would say generally we are serious with this plan. We will go and we will purchase and I'm sure that we will spend money probably in the range of $4 million to $5 million every quarter.

Okay. Then in this regard, can you give me a sense on how much -- I mean is this a 10B5 plan or how long do you think until it will be implemented?

No, it is not a 10B5, at least not at this moment. My best estimate right now, as I said, it will probably take three to four quarters with a range of $4 million to $5 million but again, it is really a guess. As we go forward, we will make additional decisions.

Okay, the last one for me, Ira, back to you. We have been reading about a bunch emerging market economies that are blowing up of late. Can you give us a sense what is your exposure to anyone of those countries either in Eastern Europe, Latin America or Asia Pacific?

We're working globally, I mean, all of the different economies. I don't think any one of the economies has a significant part of our revenues. The only country which is significant within revenue's very large number is mainly India.

Okay, thank you. I will yield the floor.

Steve Ferranti, Stephens Inc.

Thanks. Good morning. I wanted to see if you guys might be able to give us a sense for how long do you think carriers could postpone backhaul related purchasing decisions in an environment where they may be looking at expenditures a little more closely. Any sort of color you guys can provide on that front?

I will give color of two kinds. Now, two things that we see where our equipment is being used -- one is increasing capacity on existing links. In this type of situation, an operator willing in some ways to sacrifice the quality of service that they gave to their customers can delay almost indefinitely, until the point where they will start losing customers. The name of the game there will they have someone who will pick up those customers with better quality of service. My guess is it is usually a six to nine-month cycle where things are being delayed and being handled specifically. This mainly refers to customers in the U.S. and that's the type of slowdown we saw in the U.S. and somewhat in Western Europe.

In other locations, the name of the game is expanding geographies, being able to capture new customers. This is more for business decision -- is the business out there to be captured even in this economic environment and to be gained from it, and is there a competitive competitor going into those new geographies, new regional expansions, going from the cities to the suburbs, suburbs to smaller cities? This is more for competitive gain. There my guess is people will not delay deployments because the name of the game there, the first guy who gets there or soon up to the second are getting the major market share. If anyone deploys, they will deploy as well. As long as -- if there will be no competition, people will delay but because there is competition, they will not be lay the expenditures.

That's very helpful. I guess to your point, in more developed countries where the spending is more sort of capacity related, can you give us a sense for what you are seeing today in terms of what kind of capacities are needed at these base stations, particularly given the proliferation of smart phones, what types of capacities you are seeing needed at a base station site how hot they are running those networks today?

Okay. Let's focus first about planning, because planning did not stop with any of the operators. We still see very expensive RSP [RFI] activities and people planning on expanding their networks. That is why I'm not saying I'm not seeing any change in the demand on patterns in the market. People are planning today minimal about 25 or more work typically 50 megabits per second per base station, which is tending to the capacities and we see even higher numbers as they move forward.

My guess is that the 25 is more typical of what they expect to see on the usage today. The 50 to 100 is more a year to two years down the road, but today, with the equipment, it doesn't make sense to put anything below 100 into a base station. We do sell the equipment with the capabilities to do a gradual increase of the capacities to the base station, which helps a lot of those projects.

That is very helpful. Thanks guys. I appreciate the color.

Thank you very much, Steve.

Irit Jakoby, Susquehanna.

Thank you. It's a follow-up on the last question. I know the US market has been soft for several quarters now. What are you seeing in the US? Are you seeing more deterioration or any?

No, we see the market as being sable. We see the enterprise business for itself being very stable over the last few quarters. We see a little bit of a slowdown within the operators. We saw a significant slowdown in the carriers business up to this point, but we see all of the large operators continuing to plan and how to expand the capacities on their network, both in planning, in RFIs, in RFPs, in all of the activities which lead to purchasing.

What is your sense on what is going on at Sprint and ClearWire and how that may work out?

I think the only information I can give you is the same information that you have from the newspaper because I don't have a closer type of touch with them. They are both -- we work with both of them at the working levels and at the continuing to plan levels and they're [RFI] activities. But I think you're more referring to will the deal close? Will they have the financing at that level? I can echo what I'm hearing in the newspapers, so I won't echo it because I don't add value.

Okay, fair enough. The last one for me, given your cash balance and what has happened in the market, what is your view on potential acquisitions?

We are always viewing potential acquisitions in the market, although, as I said a long time ago very cautiously making sure it makes a lot of business sense. We will continue doing that. I don't think we will change our philosophy around that and we will continue doing that, very cautiously looking at the business sense that this will bring and how will this bring value to Ceragon.

Do you view as becoming more likely in the current environment or less likely?

I will not even categorize it as more or less likely. We will continue to look and if it make sense, we will do something. If not, it might make more sense because valuations went down, but also (inaudible) you need to look at why valuations went down.

Okay, thank you. That's it for me.

Larry Harris, C.L. King.

Thank you. A couple of questions, one with respect to operating expenses. I sort of gather that, based upon where you see the revenues for 2009 and your goal to reach a double-digit operating margin in the second half, we just won't see the same rate of growth in the operating expenses. Can you provide maybe a little more specificity? Are you going to freeze expenses at levels where we are now? Are you going to allow some growth? Any sort of sense in terms of operating expenses for next year?

First of all, the budgeting process is still ahead of us. So we would know better after the budgeting process. However, what I would say now is that no, we do not expect freezing the expenses. We expect growing the expenses because we also expect growth in revenues. As before, we plan the operating expenses to grow in a lesser rate of revenues, so they do bring some improvement to the bottom line.

I see. So we're still looking at 10% operating margin in the second half of 2009 as being a target, but in terms of revenue growth, about 10% to 20% year-over-year for the full year.

Yes.

Any sort of thoughts in terms of tax rate for next year? I guess, this year, of course you have been paying taxes on the interest income. Any sort of preliminary thoughts in terms of tax rate for next year?

Right now, I would stay with the same guidance that they gave before, that taxes are in the range of 5% to 10% of revenues.

5% to 10% of revenues or --?

(inaudible) pretax earnings.

Yes, I'm sorry, pretax earnings.

Okay, 5% to 10% of pretax earnings. All right, thank you.

Jonathan Kreizman, Oscar Gruss.

Hi, guys. Again, I know you are not able to say too much about the Sprint ClearWire account, but very generally maybe you could give us a sense of how you expect bookings to be [attributive] (inaudible) would this be linked to a rollout in regions meaning like a [50 by 60 basis] (inaudible) WiMax improvement or otherwise?

I will say (inaudible) clearly I do not think they know, so I don't know at this point. I think they're in planning stages, working out the details; they ar3e working out the vendors; they are working out how to merge the two networks. So it is way, way too early to tell.

Blaine Carroll, FTN Midwest Securities.

Thank you. Ira, the question is how far out do your orders currently extend? Do you any risk to any of those orders right now that are currently in your backlog?

Most of the orders extend to shipping within 30 to 60 days. No, I don't see on any of those orders any risk.

Wait. Some of our backlog, although, is project related. Those do extend to 180 to almost 270 days until we recognize them. On those, again, I don't see risk because this is projects that we are implementing in the field right now with equipment which is probably delivered by now and some of it installed, some of it being in the process of being installed. We do not expect any risk on those.

Okay. Is it very to say that a certain amount of your business, when you originally enter into the discussions with the customer, that you might have these frame agreements in place?

We do have frame agreements in place with some of the customers. We do not count frame agreements as backlog. The only thing we count as backlog is specific orders against the frame agreement.

Okay. Are there anything situations where --?

From my prospective, a frame agreement is a frame agreement for future orders I need to bring in.

Right. It's sort of the price is set or determined, correct?

Yes.

Any issues with people coming back on the frame agreements, Ira, in order to try to renegotiate those?

I had one of those with someone who was trying to extend the payment term.

Just to extend the payment terms. Okay, on that same --.

A very interesting part -- it's a very strong customer but I think he is using the newspaper noise to get better terms.

Okay. Then on that same line, is there any risk to any of the receivables? Are they all backed by letters of credit and so forth?

Let me say that our receivables, for the vast majority, they have either credit insurance by an insurance company or a letter of credit. So we have been comfortable with the receivables.

Okay. All right, thanks.

Andy Schopick, Nutmeg Securities.

Good morning. A cup of questions about customer concentration -- I wonder if you could be a little bit more specific about what the contribution was from Nokia Siemens Network in the quarter and year-to-date. Secondly, the top five customers, approximately how much did they contribute to revenue this quarter?

Nokia was our number one customer this quarter. It was true for prior quarters as well, and it was the only one who was over 10%.

Can you be more specific?

No, I prefer not to be more specific. This is usually the type of information that we provide. So we can go with that.

Okay. How about the general contribution to revenue from the top five customers this quarter?

I would say that, after that, most of them are just a few -- even the largest ones would be just a few percentage points of revenues.

All right, thank you then.

Kevin Dede, Morgan Joseph.

Ira, would you mind giving us a little more insight on what is going on in India? I understand they have delayed the 3G options. I am just wondering how you see some of the smaller operators financed and whether or not you think they are still targeting that sort of 10 million sub add per month sort of growth rate there?

Let's remember, India most of the growth is to 2G. It has nothing to do with the 3G deployments. It is capturing more handsets and people's sticking (inaudible) 2G networks and the 10 million subscriber growth that was happening is coming from the six established [similar] carriers capturing more geographies and capturing more customers. I have not seen the slowdown yet there and I'm not as close to the numbers on a daily basis and will have to see the reports shortly. I think this is continuing to happen there with significant expansions from all of the major [server] operators.

3G was a layer on top being delayed. I don't see it as a reason for a slowdown in there. I don't think any of the operators thought it would be significant overlay for next year.

I think that one of the things that you're pointing out and as someone asked me before, where do I see risks? About five or six new operators in India. I do not think all of them will get the financing to build network. I think some of them will, some of them will not. Some of them have very strong backing, and some of them less of that.

Do you see the continued reliance on sort of the SDA charter capacity radios just to maintain that sub growth that -- you know, on the 2G networks?

Yes. In India very specifically, it will be [SDH] growth. They grow the network and I know some of the operators in India are even talking about increasing the proportion of the SDH of PDH within the networks to account for the capacity.

Then how about the use of trunking versus maybe fiber on -- as these larger operators cover more geography?

I think most of them are already set up for the trunking long distance as they go. We do provide trunking solutions for them over [microwave] where it is required. Some other things we delivered is SDH trunking, also in India. Usually, in India, it is being done via [SDH] split now not classical trunking but it's long distances as well.

Very good, okay. Thank you.

James Faucette, Pacific Crest Securities.

Thank you very much. I just wanted to continue the line of questioning that Blaine was pursuing in terms of when you look at your contracts and the equipment that is being purchased, particularly outside of North America. I guess I am wondering how far in advance you can set that pricing, even if you are only looking at 30 to 60 days on the equipment itself. I guess the reason I ask the question is that you have seen a lot of deterioration in the currencies in emerging markets around the world. I am wondering at what point that may start to show up in demand and whether that is affecting demand and if you can talk about how you would think about those potential problems developing?

Most of our pricing worldwide is in US dollars. So the affect of the deteriorating currencies in some of the emerging world, actually on the pricing level, would not affect us. It might affect the inclination to buy from the customers. I have seen it through the cycles and as you remember, the dollar weakened over the last few quarters. It is usually not a major effect on the decisions on how the deploy the networks.

Okay. So, if that is then the case, I guess I am wondering how carriers are able to protect themselves or basically how they are able to avoid it from being a major decision on their deployment plans.

All of the carriers and all of the telecom business worldwide, most of it is being done in US dollars. The component which is done in local currency usually is only the installation and the services part, which had to do with local equipment. The carriers probably have to hedge themselves or protect themselves partially.

Okay, that is very useful. Just a question on OEM relationships going forward is you have said that you expect those to remain solid but return to a more normalized mix going forward. I know this was something that you talked about a couple of weeks ago, but I am wondering if you can just talk about what the puts and takes are, the things that could cause that mix to shift one way or another and kind of what we should be watching for to anticipate better -- any changes in that mix? Thank you very much.

Let's remember that our OEM business also deals, the OEM does, with their customers. There is and it is very similar to our direct business. It has a buildup of small deals and large deals. Part of the shift that we see -- and we see cycles like that, like in our direct business and the OEM, sometimes it goes up and sometimes it goes down. It depends on specific deals the OEM does with their customers.

That is what I think we saw this year. We saw a peak in Q2 and Q3 pending one of Nokia Siemen's customers which pushed the orders up. I see a little bit going down and probably we will see pickups in some of the quarters of next year. This is not untypical to think we have seen in years before but the OEM business goes up and down. Sometimes it flattens out in the revenues itself as we ship and produce; sometimes it does not flatten as much because of the revenue.

Okay, that is great. Thank you for your help. Ira.

Bill Choi, Jeffries.

I just wanted to follow up on the discussions around India here. With what we have seen in the past downcycles, there's some level of consolidation among operators. If you have new operators that are getting difficulty getting financing. Certainly, the more established ones can do some acquisitions. Can you just talk about your penetration within all of the operator and kind of if there are any discussions around consolidation in that market currently?

The question is about consolidation. You would probably have the ask the operators. As I said, any information I'm privy to is the newspaper information on those discussions, so I don't think I can add any value to that type of a discussion. We are proud, out of the top six operators in India, several operators, five of them are customers of ours either direct or via Nokia Siemens Networks with varying shares within the different operators with some of our competitors.

And how about in any of the emerging?

What? Emerging operators?

Yes.

Emerging operators, most of the five or six emerging operators have not even started to deploy. They are all in planning stages at this point.

Then Tali, when we think about the 10 to 20, we have not seen a sequential decline in revenue I guess really since 2001. Any thoughts as we head into the first quarter where we are thinking about consistently looking for sequential rev growth?

Yes, I believe that we will have sequential revenue growth in Q1.

All right, thanks. That's it for me.

Speakers, that does conclude the Q&A session. Please go ahead with any closing remarks.

I would like to thank everyone for joining us today. We had a short conference upfront and a lot of questions at the end. I hope we answered all of them. I would love to speak with each one of you on a one-to-one basis as we progress through the quarter. Thank you so much for joining us.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and thank you for using AT&T Executive Teleconference service. You may now disconnect.