Kopin Corp (KOPN) 2003 Q2 法說會逐字稿

Good day and welcome everyone to the Kopin Corporation second-quarter 2003 financial results conference call. (CALLER INSTRUCTIONS).

Let me remind everyone that a replay of this conference call is available from 8:00 PM Eastern time through Wednesday, July 30th by dialing 719-457-0820 and entering confirmation code 270944.

You might also access an archived version of the call on the WebSite at www.kopin.com.

With us from the company is the President and Chief Executive Officer Dr. John C.C.

Fan and the Chief Financial Officer Mr. Richard Sneider.

At this time, I would like to turn the call over to Mr. Snider.

Good afternoon everyone and thank you for joining us for Kopin's second quarter 2003 conference call.

I will begin by reviewing our financial results for the second quarter of 2003 and sharing our outlook for Q3.

John will update you on our recent operational achievements, our strategy and each of our product platforms.

Then we will take your questions.

Before I begin, I want to remind everyone that during today's call taking place on Thursday, July 24th, 2003, we make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

These statements are based on the Company's current expectations, projections, believes and estimates and are subject to a number of risks and uncertainties.

Potential risk include but are not limited to, demand four ar CyberDisplay and III-V products, market conditions, the Company's ability to ramp up production in its manufacturing facility, factors in the company's 10-K for the year ended December 31st, 2002, 10-Q for the month ended March 29, 2003 and other documents on file with the Securities and Exchange Commission.

The Company does not take any duty to update any statements made during today's call.

If you have not received a copy of today's news release, it is available on our WebSite, www.kopin.com, or you can contact Ferrell (ph) Associates at 617-542-5300, and a copy will be sent to you.

Turning to our financial results, total revenue for the second quarter was 19.9 million, in line with guidance we provided in our first quarter news release and conference call on April 23rd.

Total revenue in Q2 increased 11 percent sequentially and declined 4 percent compared to the same period in 2002.

III-V revenue in the second quarter of 2003 was 8.7 million, down 9 percent sequentially and 8 percent in the second quarter of 2002.

The sluggishness of our III-V business is attributable to the (technical difficulty) -- weaknesses in Asian and CDMA markets and the corresponding buildup of finished goods inventory in the wireless handset market.

In our CyberDisplay product area, we achieved our product revenue expectations of at least 2 million in the quarter.

CyberDisplay revenue in the second quarter of 2003 was 11.2 million, up 30 percent sequentially and roughly flat with 2002.

The sequential increase reflects large orders from our camcorder customers and R&D revenue (technical difficulty) -- we did not have in Q1.

Net loss for the second quarter was 1 million or 1 cent per share.

This compares with a net loss of 2.2 million or 3 cents per share in the sequentially first quarter and a net loss to 1.6 or 2 cents per share in the second quarter of 2002.

The net loss per share for Q2 2003 and Q2 2002 was calculated based on 69.4 million shares standing.

Costs of goods sold for 2003 represented 74.1 percent of product revenues versus 83.4 percent in Q1 and 76.6 percent one year ago.

The improvement was primarily attributable to sales mix, particularly an increase in revenue from higher margin displays.

Research and development expenses were 3 million or 15 percent of revenue in the second quarter which is in line with our projections.

We expect revenue R&D expense to continue in the 15 to 20 percent of revenue range in Q3.

Selling, general and administrative expenses in Q2 of 2003 were 3 million or 15 percent of revenue and were in line with our guidance of 17 percent.

Typically SG&A declines from Q1; however, in Q2 we increased our ownership percentage of Kawan (ph), our Korean subsidiary, from 67 percent to 73 percent, and there was approximately 300,000 of costs associated with additional shares.

We expect SG&A to be in the range of 2.5 to 2.9 in the upcoming quarter.

As of June 30, 2003, we remain financially strong with cash and marketable securities of 114 million compared with 118 million as of December 31st, 2002 and 115 million as of March 29, 2003.

In addition, as of June 28, 2003, Kopin owned approximately 500 shares of common stock of Micrel (ph ) Semiconductor.

Inventories were up approximately 2.4 million.

As a result of our planned shutdown in the first week of July because of the holiday and (inaudible) time, we buildup inventory to ship during the first two weeks of July.

In addition, there is a normal seasonal build for the third quarter.

Cash flow from operating activities in the second quarter (technical difficulty) --.

DSOs are running approximately 46 days compared to 49 in Q1.

For the quarter, companywide (technical difficulty) -- excluding the 70 percent.

CapEx for the quarter was 2.6 million and 3.8 million for the six months of 2003.

Our CapEx expectations for 2003 (inaudible) at 10 million.

Depreciation and amortization was approximately 2.5 million for the quarter.

For the six months ended June 28, 2003, total revenue was 37.9 million versus 38.4 million for the same period in 2002.

Revenues from III-V products were 18.2 million compared with 17.1 million for the six months period June 30, 2002.

Revenue from CyberDisplay products were (inaudible) million compared with 20.3 million in the same period a year ago.

The net loss of the first two quarters of 2003 was 2 million or 5 cents (inaudible) 69.4 million outstanding.

This was a net loss of 17.4 million or 25 cents per share based on 69.3 million shares outstanding for the (inaudible) of 2002.

Of course, included in the 2002 six-month loss, was an accumulative effect of accounting change 12.6 million or 18 cents per share.

I will now turn the call over to (technical difficulty).

Considering the market environment, Kopin enjoyed a very successful second quarter both in terms of our financial and operational performance.

Total revenue was up 11 percent sequentially, and we made progress both in CyberDisplay, HBT and CyberLite.

I want to spend a few moments reviewing the highlights on each product area, starting with CyberDisplay.

CyberDisplay revenue increased about 30 percent on a sequential basis in the second quarter.

As Rich indicated, this growth was (inaudible) increased orders from our camcorder customers and increasing R&D revenue.

During the quarter, we have announced that the design with Raytheon for our 640-M monochrome CyberDisplay, which will be included in the thermal weapons site.

We expect thermal imaging displays systems to be used not only in more weapons systems but also industrial applications such as firefighting equipment.

While CyberDisplay established a reputation as a new kind of choice for the camcorder business, the Raytheon production contract illustrates our success in diversifying our CyberDisplay customer base into new applications with strong growth potential.

Another component of that strategy is involving special new products, and on that front, we also made substantial progress in the second quarter.

At the (inaudible) conference in May, we launched three new displays to take advantage of the growing portable electronic device market -- (inaudible) digital express, wireless phone and gaming devices.

Our newest (inaudible) 6 inch diagonal display, the CyberDisplay 113K and 300M have features that reinforce Kopin's position as a technology leader and reduces the industry's smallest microdisplays to approximately half their previous size.

They are now about the size of a grain of rice.

Responding to the needs of customer electronic OEMs, these displays enable our customer to continue shrinking the size of Next Generation mobile devices and systems.

We also introduced a color filter VGA, a .4 inch diagonal 640 x 480 color pixel display, which is now the world's smallest lowest power color filter VGA resolution display.

Remember our color filter display has the same architecture as the conventional TFP (ph) displays that people use in their laptops, and this enables much faster design.

The CyberDisplay color filter VGA will enable a new consumer product application and revolutionize artists through these low-power (inaudible) and stunning image quality.

Along with our three new displays, we are introducing several new electronic viewfinder systems solutions.

The CyberDisplay CyberEVF 113K, the EVF 300M and CyberEVF 180K.

These EVF systems, which includes the display, the length, (inaudible), housing, allows manufacturers to shuttle their design cycles, outsource more of their production needs and speed their time to market.

The CyberEVF EVF 113K and CyberEVF 300M completes the viewfinder solution.

At total volume of less than .15 cubic inches, these viewfinders are the smallest in the world since they are ultra small .16 inch display.

EVF digital still cameras are currently being integrated into more expensive digital cameras.

The CyberEVF 113K and CyberEVF 300M addressed drawbacks in the assisting EVF which are too large, too power hungry and too expensive.

Kopin's new EVF giving OEMs the advantage of small, light weight and power efficient electronic viewfinders for digital cameras are targeted at a broader range of customer electronic markets.

They can display stored data information and prefer optical viewfinders for high zoom operations.

The CyberEVF 180K is a complete compact new cyber solution using Kopin's .24 inch CyberDisplay 113K 180K color filter display, which was announced late last fall.

With an ATV (ph) greenfield view, the CyberEVF 180K gives a virtual image of a 19 inch screen at a distance of 5 feet.

To introduce this (technical difficulty) -- transition from monocrome to color microdisplays.

With the (inaudible) sampling each of these new products with our customers and partners, and the response so far has been very positive.

The color microdisplays will be a significant part of our display sales in 2004.

Turning to our III-V business.

Weakness in the Asian region and CDMA market certainly affect Kopin as it did (inaudible ) in this region.

Although we continue to gain market share and move our technology forward, our gains to this date have been well-received by customers sampling this Next Generation of HBTs.

We continue to see opportunities for our HBTs in a wireless LAN area, and we continue to believe this application will be a steady contributor to our III-V business.

In Q2, we estimate that HBT sales from a wireless LAN application exceeded 10 percent of our HBT sales in the second consecutive quarter.

We continue to see this exciting market opportunity.

Regarding CyberLite, our (inaudible) CyberLite is too low.

The (inaudible) Australia working with Tier 1 customers. (inaudible) for a quick fix and sell less quality products, we believe the long-term success achieved by working with those customers whose high standards are met only with high world-class production.

Our objective is to continue to meet standards.

The same strategy enables us to successfully launch our HBT and CyberDisplay products.

We have ideas to improve in the coming quarters as we bring new systems online and gain additional experience with these unique features of our product.

Our investment in this new product area will be made with the same uncompromising level of fiscal responsibility and conservation with which we run the rest of the business.

Let us now summarize our lookout for the second half of 2003.

Earlier this week I returned from Asia where I had a chance to meet and talk with a number of our current and prospective customers and get their views on the trends of our core markets.

Those meetings confirm our conviction to focus on nanosemiconductor product for portable electronic complications are correct.

Our products fit squarely into OEM requirements for components that we were able to develop digital cameras, portable games systems, wireless handsets and other consumer electronic devices, ever smaller, lighter and more power efficient.

Ultimately it is about being able to deliver the right product at the right price, and Kopin has become successful in doing so.

Turning to Q3 guidance.

We expect to Q3 revenue to be down in the range of 10 to 20 percent.

This decline will be primarily due to the decline in HBT revenues.

We recently just reached an understanding with a large HBT customer who had decided to immediately transition 100 percent of his business to Kopin for the long-term.

The actual result is a significant decline in Q3 HBT sales as that customer worked out his remaining inventory of second source wafers.

We do understand that this is only a third quarter event.

Longer term, this (inaudible) for Kopin, and we are pleased with this outcome as it provides new revenue growth potential and reinforces our position as the leading emerging supplier of HBT in the world.

During the third and fourth quarters of year 2003, we will move forward with a number of new initiatives.

Among them, we plan to broaden our CyberDisplay customer base during (inaudible) non-camcorder design wins.

In CyberLite, we continue to work on improving our manufacturing processes and capture additional customers and develop (inaudible) LED products.

In HBT, we continue to pursue opportunities in wireless LAN and (inaudible) customers designing of our game transistors.

In summary, our customer responses validate our strategy of developing three product lines.

We had strong Q2.

Although the third quarter will be challenging, it is not because of product or operational issues, but actually the results offer a significant opportunity for Kopin.

We would like now to open the call to your questions.

(CALLER INSTRUCTIONS).

Blaine Carroll, Adams, Harkness & Hill.

Thank you.

A couple of questions if I can.

First of all, is it fair to assume that the HBT customer was your largest HBT customer?

For the impact, you probably can judge that will the customers as (inaudible) speaking, yes.

You might want to take this off-line, but if they typically represent about 50 percent of your HBT revenue -- let's just back of the envelope say that is somewhere around 4 million -- and if you typically represent 80 percent of the wafers that they end up purchasing during the quarter, I am getting somewhere around $1 million impact.

Is there something else going on within the HBT business?

Is there still softness because of SARS in Asia or something, or am I just making the calculation too simplistic?

I think you made it a little bit too simplistic, but the short answer is that it is going to hit us very hard in Q3 as they move out the wafers from some of the second sources that cure them.

Their objective is to move them all out by the end of this quarter, and so we might have some lean weeks until they do it.

Was there any impact during the quarter you just printed?

No.

Does it change your view at all of the print?

No, actually the fourth quarter should now be better.

Because now we are going to have 100 percent consensus.

The consensus right now is somewhere around 25 million in revenue.

Are you saying it could be better than that?

That is not HBT.

According to HBT, it will be there.

What about overall (technical difficulty)--?

How was the CyberLite business ramping?

You said that it did 2 million during the quarter.

Do we expect that to have the same type of sequential growth?

We always work hard to continue to ramp the products.

As John said, we are working on derivative products and additional customers and so on.

So we factor all that in, and ofr right now, we factor that all into the overall guidance of 10 to 20 percent down.

And then last question and I pass it on.

What do you expect gross margins to be during the September quarter?

Right now gross margins will be probably in the 15 percent range because of obviously the decline in HBT.

Okay.

I will pass it on and give some other guys a chance to ask questions.

Sandy Harrison, Pacific Growth Equities.

Good afternoon.

Just a couple of quick follow-ups on some of the earlier questions.

Recognizing this is your opinion, but what was the reasoning behind your customer returning back to effectively 100 percent prior to his earlier decision?

Number one, I think you see all customers, all companies today are downsizing the number of vendors they are using.

The bottom line is we have always believed we have the far superior performing product, and our pricing has always been volume-based.

At some point, I think they looked at the performance and made a better price by buying more is a compelling reasons to have a sole source versus trying to make do with two.

Also if I may, I think that right now we have been punished for a long period of time, and I think that it's very clear we are the best partner to be with.

What do you believe the split was (technical difficulty), or what do you believe the split was that you were getting prior to this? 70/30, 60/40, 80/20?

What do you think was your piece of the pie?

Probably 75/25.

You talked a little bit about your trip over to Asia, John, and how it looks like the consumer market continues to be an area of opportunity.

Did you see any particular countries or companies over there that were going to emerge?

We are looking at this next cycle for the next leaders of the next group.

Any stick out at you that you thought are real interesting and show some real promise?

Yes.

I think the question is that my Asian trip was actually very good.

I was very pleased with the results.

Well, (inaudible) III-V product in Asia.

I think the CyberDisplay was extremely well-received.

People really liked our color displays.

So for my tax today (inaudible), you can see that we are pretty optimistic that new design wins are coming.

What are some of those challenges that you face for the major final big major handset display when what are the last few hurdles we have to get through here, you see getting through here before we start to really see those opportunities?

I am just waiting for the PO.

Alright.

I will let the line go and come back later.

Earl Lum, CIBC World Markets.

John, can you give us a little bit more granularity in terms of your CyberLite product revenues in the quarter relative to the HBTs?

We said we wanted to do more than 2 million in LED sales, and we accomplished that.

So that is where we are at.

We are not going to go into a lot of granulation about -- if that is the word;

I am not sure -- between display, LED and HBT.

We have made some sensitive analysis around each of the product lines, and overall we have come up with a range of down 10 to 20 percent.

Obviously we may be better than others and worst than others and so on, but that is a number we feel comfortable with right now.

Given where you see the inventory situation at your customer right now and I am sure you have a pretty good idea of how many wafers are holding, do you think at the current run-rate that they are consuming these wafers that take the entire quarter to burn through all that inventory, or do you think there is a possibility they can get through it before the end of the quarter and resume shipments of your products?

Well, we are told that based on their assumptions of what they can do for revenue in Q3, we are told that they will get through all of this in Q3.

The goal is to all be over in Q3, and in some way, it would not be to bad to get it all out of the way.

If you got to understand, we don't know exactly how many wafers they have or from other sources.

They may not be using a lot of them until they make the decisions (inaudible).

At this point, you are not aware of them scrapping or reserving any of that inventory that they have if they do intend on utilizing through the fab?

They make it very clear they will be -- I don't know.

It's only a third quarter event, and the fourth quarter everything will be fine.

If you look at the CyberDisplay, John, at this point with significant revenues coming from color in '04, can you give us some guidance as do you expect to report any revenues for color in Q3 at all?

I better not promise yet, but I think the second half will be a very good half for color display, yes.

So at this point, you are not going to quantify if you're going to be able to record revenues in Q3 then for any type of color (multiple speakers)

Right now I estimate we quantify zero, but it could come out earlier.

Could you give us an idea fwith the infrared, was that a significant portion of the revenues in Q3, and will continue to ramp in Q4 given that those are monochrome displays?

It was not significant to Q2.

We fully expect it to have a meaningful impact in Q3.

Then continuing in Q4?

Yes.

It is a long-term contract.

Tom Sepenzis, Bank Equity Partners.

All things being equal outside of the III-V business, do you expect your other businesses to be up in the September quarter?

Like I said, Tom, what we have done is there is some in the display obviously some SARS issues related to overhang of inventory.

We don't know really know how much it is.

It doesn't sound like it is a lot.

And then, of course, when you get into the third quarter as you get towards the back end, that is affected by what the economy is doing, what people think Christmas is going to be because obviously you are shipping Q3 for the Christmas season.

We made a bunch of assumptions, and that is how we come up with our guidance of around 10 to 20 percent down.

And for the year or for the December quarter, all things being equal you would expect that to be at least where it was, if not slightly higher with the return of the business from your III-V customer?

All I can tell you now is our customers are talking very bullishly about Q4.

The event today to answer the primary problem right now is this third quarter adjustment in the HBT revenue.

If you look beyond the third quarter situation, we think that actually it is a win for us because we now establish us 100 percent vendor to that customer, and display (technical difficulty) -- a message to the whole HBT world that we do have the best performing product.

You said that they signed, was it a multiuser agreement on that?

It is very long-term.

Lastly, can you give us some kind of update on the green LEDs?

The green LED it is qualified by our customer, and we will hope to ship soon, yes.

Chris Versace, Friedman, Billings, Ramsey.

Good afternoon.

Just a couple of questions.

One is more of a nit on the interest expense and other.

It looked like it was down a little bit.

I am wondering is anything going on there in the quarter?

There was about 150 some-odd thousand related to foreign exchange gains -- excuse me, loss -- that we had in the quarter.

Okay, I am just curious, I am wondering you mentioned SARS and the impact of CyberDisplay.

This morning when Sony they reported they are seeing a lot of pricing pressure in the camcorder market.

I was wondering if you guys are seeing any of that and if that has any impact on some of your guidance?

Yes, we do see pricing pressure on the monocrome display, and it is not normal.

It is something again that we always see pricing pressure between the last 15 percent to 20 percent.

This is about normal, but then we are going to switch into color.

I think we will get (inaudible) once the color comes in.

So nothing not normal, except the SARS virus has slowed down.

The SARS virus (inaudible) side of the business in China.

I guess one last one.

The margins were a little better, at least the ones I was looking for, and you attributed that to mix on the CyberDisplay.

I am also wondering, are you guys still continuing to hammer away at the gas wafer suppliers and getting favorable pricing there?

Okay.

Great.

Thank you.

Sorry about that.

We just discontinued.

The whole food chain is being hammered away. (multiple speakers)

Jane (inaudible).

I had a few questions.

I was wondering what is the sequential growth or decline that you are seeing in gross margins in your LED business?

We have never given that information out.

Okay.

And how many LED customers do you currently have right now then?

We have one customer, one Tier 1 customer right now.

I was wondering about the display business.

Was there hopefully an overshipment of monochrome this quarter?

No.

I don't know what you mean by an overshipment.

We received purchase orders 90 days in advance, and we ship against those purchase orders.

As you are probably aware, under generally accepted accounting principles, we are only allowed to recognize revenue on shipments of product in the period in which the purchase order request (technical difficulty)--

You cannot ship anything that you are not being paid at least half are paid for order for.

I think you guys got it.

Thank you.

(CALLER INSTRUCTIONS).

Greg Weaver, Kern Capital.

On the CyberLite, in light of the yield situation, are you really actively marketing this?

If you hook into someone else who wants some volume, I assume you don't want to disappoint them, so?

Greg, it is a very good question, and it is one that we deal with.

We obviously want to keep our current customer happy and expand the product line at the same time.

We are getting a lot of inquiries for people who want samples of the CyberLite, and so we are supplying samples and working with the customers given that it is a normal long-term qualification process and so that it all goes along according to plan.

Right now I don't anticipate shipping large volumes to a second customer in the third quarter.

So most of the shipments will still go to our first Tier 1 customer.

So you got a couple more guys coming on?

I think I made a comment I think we're certainly looking at qualifying at least one more customer, and that is going along pretty well.

Is the green LED qualified guy the same one as your main customer?

Yes.

Okay.

And on the game transistor, do you have any design wins there?

No.

I said the design wins hopefully will be through the next few quarters.

However, I do want to point out that all our major customers that we know of or all the major players of our PAs are part of improvised circuit.

I am working with those very diligently on the game with us.

The advantage of the game using fast better power efficiency, higher speeds, better linearity and better reliability.

So this is exactly what it gives some people.

New handset guys are asking for it, so we see a lot a response there.

We have high hopes for them.

Earl Lum, CIBC World Markets.

If you would go back to the Q1 in terms of the HBT sales into the Wire LAN market, can you give us and idea what the percent was back then?

I think that roughly speaking it equals around 16 percent in Q1, and in the most recent quarter, we did 13 percent.

You did 13?

Great.

And do you expect that to be sequentially up in percent in Q3?

That is what our customers indicate.

Okay.

That is on a revenue basis, is that correct?

That is correct.

I just want to do a little caveat in here.

In many respects, the transistor we sell for PA for Wireless handset or a wireless LANs application are very similar, so we have to rely on some communication from the customer as to where it is going.

We don't have any specific concrete information per say at Kopin.

Right.

John, if we look at the green LED, it is qualified now.

Are you expecting initial beginning in the third quarter, or can you give us an idea when that will be shipped?

Yes, I think (inaudible) qualify (inaudible).

We expect second-quarter, third quarter or early fourth quarter.

You are border line between Q2 and Q3?

That is our expectation.

As I answered before, I think our qualification on the customers are continuing, and we are pleased with the progress.

With the other customers, again just to make sure that I quickly heard you, you are not expecting to ship revenue to any second customer in the third quarter for CyberLite?

No.

I said nobody no volume shipments.

Thank you for that clarification.

Greg Weaver, Kern Capital.

Just on the game transistor again.

Do you expect your first design win there will probably be a wireless LANs application you figure?

I don't think so.

I think it most probably will be a car in phone.

Okay.

And on the color display side, how many design wins do you have at this point?

We have not announced any real design wins.

We just say that we believe we will get design wins very soon.

Are these new people?

No significant design wins.

Are these new people, or you are just expecting the monochrome guys switching over?

No switchover.

We are looking for real new applications and new customers.

Again, I want to remind people we always deal with customers.

So once they design win, they always have significant (inaudible).

Lastly, on electronic viewfinder, was is the rough ASP on something like that?

Again, it depends on volume, it depends on resolution they are looking for.

It can vary anywhere from high single digits to $20 or higher.

Blaine Carroll.

Actually I think Earl asked it a couple of questions ago, but I don't know if I heard your answer.

Was the wireless LAN in Q1 16 percent of revenue, is that what you said?

That is correct.

And then it was 13 percent in the quarter you just printed?

That is correct.

You expect it to be up into September.

Yes.

Actually I will stay with it for a minute.

John, what types of trends are you seeing in the wireless LAN as far as pricing pressure as well as units?

Are units continuing to grow?

Yes, the wireless LAN, as you well know, a lot of activities are (inaudible) type of application, which is very stronger in Taiwan.

I visited some of those people, and the trend is definitely up.

People think all the laptops will have one, and we definitely play in many of the laptops right now.

Unfortunately, as you well know, the the size of the PAs for Wireless LAN is smaller than the size of PAs for wireless phones.

So total revenue significance, our estimate may be an improvement over 25 percent (inaudible).

How has the pricing been in that environment?

It is the same as the price for the cellphones.

The wafer is really pretty transparent to them.

They dislike it because it is change, but some of the people don't even change the structure.

So that is why we are saying it is our estimate, sometimes not fully transparent to us when we go through wireless LAN.

Jane (inaudible).

I just wanted to quickly check-in, and I am a little bit confused.

The CyberDisplay area I believe last year grew about 11 percent sequentially from the March to June.

This year it definitely lost at 30 percent.

I am just wondering, I think that before you did say that there was no overshipment or there were no extra inventory in the channel.

I am just trying to get a sense of then why the CyberDisplay revenues are expected to climb in September?

Can you just reexplain that to me?

I am not sure we expect CyberDisplay revenues to decline.

That is possible, and increase is also possible.

As far as why CyberDisplay is so strong in this particular quarter, 1Q was somewhat weak so that helped.

In addition, I think there was some penetration into China for some of our customers for camcorders, which was new business.

I am assuming that ASPs did increase or (inaudible) as has been the historical trend from March to June, so the units must have been quite a nice pickup?

Right and that is why we got the good margins because obviously efficiencies were running very high with the CyberDisplay.

Thank you guys for explaining that again.

I do want to make a comment that the CyberDisplay, the situation is actually pretty good because we also believe we are going to get more color applications.

So the situation and the margin is pretty good.

Would you say, John, that would actually allow you guys to see flat ASPs in the second half of the year to the first half or maybe is that too (inaudible)?

Actually the ASP decline displays are not -- at least the first part of the second quarter is not (inaudible) at all.

Okay, I've got you.

Thank you.

That is all the time we have for questions today.

At this time, I would like to turn it back over to the speakers for any additional or closing remarks.

Well, thank you for joining us for our second quarter conference call, and we look forward to speaking to you again soon.

Thank you.

That does conclude today's conference.

We thank you for your participation, and you may disconnect at this time.

(CONFERENCE CALL CONCLUDED)