GSI Technology Inc (GSIT) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to GSI Technology's fiscal 2009 third quarter conference call.

(Operator Instructions)

Before we begin today's call, the Company has requested that I read the following Safe Harbor Statement.

The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially.

These risks and uncertainties are described in the Company's Form 10-K filed with the Securities and Exchange Commission.

Additionally, I have also been asked to advise you that this conference is being recorded today, February 5, 2009, at the request of GSI Technology.

Hosting the call today is Lee-Lean Shu, the Company's Chairman, President, and Chief Executive Officer.

With him are Douglas Schirle, Chief Financial Officer; and Didier Lasserre, Vice President of Sales.

I would now like to turn the conference over to Mr.

Shu.

Please go ahead, sir.

Thank you.

Good afternoon, everyone, and thank you for joining us today.

As we said in today's press release, third quarter results were pretty much in line with our expectations, [keeping pace] in our last conference call in October.

And a $14 million net revenue was slightly below the low end of our guidance and reflect a quarter [that intensive] global demand was even softer than most had anticipated.

On a positive note, gross margin of 42.7%, or 300 basis points lower than in the second quarter, was within the expected range.

In effect, the fact that, despite the anticipated decline, overall sales, high density and those higher margin products continued to do relatively well.

Notable here were sales of our SigmaQuad line, which increased in both dollars and as a percentage of net revenue compared to the second quarter.

In the third quarter, SigmaQuad shipments were 14.9% of total shipments, compared to 10.2% in second quarter.

Overall sales to Cisco Systems, our largest customer, remained steady at approximately 25% of revenue, compared to the second quarter.

In dollar sense, they declined by approximately $600,000 to $3.6 million, compared to $4.2 million in the second quarter.

We also saw some weakness in a couple of other telecom customers.

Offsetting this decline were relatively strong sales in Europe.

Asia was down in large part due to a [test and measurements] customer, whose few orders tend to be somewhat lumpy and whose second quarter order was not replicated in the third quarter.

The military sector remains strong, accounting 20% of revenue in the third quarter, compared to 15.9% in the second quarter.

Operating expense of $3.9 million were up approximately $20,000 from the prior quarter.

Higher on defense were partially offset by lower SG&A expenses.

Inventory at the quarter-end was $13.5 million, down from $15.6 million in the second quarter.

Given the outlook of fourth quarter revenue, this is an appropriate label.

We continue to have the benefit of exceptional balance sheet with no debt and more than $47 million in cash and liquid investments.

When we last spoke, we know that we, like so many others, expect the recession to be severe and prolonged.

In the intervening three months, all indications are that the recession is likely to be even deeper and more prolonged than was then anticipated.

That being the case, we expect to see further pressure on revenue as our customers themselves feel the effects of the continued economy slowdown.

Our current expectation is that fourth quarter 2009, net revenue will be in the range of $11 million to $11.7 million.

Gross margin is expected to be in the range of 36% to 38%.

The forecasted reduction in gross margin, compared to recent quarters, is a result of the expected product and customer mix in the March 2009 quarter.

We expect that as the revenue rebounds, our gross margin will recover and move back within our gross margin target range of 40% to 43%.

I will now turn the call over to Doug.

Thank you, Lee-Lean.

December quarter was our 21st consecutive profitable quarter.

Net income for the quarter was $1.5 million or $0.05 per diluted share, on revenue of $14 million, compared to net income of $1.7 million or $0.06 per diluted share, on revenue of $14 million in the comparable period a year ago, and $3.6 million or $0.12 per diluted share in the prior quarter.

Third quarter 2009 gross margin was 42.7%, compared to 45.7% in the prior quarter and 39.7% a year ago.

The December gross margin was within the expected range and reflects the continued shift towards higher density, high-margin products.

SigmaQuad shipments were approximately 14.9% of total shipments in the third quarter fiscal 2009, compared to shipments of approximately 10.2 million -- 10.2% in the second quarter of fiscal 2009.

Our military business increased from 15.9% of net revenue in the September 30, 2008 quarter to 20% of net revenue in the December 31, 2008 quarter.

Third quarter operating margin was 15.1%, compared to 24% in the prior quarter.

A year ago, operating margin was 14.4%.

SG&A expenses were $2.2 million or 15.6% of revenue, compared to $2.4 million or 13.9% of revenue in the prior quarter; and $2.5 million or 17.7% of revenue a year ago.

The decrease is primarily attributable to a decrease in outside consulting expenses related to implementation of the Company's enterprise resource planning system and Sarbanes-Oxley Act compliance.

Our expectation is that operating expenses will be approximately $400,000 higher in the March 31, 2009 quarter due to research and development projects in process.

Operating expenses rose slightly to $3.9 million from $3.7 million in the prior quarter.

Offsetting a modest decline in SG&A expenses to $2.2 million from $2.4 million in the second quarter was an increase of approximately $330,000 in R&D expenses.

Given the decline in net revenue, the result was a decline in operating margin to 15.1% from 24% in the prior quarter.

Total third quarter pretax stock base compensation expense was $348,000, compared to $309,000 in the second quarter and $387,000 in the comparable period a year ago.

The December tax revision of $1 million included increase in our tax reserves due to some exposures arising from state tax audits for fiscal 2002 through fiscal 2007.

We expect the effective tax rate for the March 2009 quarter to be approximately 24%.

Net accounts receivable have decreased to $7.4 million, down from $10 million at September 30, 2008 as a result of the lower net revenue in the December quarter compared to the second quarter.

DSO has improved to 53 days, down from 56 days at September 30, 2008.

At December 31, 2008, we had $47.6 million in cash, cash equivalents, and short-term investments; and $15.1 million in long-term investments, $63.8 million in working capital, no debt, and stockholders' equity of $84.7 million.

We held no auction rate securities at December 31, 2008.

On November 6, 2008, our Board of Directors authorized us to repurchase, at management's discretion, up to $10 million of our common stock.

Under the repurchase program, we may repurchase shares from time to time on the open market or in private transactions.

The specific timing and amount of the repurchases will be dependent on market conditions, security law limitations, and other factors.

The repurchase program may be suspended or terminated at any time without prior notice.

During the quarter ended December 31, 2008, we repurchased 869,414 shares at an average price of $2.88.

As of February 2, 2009, we have repurchased a total of 1,339,530 shares, which include the 869,414 shares purchased -- repurchased in December, all of these at a total cost of $3.8 million.

Operator, at this point, we will open the call to Q&A.

(Operator Instructions)

Your first question comes from the line of Edwin Mok with Needham.

Thanks for taking my question [now].

So, first question is for Doug, just some housekeeping.

What was your accounts payable in the last quarter, and how much CapEx did you spend in the last quarter?

Account payable at the end of December was $2.7 million.

It's probably down -- I don't have the number here in front of me for the September number, but as of last March year-end, it was $4.3 million.

So it's down significantly, mostly because we've reduced our [wafer] purchases and other manufacturing expenses.

[TSMC] has a lot of open capacity, and we're trying to work with them to reduce our wafer cost, so we've cut back a bit on our wafer purchases.

Great.

And CapEx?

We spent approximately -- I believe it was a little over -- almost $600,000 in the nine months ended December 31.

Great.

That was what I was looking for.

One question about your [Obex line], right?

So, looks like it had gone up a little bit in last quarter on some development costs, and in the coming quarter you expect to spend a little bit more on that.

And how do we look at that beyond that?

Do you guys have a, what I can call, like a normalized R&D spending -- a target, if you will?

You guys go back -- a few quarters back, you used to spend around $1 million, plus or minus, right, per quarter?

How do I look at that going forward in your R&D expenses?

Well, the next couple quarters, we're going to have some R&D mask tape-outs.

We'll have about $500,000 in the March quarter, and that's why the expenses are up a little bit.

I know last quarter, Didier talked briefly about our LLDRAM -- our low latency DRAM -- and we've actually hired approximately half a dozen people during the quarter to work on that project.

And we've also had some additional expenses during the quarter related to some outside consulting expenses for that project.

But in terms of going forward, a reasonable number -- yes, probably somewhere in the $1.7 million to $1.8 million number.

I don't have a good number for you right now.

We're still in the process of putting our plan together for next quarter.

It's obviously going to be a little bit higher than it was before.

Total payroll costs for the group of people that we've hired are in the range of $0.5 million a year.

So if you want to take it on a quarterly basis, it's somewhere around $125,000 per quarter more.

Like I said, the next two quarters or so, we will have some R&D tape-outs that are going to skew our spending levels.

And those will range from, like I said, about $0.5 million in the March quarter; and depending on the time of tape-outs, could be as much as almost $1.3 million or so in the June quarter.

Okay, let me just clarify that $1.7 million to $1.8 million number that you were talking about.

Does that include that $0.5 million, or you, from a more of a normalized range, average, over four quarters?

For the next couple quarters, that includes some of those expenses.

Okay.

If you look at the trend, we're about $1.3 million in the September quarter.

Add a little bit of headcount, I'd say somewhere between $1.3 million and $1.5 million is probably more of a normalized number.

Great.

That's what I was looking for.

And then -- actually, one more financial-related question and a few other questions.

Just long-term investment actually gone up little bit last quarter [cash], right?

Which one?

Long-term investment in last quarter actually went up [2.6]?

It's fairly consistent with where it's been.

It's just a matter of when we buy investments, at anything that matures outside of a year, it's considered long-term and is classified as such.

I've been having a real problem investing money lately because we try to be conservative.

I think that's reflected in the fact that a year ago, we had almost $20 million in auction rate securities, and we've recovered every penny of that.

There's just not a lot available to purchase right now that we're willing to invest our money in.

Some of the things we've been buying recently are a lot of these government-guaranteed issuances.

Yes, interest rates are pretty low, and there's really not a lot of attractive stuff out there to buy.

Okay, great.

I have two market questions now, then I'm off the queue.

First one, just maybe a general view of the March quarter in terms of market or maybe your end market.

You mentioned that -- I think it was [in September, you] mentioned that military, actually, is -- remain at 20%, which is a pretty good size, and SigmaQuad grew in the December quarter.

I was wondering what happened to those two areas, which seem slight growing areas.

Are we seeing decline; and if so, are they declining more than you -- than the point of your guidance?

How do we look at those?

So for military -- the military sector grew the percentage, and it also grew the -- a few -- a bit by dollars as well.

But again, the large percentage of growth within the military sector was also attributed to the fact that the revenues were down.

So dollars were up, but not significantly.

So it was essentially flat dollars with percentage going up, but the revenues coming down.

I anticipate military percentages to certainly be at least what it was two quarters ago, which is 15.9%, but I don't think it will hit 20% again this quarter.

We had a couple nice pops in the December quarter, and I think it will be difficult to maintain that 20% market share for the March quarter.

Okay, great.

Military signs slumped here.

What about SigmaQuad?

SigmaQuad, the percentage should remain the same.

Dollars will come down a bit.

We had one of our Tier One customers have a nice build on in December quarter using the SigmaQuad product, and the indications we've got is that they built a bit much, and so they're looking at burning off some inventory, which will certainly affect some of the revenue this quarter.

You care to venture -- to guess if SigmaQuad will grow in the coming calendar year?

Yes.

Yes, that's -- that will happen.

We have, certainly, some design wins that we have recently closed that will be, certainly, within this calendar quarter.

A couple of them at Cisco, and several of them outside of Cisco.

So yes, the -- certainly, the SigmaQuad revenue will increase throughout the year.

Great.

And then one last question, just on pricing and channeling inventory.

What are you guys seeing, at least for your products, in terms of pricing and channeling inventory out there?

So no strange pricing dynamics; and certainly, the lower density products -- we'll call lower density eight meg or below, prices have maintained.

And then we have normal price erosion on the higher density products, like the 72 meg and the 36 meg.

But -- so nothing unusual, even in this market condition.

And channel inventory?

Yes, distribution inventory is the deferred revenue value, which is what we bill on that -- it's not our cost -- dropped from $4.6 million to $3.7 million in the span of the quarter.

So there is definitely not an excess there.

If anything, I think we'd probably like to see more inventory out there, but they've really reduced their inventory levels.

Did you say $4.6 million to $3.7 million?

From $4.6 million to $3.7 million.

Great.

Thanks.

That's all I have.

Your next question comes from the line of Tristan Gerra with Robert W.

Baird.

Hi, this is Scott Hurling calling in for Tristan.

Thanks for taking my call.

I just had a couple of quick questions.

I wanted to follow up a little bit on a couple of the questions that Edwin had.

You were saying that you expect SigmaQuad to grow this year.

What could we expect it to be as a percent of revenues coming out of the end of this year, and when would we expect the LLDRAM to really start to ramp and become a significant portion of revenues?

So I'll address the SigmaQuad portion of the question.

So we've always maintained that we were looking for about a 20% of our revenues for SigmaQuad going out of the calendar 2009.

We still feel comfortable with that number.

Okay, and should that just be a pretty steady ramp throughout the year, or are you expecting a step function, maybe in the June quarter, since you've got these design wins that are closing?

It'll be -- it won't be a step function.

It'll be gradual increase.

Again, we're getting more and more design wins on that family.

Certainly, some are larger [TAMs] than others, but certainly, they're not all coming in one quarter.

They're coming over time.

Okay.

Thanks.

Your next question comes from the line of Manoj Nadkarni with the ChipInvestor Group.

Hi.

Good afternoon, and congratulations on decoding the AR list completely.

Thank you.

Long-term investments -- are these mostly munies and liquid?

Mostly state munies and some corporate obligations.

Okay.

All right.

So if you look at cash [output] plus long-term investments, you have usually more than $2.00 per share.

That's true.

Yes.

Okay.

What are your expectations for revenue from Cisco in the current quarter?

So -- I'm not sure if you've looked into their announcement in the last few days, but they're expecting 15% to 20% down in their revenues.

Certainly, I think our revenues will be down with them, probably in a similar percentage.

Okay.

And would your revenues typically move along with their revenues, or is there a lag or lead to your revenues?

Yes, that's a good question.

In the past, it hasn't always tied, again, because even though we are designed in in several business units -- in fact, when I've done the analysis the last two quarters, we were in 11 business units within Cisco, of which no single business unit accounted for more than 30% of our business.

And so we don't always track their percent up or their percent down.

In this case, what we've seen we will probably be pretty close to tracking them this quarter.

All right.

And can you guys give us briefly an update on 65 nanometer and [99] nanometer processes that you see for your products, where you are?

Okay.

The 90 nanometer -- we just have (inaudible) and received the last 90 nanometer part that we designed.

So intended, development-wise, we writing up all our [99] nanometer part, ever.

Okay.

35 nanometer, we expecting to see the [Silican] next quarter.

For one product, the high-speed SigmaQuad quarter, and we probably see another 35 nanometer the quarter after.

Okay.

So basically, we complete our product development at 90 nanometer, and we are seeing the pipeline of 35 nanometer coming up.

And the upcoming expense for the mask tape-outs.

Are those for 65 nanometers?

Part of it is 65 nanometer, part of it is the LLDRAM.

I see.

Okay.

All right.

Thank you.

Yes.

We do have a follow-up question from the line of Tristan Gerra.

Hi.

Yes, sorry about that.

I guess I got cut off there.

I was wondering if you could give any kind of an update on the competitive landscape.

Samsung seems to be suffering on their nano and DRAM side.

I didn't know if you'd seen any change in them on the SRAM side of things.

And then also, could you give us -- reassess how we should think about you from an end-market perspective?

Should we still think about telecom and networking being 78% to 80% of the business, or should we think about military going forward, being in this 15% range?

Any kind of thoughts on that would be great.

Well, let me start with the competitive landscaping.

So certainly, we haven't seen much coming out of Samsung.

As you mentioned, certainly, DRAMs and flash have been challenging as well as anything else.

But with Samsung, they actually have not introduced a new SRAM in some time; and from what we hear, there is not an SRAM on their roadmap at this point.

In fact, we've heard some of the opposites.

We heard that they're certainly looking obsoleting some more products, which they've done in the past.

So we don't anticipate any additional pressure from Samsung.

And you have to remember that the SRAM market is different than the nan and DRAM market in the fact that nan and DRAMs are very high volume, low-mix kind of a market, so it's easier to kind of try and flood the market with product, while with SRAMs, it's a different model.

It tends to be lower volume, higher mix, so it makes it more difficult to, I guess, flood the market certainly.

So we haven't seen that kind of price pressure or prices going up and down like the nan and the DRAM market.

The second question regarding market segments.

So the networking telecom portion of our revenues has actually come down over the last couple quarters.

We're actually running in the low- to mid-60% now.

So, as you mentioned, in the past we've been as high as 80%, but for the last few quarters we've actually brought that percentages down by increasing other market segments.

So we anticipate that networking and telecom will stay in that mid-60% kind of range.

Military, as I mentioned, should maintain, maybe come down a little bit from this quarter, because again, 20% is the high it's ever been.

The telecom -- I'm sorry, telecom -- the test and measurement portion of our business was actually down in December.

Lee-Lean had mentioned how one of our larger customers did not take any product in the December quarter.

And actually, at this point, it looks like they're not going to be taking any this quarter.

So I anticipate that market to still be down for us, but will be recovering in the June quarter for us.

And I guess, longer term, should we think about, like 65% networking telecom, 15% military, and then how should we think about the rest of the 20%?

Is it 10% testing and then 10% other or --?

No.

So right now, it's the -- again, 60 -- we'll call it mid-60% and then 20% for military.

The rest of the markets fluctuate between 2% and 8%; and the other markets we track are industrial, automotive, test and measurement, work station, consumer, high end audio and broadcasting, and then medical.

So the rest of those -- in fact, this past quarter, none of them were over 4%.

So they were pretty spread evenly.

As far as going forward, again, it's going to be tied to the LLDRAMs.

So certainly we're not anticipating too much LLDRAM revenue anytime soon.

It's -- right now it's -- we haven't seen [Silican], and it's going to be some time before we are ready to sample the device.

But once that's out, that right now is geared towards the networking and telecom.

So I would say we're going to maintain our market percentages until that product becomes shippable.

At that point, I think you'll see a shift to a higher percentage revenue coming from networking and telecom because of that product.

Okay, and do you have any kind of a gross margin target on the LLDRAM?

Is it too early to tell?

Are you going to try and put it in the same kind of bucket as an SRAM, or is it going to be a higher margin product?

I think it's not going to hurt our corporate average.

I think, from what we've seen, we think it will still fall within our corporate gross margin targets.

But again, we're probably looking at a year or more before we really start seeing anything there.

Okay, and then, Doug, I just wanted to confirm on the tape-outs.

You said you're looking for one in the $500,000 range here?

In the March quarter, and could be $0.5 million to $1.3 million or so in the June quarter.

It's all a matter of timing and when we feel it's appropriate to do those.

Anything past those for the rest of the calendar year?

Besides the next two quarters, we're looking at a 65 nanometer.

We're looking at LLDRAM.

Okay, just like probably two quarters down below could be up $0.5 million to $1.3 million.

So it depends on the timing.

So when it ships -- we may have some of the money flow into the quarter after.

So basically, at this moment now, we are looking at basically (inaudible).

I think he's also asking for anything beyond that next year.

Oh, I think we are going to be quite busy on the 65 nanometer.

So I think at this moment, the roadmap pretty much the LLD and the 65 nanometer.

Yes, I guess one other comment that I can make is that typically, when we charge things to R&D, it's just the first mast set on a new process technology for us.

So let's assume that we do -- and I'm not saying we're doing this -- let's assume we had two 65 nanometer tape-outs.

What we would probably end up doing is expensing the first one to R&D and then capitalizing the second and amortizing that to cost of goods sold.

Okay.

Okay.

I guess to answer your question, it looks like there's just a couple, potentially, R&D tape-outs coming in the next year.

Okay, that's very helpful.

Thank you very much.

Sure.

Sure.

You do have a follow-up question from the line of Edwin Mok with Needham.

Hi.

Thanks for taking my call.

I have a - well, this is a follow-up question, if you will.

So if I go back to the last cycle, right, back in 2002 or so -- last cycle, your (inaudible) business went down to, maybe, around $5 million to $7 million a quarter.

Obviously, we're in a very tough environment right now, but obviously, GSIT is a very different Company right now.

Yes.

Can I ask -- maybe, Lee-Lean, you can help me here, right?

Yes.

What are the few metrics that you're looking at to make sure that you don't go back to that level?

You guys have great profitability; and always, I think, everybody wants to keep this profit model going.

So what are the things that are different now that will enable you not to go back to that $5 million to $7 million low per quarter level?

Yes, sure.

I think that you know we -- the Company has been here for almost 15 years, and we went through three cycles of recession now.

We went through '98, 2001, 2002, and today.

Of course, I mean, we [lever] like before.

We have more than $50 million in the bank.

Of course, financially is very, very strong, and we have a low inventory.

Basically, we - somehow, today we expertise a lot of our material in the line that does make a shipment.

Okay.

So the cost will be very competitive just because we don't have inventory, and we have enjoyed the lower cost of today's environment.

And development-wise, we have so many products lined up in the pipeline, and we are going to have a fun [part of all these coming out].

So even in today's environment, we try to be profitable.

We have a 21 profitable quarter going, and even though we're down to 11.5 in the neighborhood of revenue this quarter, I think we still can be profitable.

So we try to be as profitable as we can and still continue doing the product offering and R&D activity, and we are buying back our stock.

So --

I -- I --.

That's how we look at the -- this cycle.

I think the other thing, Edwin, is that up until these last couple years, we didn't have the SigmaQuad product line, and that's something where there's a tremendous amount of growth or tremendous amount of opportunity for us.

So that's different than four years ago or eight years ago.

Okay, great.

Okay, then just quickly, on, I guess, a follow-up with that is -- if this [instance] becomes even worse, right, which some people, I guess, are predicting that way, right, how do you look at your -- will you guys take some cuts, because you mentioned that you actually had to add some people with the LLDRAM implementing.

I understand investing for the future is important, but will you venture to take a cut as protecting profitability a high priority in your mind, or how do you look at that?

No, we are not looking at that.

We are -- all I say is, [Didier], the development -- I mean product development and the marketing.

We don't have a manufacturing.

We work with our vendor closely and to bring down our costs.

And basically, I don't see we are doing the layoff or reorganization or anything like that.

We just don't have a lot of headcount.

It's almost embarrassing sometimes to talk about how much we have.

There's really not a lot to be gained by laying off people.

One thing -- we've already decided that we're not going to be doing raises or anything in the near future, so we've delayed that.

Normally, we would have done that April 1.

We're not going to do that at this point until we see how things shape up.

There are potentially other things we can do.

Maybe we can have people take vacations or something.

But we really do run pretty lean as it is.

Yes, of course, anytime I have probably such good profitability in the last two quarters.

One final -- actually, I guess, just a clarification on the LLDRAM.

I think, Didier, you mentioned something about not -- you don't expect to see Silican in the coming quarter.

Can you give, maybe, roughly, the timeline for that product?

When will you expect to see Silica, and when do we expect to get to a point where we can start sampling and ultimately --?

Let me take that.

Okay.

We -- if everything go well, we probably have the Silican third quarter -- sometime third quarter, fourth quarter timeframe.

But remember, this is our first attempt on a very complicated design.

So we're really not expecting the Silican come out, and then we can [make sure] another way.

So we are more expecting the second half of 2010 to have some impact -- the financial impact [on].

Great.

That's exactly what I was trying to figure out.

But -- so basically, product -- [for] Silican in second half of this calendar year, maybe sampling first of '10 and maybe start to see some revenue in second half.

Okay.

Sounds great.

Thanks.

That's all I have.

Thank you.

Thanks, Edwin.

Your next question comes from the line of [Jeeve Macon] with Courtside Capital.

Hi, guys.

Many of my questions have been answered, but just a clarification, if you could, on the R&D.

I suppose, to follow up on the last questioner, if you're in a situation, come the second half of this calendar year, where, let's say, the sales are -- haven't rebounded or perhaps have even fallen somewhat.

Should the R&D beyond the -- that tape-out go back down to that $1.3 million, $1.5 million, whatever, quarterly level, or is that just the nature of doing business, that there will always be things you're working on for 2010, 2011, so it'll be constant, where are the new levels for R&D?

I think, given the fact that I wouldn't expect a lot of R&D tape-outs beyond the next couple quarters, we could be in the $1.3 million to $1.4 million range.

Okay.

So you would expect expenses to come down -- total expenses come down the second half of the calendar year?

Definitely from December, yes, they could, in the second half of the year.

Yes, at this moment, I think we are pretty comfortable we can be still at the break even, and also try to keep our profitable quarter streak alive.

You definitely seem like --

If we couldn't do that, then, of course, the cost -- we have to consider how to manage our cost structure and everything on that.

And so at least, I think, at this moment, as far as we are looking at, we are going to have a new product tape-out, and still try to be competitive and be profitable.

Does that mean, if I'm reading into your comments properly, that you would expect revenue to come back in the June quarter?

I think it's a little early to talk about that.

We've given guidance for the March quarter here, and it's tough to do that as it is.

Didier is working on a forecast for the next fiscal year, and we really haven't had a chance to take a good look at that yet.

Okay, but without giving guidance, is my arithmetic correct in that you'll be -- assuming you hit your guidance for March, you'll be roughly break even, and assuming you want to be break even for June, your sales have to go up, given the higher tape costs?

How -- putting it that we are optimistic, even though the recession is bad.

It is, but I think we are pretty optimistic --.

I'd say it would be tough to be profitable at this revenue level with $1.3 million and the tape-out expenses.

Yes.

Okay.

All right.

If that's what you're asking, that's the answer.

Thank you.

And then, you addressed earlier the Samsung as a competitor and then not really -- not much changing.

Other competition -- am I wrong in wondering if Spansion is a competitor, and do their financial issues -- do they have any relevance?

Or any other competitor changes in the market?

No, so they are not a competitor.

And as far as other competitors in the market space, there really hasn't been any new competitors have entered.

We've had one that actually is -- has a lower percentage of revenues.

IDT, who used to be more significant SRAM player in the past, this past quarter reported that their SRAM revenues are down to 5% of their total revenues, which, I believe, is a low for them.

Couple quarters back -- I should say, maybe not a couple quarters back, but certainly, a year ago, I think they were at 14%.

They came down to 7%, and now they're down to 5%.

And again, there's another company who hasn't introduced a new SRAM in quite some time.

So I don't actually see the competitive landscape getting worse.

I think optimistically, there may be a chance it'll get better with Samsung, being the largest supplier in the market space, potentially continuing their obsolescence that they've done in the past.

And then, can you say again the share buyback -- where you are at the current time?

Yes.

Through the 2nd, we've repurchased 1,339,537 shares.

For what price?

Total, I think you --?

The average is around $2.80, $2.82.

Okay.

Great.

And would you expect -- I know you have the authorization for $10 million worth.

Let's assume you hit that at some point soon.

Would you expect to continue to purchase shares?

I guess, let me answer that a different way.

We have a [KB51] plan in place, so it's kind of out of our control, other than during open windows for us, to make changes to that plan.

But really, based on all of the regulations and limitations, for the most part, we can only buy somewhere between 6,000 and 10,000 shares a day.

Now we got to the level we're at, because there were several blocks that we purchased, and our plan does allow blocks.

But to be honest, I don't believe there are that many shares out there that people are trying to sell.

So I guess I'm surprised we've already spent $3.8 million, but I think I'd be shocked if we got to $10 million anytime soon.

But you would expect the plan to do what it does, so --

Yes.

-- so just in case there is availability.

Yes.

Okay.

Great.

I guess the last thing I would say is I commend you guys on doing the buyback at these levels, and I hope you continue.

So, thank you.

Thank you.

Thanks.

(Operator Instructions)

There are no further questions at this time.

Thank you all for joining us.

We look forward to speaking with you in another three months when we report our fourth quarter and year-end fiscal 2009 call.

Thank you.

This concludes today's conference call.

You may now disconnect.