Quicklogic Corp (QUIK) 2009 Q1 法說會逐字稿

Good day, everyone. And welcome to the QuickLogic Corporation first quarter 2009 earnings conference call. At this time, for opening remarks and introductions I would like to turn the call over to Mr. E. Thomas Hart, Chairman and Chief Executive Officer for QuickLogic. Please go ahead, sir.

Good afternoon, ladies and gentlemen. And thank you for joining us today for the QuickLogic first quarter 2009 earnings conference call. Joining me today is our President Andy Pease and our CFO Ralph Marimon. Ralph will take you through our first quarter 2009 financial results and then I will share my prospective on our business. Finally, Ralph will detail our guidance for the second quarter of 2009 and then we'll take questions. Ralph?

Thank you, Tom. Before we get started, I'd like to read a short Safe Harbor statement. During this call, we will make statements that are forward-looking. These forward-looking statements involve risk and uncertainties including but not limited to stated expectations related to revenue growth from our new products, statements pertaining to our design activity and our ability to convert new design opportunities into customer activity. Market acceptance of our customer products, our expected results, and our financial expectations for revenue, gross margin, operating expenses, profitability and cash.

QuickLogic's future results could differ materially from the results described in these forward-looking statements. We refer you to the risk factors listed in our annual report on Form 10-K, quarterly reports on Form 10-Q and prior press releases for a description of these and other risk factors. QuickLogic assumes no obligation to update any such forward-looking statements.

For your information this conference call is open to all and is being webcast live. It can be accessed from the investor relations area of the QuickLogic website located at www.quicklogic.com.

For the first quarter of 2009, we met the low-end of our guidance with total revenue of $4.6 million. New product revenue declined to $658,000. The majority of this decline was due to an expected shift in designs at a tier one GPS manufacturer that began using a new processor that includes functions our CSSP chip was supporting. As we have discussed, our design supported a crucial requirement for this customer, but one we knew would eventually be supported by a new processor.

Designs like this provide us with great opportunities to get inside tier one companies and show them what can be done with CSSP technology. In this case, we provided the customer within -- with working prototypes within three weeks of receiving their design requirement. While this opportunity has run its course, we are working new opportunities with this customer.

I would normally save this comment for when I provide you with guidance later in the presentation, but I think it's appropriate to interject here that we expect new business to increase significantly next quarter. In a moment, Tom will present some of the drivers.

Due to macro economic conditions, our legacy business declined to $3.9 million, but at 85% of the total the mix boosted our gross profit margin to 61% on a non-GAAP basis. Non-GAAP operating expenses for the first quarter totaled $3.9 million, which was at the low-end of our guidance range. R&D expenses increased 15% sequentially to $1.5 million. This increase represents planned investment in chip development.

SG&A expenses decreased 16% sequentially to $2.4 million. In total, operating expenses were down 6% sequentially on both a GAAP and non-GAAP basis. Other income expense was a net expense of $57,000 and in line with our guidance.

Our non-GAAP net loss was $1.2 million or $0.04 per share, which is essentially the same as a loss incurred in the fourth quarter of 2008. We continued with strong working capital management in the first quarter. Our ending cash position of $18.2 million reflects a sequential decrease of $1.2 million from the fourth quarter of 2008 and was primarily due to the net loss incurred in the quarter.

Our GAAP results include stock based compensation charges of $384,000 and a fixed asset write-off of $13,000. Our first quarter GAAP net loss was $1.6 million or $0.05 per share. Please see today's press release for a detailed reconciliation of our GAAP to non-GAAP results.

I'll rejoin you in a few minutes to discuss our guidance for the second quarter, but first Tom will update you on the status of our strategic efforts.

Thank you, Ralph. So, while we are disappointed with our Q1 revenue results, we're encouraged by the tangible progress we made during the quarter towards realizing our strategic objectives. In an effort to provide you with visibility into our strategic focus, and progress towards these objectives, we began sharing data points from our sales funnel during our Q2 2008 earnings conference call.

As I've explained during previous conference calls, our sales funnel tracks what we call single sales objectives, SSOs for short, from qualification stage to production win. There are two ways for an SSO to leave the funnel. One is if an opportunity is lost owing to a variety of reasons. And the other is if the opportunity's won. Design wins are acknowledged upon receipt of a production order.

During Q1, we booked our first high-volume production orders for ArcticLink CSSPs for a new application that I think is very interesting. We're all familiar with USB memory sticks. And now with memory densities large enough to carry the entire contents of a moderate sized hard disk drive, these devices have become nearly ubiquitous. The problem is, what if you lose it?

While these tiny memory sticks are convenient, they could easily contain sensitive corporate data or enough personal information needed to steal your identity. Later this quarter, you will hear about a new generation of smart USB memory sticks that include new security features to -- designed to protect your data. These products will initially launch in Western Europe markets, where the sensitivity to risks of unprotected data appear to be the highest today.

If the product catches on like our customer thinks it will, we'll soon see them marketed worldwide. This design, by the way, was establish -- was enabled by our CSSP technology.

During our last several conference calls, I've discussed our focus and design activity in the broadband wireless data card market. Broadband wireless access is rapidly being embraced on a global basis and is the focus of network operator ad campaigns worldwide. During Q1, we secured design wins with three of the top five companies in this market and have active designs with three additional tier one communication companies that are seeking to grow their presence in this rapidly expanding market.

During Q1, we booked several pre-production orders for new base -- broadband wireless data cards that are now in various stages of testing. Please note, by the way, that these testing cycles can be long and arduous before production can begin.

We've also booked our first production orders for what I think is best termed the next generation broadband wireless data card. This particular design is optimized for speed and very low power consumption. Now, in addition to its high speed, our solution will provide unique features enabled by the proven system block we call SPIDA. SPIDA is short for Smart Programmable Integrated Data Aggregator. SPIDA manages data flow to maximize performance and minimize energy per byte transferred, which is a key benefit of the product design. I'm sure you'll hear much more about this new broadband data card when it's released by service providers this summer.

We announced our newest ArcticLink platform, ArcticLink II with VX4 at the end of March. VX4 contains the second generation of our digital enhancement engine and a micron cellular RAM memory, which can be the frame buffer for up to wide SVGA displays. Wide SVGA is 1024 by 600 pixels, by the way.

VX4 easily handles refresh rates exceeding 60 frames per second, while also offering direct connectivity to Qualcomm processors on their latest MDDI type 2 serial interface. And of course, it wouldn't be a CSSP platform without our embedded programmable fabric to implement our proven system blocks or our customers' proprietary intellectual property.

The technical and business press have embraced VX4 and we've seen over 140 articles published on websites and blogs in the four short weeks since formal introduction. Simply put, VX4 allows makers of smartphones and netbooks to use low-cost RGB or LVDS driven liquid crystal displays while improving the video viewing experience and extending battery life.

Okay, let's shift our focus here for a moment to industry trends that we're observing. When semiconductor demand drops, financial reaction is to assume that there's plenty of capacity just sitting idle. Conventional wisdom and history tells us that lead times fall and product becomes readily available. However, this does not appear to be the case with this downturn.

This time, suppliers have taken capacity offline using several different approaches. For example, we know of ODMs that are only working four days a week. Assembly and test houses that are closing for four weeks out of a quarter. Wafer fabs that have actually turned off equipment and laid off operators. In short, tech companies throughout the supply channel reacted quickly and decisively to the downturn in demand and through this have avoided the balloon in inventory we saw in 2001.

As a matter of fact, aggregate inventory levels in the supply channel are actually below normal and in some cases, we're seeing spot shortages caused by customers who were reluctant to forecast future needs during Q4.

At QuickLogic, some of our customers are now expediting for product delivery. They see upsides in their business, but have insufficient inventory on hand to fulfill their increased orders. Will this trend be sustained? Or is it just a transient? Who knows for sure?

Okay. Well, now back to our sales funnel. We track SSOs, single sales objectives, in the funnel and judge the annual total revenue potential for each SSO. This is called the gross or unweighted funnel revenue. We then weight the revenue potential by how far along the SSO is in the funnel to come up with a net or weighted value for all the SSOs in the funnel. This gives us a good gauge on our potential revenue. Unfortunately, it cannot serve as a forecast, but it does give us the visibility to manage our business and set priorities.

Now, the three most important things to manage with a sales funnel are the weighted value, expanding the size of the funnel at the bottom, and the rate of movement inside the funnel. Focusing on these factors helps us to manage our resources and optimizes the output of the funnel. And as I noted above, the output leads to orders, and we all know orders lead to revenue.

I provided you with a few examples of this output already, but now let's look inside the funnel.

While the overall number of SSOs in Q1 was down by 3%, the total weighted dollars for all SSOs was up by 24%. Now, you may remember from previous conference calls our sales funnel is divided into six stages. The last two, which are closest to real revenue, we call implementation and production win. Even more importantly for us than the total aggregate weighted funnel value are the weighted value of stages five and six.

During Q1, the number of SSOs in these stages increased by over 42% and the weighted value increased by 73%. During the quarter, there was a concerted effort to widen the bottom of the funnel and push our best opportunities into these last two stages. As these metrics imply, the team was very successful in this well coordinated effort.

So, let me make sure here you understand that while the total number of SSOs in the funnel was slightly down quarter-over-quarter, this was not caused by a lack of opportunity in the market, but by our purposeful decision to focus our collective efforts on advancing those SSOs through the funnel. Based on these metrics, we are confident in saying we expect CSSP revenue to increase next quarter.

Let me wrap up here by just commenting on the fact that we continue to see expanding opportunities in smartphones, netbooks, and MIDs -- M-I-Ds, or mobile Internet devices as Intel calls them. In spite of the still weak macro economic environment in the world today, demand for these products continues to grow and sensitivity to power consumption becomes a bigger concern.

Not only are these marking -- markets showing strong growth, we are rapidly nearing a point where there will be a collision somewhere in the middle, which is where we have yet to see -- sorry, where we see the yet to be defined mid-space and the rapidly evolving netbook market. The PC world is coming to this space with X86 architecture and Windows operating systems while the smartphone designers are coming from the side -- the other side with ARM core architectures and mobile operating systems, running the gamut from Linux to Windows Mobile.

The good news for us in this confrontation is that we are processor architecture agnostic. We can win either way with ARM or with the X86. Now a more subtle advantage for us is that the uncertainty in what feature sets consumers will embrace is actually our friend. Core to our strategy is to offer hardware based CSSP solutions, leveraging proven system blocks. These proven system blocks are based on the flexibility of programmable fabric, which solves time to market challenges for both the ODMs and OEMs.

Okay, Ralph. Back to you.

Thanks, Tom. Due to limited visibility caused by macro economic issues and the unpredictable nature of our customers' new product introduction schedules, we're taking a conservative position with regard to our revenue forecast.

With this in mind, we're forecasting total second quarter revenue to be essentially flat at $4.5 million plus or minus 10%. As Tom mentioned, we have several new designs that are scheduled to hit production mid-year. However, since schedule variations of just a few weeks can notably shift a product mix, we're not breaking out a forecast for new and legacy business beyond stating that we expect new product revenue to increase significantly on a sequential basis.

On a non-GAAP basis, we expect gross margin to be approximately 54% plus or minus 3%. The decrease in gross margin from the first quarter is due to our expectations that new products will be a greater percentage of total revenue as compared to the first quarter. The actual gross margin, however, will be dependent on the mix of product shift.

Operating expenses will be essentially flat with the first quarter, or about $4 million plus or minus $300,000. The actual amount will vary depending on revenue and timing of our investments in new product design. Our other income and expense will be a charge up to $60,0000 during the second quarter and any tax provision will be negligible.

Our stock based compensation expense in the second quarter will be approximately $400,000 and we expect to use approximately $2 million in cash during the quarter, primarily due to the lower revenue risk level and the resulting loss. And now I'd like to turn the call back to Tom for his closing comments.

Okay. Toward the end of Q1, I had the distinct pleasure of announcing that we promoted Andy Pease to be our new President. This move was part of a well ordered succession plan we're implementing here at QuickLogic to ensure we have the leadership in place to capitalize on the opportunities we see coming for CSSPs.

Andy joined us almost two-and-a-half years ago as our VP of Worldwide Sales and has proven himself to be a most effective leader as demonstrated by the total restructuring of the way we come to market. Selling CSSPs is very different from selling FPGAs.

Andy will focus on sales and marketing, engineering and operations, while I will remain the Chairman of the Board and CEO primarily focused on more strategic issues, partnerships, and our investors.

Please join me in welcoming Andy to his new role. We're all very confident he will prove to be most effective.

Our second quarter 2009 earnings conference call is scheduled for July 28, 2009 at 2:30 P.M. Pacific Daylight Time. Okay, Jamie, now let's open up the call for questions.

Thank you, sir. (Operator instructions) And we'll take our first question from Edwin Mok with Needham & Company.

Hey, thanks for taking my question. I'm just trying to reconcile your guidance. You mentioned that you expect a substantial increase on your new product because these digital (inaudible) SSO are turning into revenue, yet you remain flattish sequentially. Are you just expecting some softness in certain market data mature products that sell into [your inventory]? Or should I read -- am I reading too much into that?

No, I think you're reading it properly. Our mix is a little bit uncertain, as I stated, but our legacy products, because of the -- just the general economic climate, it's certainly much softer today than it was a few quarters back. So, I don't think you're reading that wrong.

Any particular end market that you guys see more softness given you guys have to by (inaudible) and instrumentation market historically?

I don't think so. It's across the board. We don't have one in particular that we notice is particularly worse than another.

Yes, just as an -- just an example, Edwin, you know that Honeywell's been our -- one of our biggest accounts over the years. And of course, a large portion of the silicon that we sold them went into commercial aviation or general aviation. And you know what's happened, well, I don't know if you've bought a G5 lately, but they're a lot cheaper today than they used to be. And they aren't selling as many of them. So, I mean that's just one area that -- where the market's gotten really soft.

Yes, well, in the financial market we can't afford to buy those things. But anyway, so, just another question I have on the SSO. You basically minus that (inaudible) from your commentaries that you guys are focusing the asset in the areas where you think you can drive the most revenue. Am I reading that correctly? That's the reason why your SSO is down sequentially?

And then, in terms of this opportunity, is it possible, will you quantify it, I know that if you go back to first half of 2008, you guys -- and the new product revenue, you were in 2 point -- I think I have $2.6 million or so, around that revenue level. And that was basically driven by this big opportunity on the NPV unit. Since you mentioned it, there is some USB product and while (inaudible) looks like those can be really high-volume product. Is there any way you can give you give us some color on that? It would be helpful.

Well, I'll let Ralph answer the second portion of the question relative to new product revenue. I don't think it's ever been as high as $2.6 million, by the way. I think the peak was -- I'd have to look back, but I thought the peak was $1.6 million.

But at any rate, if you ask about the focus on the funnel, we're not focusing on the biggest opportunities, because there are certainly bigger opportunities in the funnel than are at the end of the funnel. We're focused on moving things forward to accelerate revenue sooner. That's precisely what we're focused on.

And there's really nothing in the funnel that -- virtually -- I think 80% of what's in the funnel today is with tier one and tier two accounts. So, we're not talking about small opportunities that we're accelerating or working to accelerate.

And actually, I guess accelerate is kind of a misnomer in a way. Because you really can't beat customers into speeding up their development process. What you can do is you can make certain that you're never the long pole in the tent, if you will, or you're never a drag on their ability to get things done quickly. And we've got a lot of focus on that.

So, we're lending them support that we might not have in other times to help them accelerate the process, but they're really in control of it, as you would expect relative to revenue.

We -- the Company got back into 2008 in the first half of the year, I think Q1 and Q2 were both close to $2.6 million in revenue. But a little before my time, so I can't tell you -- I can't break that out for you. And I also can't tell you whether the Company disclosed customers back then or not. But we were at that peak volume in early part of 2008.

I don't know if that answers what you were looking for, Edwin.

Yes, suffice to say the USB opportunity could be huge, right? And USB drives itself is typically a pretty high-volume product, right?

It could be. And it's certainly material to our results. But again, we have, as I mentioned in the guidance, we have shifting production schedules and we're not breaking out that mix yet until we get a little bit further along and a little bit more steady of a ramp up.

I see. So, it sounds more like it's more than a timing issue, right? The customer decided to delay the rollout like four weeks out or something like that, then obviously it would be next quarter. That's kind of the issue that you might -- you guys are facing (inaudible).

That's the issue we're facing.

Let me clarify something. I misspoke. Q1 and Q2, total new product revenue was right at $2.6 million for both those quarters. I was thinking about PolarPro revenue, which was only an element of that.

Right, because historically you guys have eclipsed $2.5 million.

Exactly.

Yes.

Which are also considered new product, but obviously those are not areas that you guys are doing to sign right now.

Exactly right.

That's correct.

Great, thanks for clarifying that. That's what I was trying to get to. And then, one question in terms of your operating expense. It has to come down. Back in the first half of 2008 you guys were [$6 million] level before that and you brought it down to the $4 million level. Do you think you guys have the right mix of expense? And also right mix in terms of right team in terms of to execute this plan of ramping this new product? Or do you think that as your new product ramps you might need to go back and add back from the expense just to -- because -- just because [of sales rate] expenses (inaudible)?

Yes, we think we're in a position to really scale the expense that we've got. If you remember, in Q2 of last year, when we talked about restructuring, it really was a restructuring in the way we fundamentally do our business, by shifting a lot of what had been fixed costs to variable costs. And we're -- we've actually done that throughout the organization, not just in product development.

And so, we think we've got a very scaleable model that doesn't require us to take on a lot of fixed expense now to grow our business. So, total operating expense, will it go up? Yes, but it won't go up in the same ratio that you would have expected. There's a lot of leverage against revenue.

That's exactly what I'm looking for. Thank you.

And we'll take our next question from Brian Coleman with Hawk Hill Asset Management.

Great, thanks. My -- a couple questions on SSOs. First, if my math is right, you ended the quarter with about 85 SSOs off of the 88 at the end of the fourth quarter. Can you just give me the mix on how many gross SSOs you added during the quarter? And then I can figure out the -- kind of how many of those turned away during the quarter do -- to give you a negative three delta for the quarter? And then a little clarity on why some of those turned out?

Well, I think we can certainly give you some sense of the churn. We haven't -- you're asking for the level of detail that we haven't shared of the funnel. This whole issue of letting people have the metrics on your funnel and you get further and further into our knickers, so to speak, is one that is a slope that our attorneys have warned us not to go down.

So, I won't give you the specifics that you're asking for straight away. I can tell you, or actually Andy can share with you, the ones that we lost during the quarter, why did we lose them.

The -- by far the biggest category in terms of losses for us because the customer cancelled the project. That was by far and away the biggest category. Actually, it was more than half as a matter of fact. And the second largest reason was the customer actually had an architectural change, which really means that the customer decided to de-feature the product rather than going through some extra engineering effort, which really negated the necessity for CSSP.

Okay. So, as you go forward, what is the --?

Sorry, Brian, I lost you. Brian, are you there?

Mr. Coleman, your phone line is still there, but we are not hearing you at this time. If you check your mute button.

Yes, I'm sorry. Can you hear me?

Yes.

Yes.

Okay, the question is can you provide a little bit of color on how the quality of the SSO funnel changes over time? And if you've got some experience now in terms of going out and selling CSSPs, if your -- if you think the churn rate in the SSO funnel will go down over time as you improve the quality of the SSOs you target?

Well, it's funny, we -- about six weeks ago, we took a look at all of the CCSP projects that we've done in the last three years. All of the ones that we've invested engineering effort in, whether we won them or lost them. And we looked at do we have the right criteria for deciding whether we begin to do them or not?

And I think what we concluded, we came up with basically a filter that we now go through and look at projects on a regular basis. Or each project, before we even put it in the funnel, and run it through that filter and see if it meets the criteria that we want to move forward and make the investment of engineering time and dollars to carry it forward.

So, I fully expect that in the future, our -- the quality, if you will, or the completion rate, will improve, which is another way of saying that the drop out rate will improve for the things that are controllable by us.

But you know we're not losing things because we can't do them. We're not losing things out of the funnel because we can't do them from an engineering perspective. We're not losing them because we decide to throw them away. We're not losing them because we're not price competitive or we're being beat out by an alternate solution. So, it's an assessment really of whether we should have put them in there in the first place or not. And we fully expect to improve our hit rate by being tighter about what we do and what we don't do.

Okay. And then a follow-up on that. When you look at SSOs that have made it to stage five and six, do you have any experience now what percent of those might turn away and what percent of those would -- you'd expect to see move on to production?

Actually, the closer we get to the end of the funnel, the more likely we are to have them move forward into actual revenue dollars. So, I think our -- I don't think we've shared those -- that kind of level of metric with you, but I can tell you that as you move through the funnel, you're investing more and more energy, obviously. More and more resources, as you move from just doing evaluations to implementation to verification of the actual design to production. We're investing more and more. And obviously to really make this scalable, you've got to make damn sure what you're investing is going to get you to revenue. So, we're pretty -- we move things forward if we believe that they're going to generate revenue. I think the last two stages is well over 90% that we see going to -- into revenue.

Okay, good. That's a good (inaudible).

That is good news. The problem is, you don't have any control over the timing. You see this can't really be used as a forecasting tool, because you don't know what the customer's timing's going to be.

Without adding too much detail -- without adding detail, the -- we actually do measure where in the funnel something drops off to close loss. And we -- the bulk of what gets dropped off is actually at stage two and stage three. And we don't start investing engineering resources until something hits stage four. The drop off rate when something hits stage four, five, and six, is -- it's very small.

Okay. And then I -- this might dovetail, Tom, into your last comment, but the press release said that you had delays in new product revenue associated with several major customers. I'm wondering if you can just expand on that a little bit. If that was kind of a macro environment issue or whether that was something specific related to designs and bringing certain designs to market?

I don't think it's macro. The -- I don't think that can -- as much as I'd like to blame it on macro, that's an easy out. I don't think that was the case. I think the case is that with the data card part of the business as an example, which is where the delays were, there's just a lot of moving parts there. And various operators have qual cycles and certification cycles that can extend -- traditionally can be 18 weeks, as an example, and can extend out significantly longer than that.

So, I think the -- we'll see revenue in this quarter. We should have seen revenue in Q4, so those designs haven't gone away. It's just that it's taking the customer longer to get to revenue than we -- than they had told us they were going to or that we had obviously planned on them being.

Okay. A question on the -- you've talked in the past about the environment really kind of hampering your visibility. And I'm just kind of curious as -- if you can kind of maybe add to or separate from some of the recent comments from Qualcomm and Nokia that have talked about an actual improvement in the environment or it's less bad than people had feared with respect to handset sales.

And I'm curious if those types of comments dovetail into what you're seeing in terms of design activity. And if you can relate that once again back to that SSO number and maybe just -- if you don't want to quantitatively do it, maybe just give some comment on how healthy SSO activity kind of coming into the funnel looks.

Well, I guess the way I'd answer that is first of all Nokia and Qualcomm's a much larger player in this market, and therefore influenced by a lot more things than we are, and in ways that's good for us. We're much more focused specifically in the data card space today. That's the closest to revenue. But closer to our revenue than smartphones as an example.

In terms of what's going into the funnel, I don't know how I'd characterize that today. I haven't -- to be honest with you, I -- my focus has been on what's at the end of the funnel, not what's going in. I know that obviously we had losses during the quarter and we made virtually all those up with new things going in. But I don't know how to characterize the quality or the likelihood that those will go through the funnel. Do you have a sense of that?

I guess the only thing I would say is to amplify what you said earlier about six weeks ago, us putting in a more rigorous qualification process. So, we are actually running each SSO through a lot more gates before we allow it to go into the active funnel. So, in that sense, I feel more confident that those things will progress more rapidly and have less of a fall out. But of course, it's hard to say what will happen in customer land. You can't predict that.

We looked, just as a -- just to give you a sense of what we do here internally, we look at the progression rate from -- for each stage by each month actually and measure that. And I can tell you that in general, it's improving. So, our hit rate, our ability to move from stage two to three and from three to four, and four to five, and so forth, is improving. Having said, that, and obviously you're seeing that at the end of the funnel.

So, I hope that gives you the sense of what -- we feel our funnel is better today than it was. It clearly represents more potential revenue to us by a wide margin than it was a year ago as an example. We've had over a year of experience now of tracking motion through the funnel. We're getting smarter about the way we decide whether to put them in or not. We're driving at the end to get to revenue. That's about all I can give you a sense of at this point, Brian.

Okay. That's fine. I have one other question. I know in the past you had -- you kind of kicked around the idea with respect to [V] of possibly an exclusive with a -- whether it's a region, a country, whatever, an exclusive with a handset manufacturer. I'm just wondering if you've kind of refined your thinking on that at all or if you can kind of share any thoughts with respect to that?

Well, we'd -- we're open to entertaining all kinds of things. And exclusivity's one of them for a limited period of time in limited markets. But that's not our first priority is going out to look for exclusivity. Our first priority is to drive this into the marketplace. And we're still working the bejesus out of it.

Okay. All right. Thanks very much.

Thank you.

(Operator instructions) And we'll go next to Fred Demarest, Private Investor.

Hi, Fred Demarest. I've been an investor in this Company for four years. I've heard your conference calls and you guys are very professional. You know what you're doing. But did you ever think about just selling out to someone larger?

Yes, we have, actually. Obviously the Board has explored those opportunities and thought about it. And our conclusion -- the thing you come back to is would you be better off doing that for our shareholders and for our -- primarily for our shareholders. Would we be better off doing that or would we be better off realizing CSSP ourself? And our conclusion has been we're better off doing it ourself.

So, Fred, one of the things -- we appreciate the fact that you've been a shareholder for four years. I myself have been a shareholder for 15 years and I'm still here. The -- which is not to compare us in that sense, but --

Is this Tom Hart I'm talking to?

Yes, it is.

Okay, go ahead.

So, the -- by comparison, go back and take a look at Silex and Altera, about how long it took them to get FPGAs off the ground. And you could argue, well, hey, you guys have been around for a long time and you're still not off the ground. That's a fair argument. We've changed the business model three times in the last -- since I've been here. We believe CSSPs are the right one and we're pressing on that.

All you can do is wait or sell. Thank you.

Okay.

And that does conclude our question and answer session. At this time I'd like to turn everything back to you, Mr. Hart, for any closing or additional remarks.

Well, thank you for your time and your interest. And we look forward to hearing you on our next call, which is, as I said, we're scheduled for July 28th at 2:30 P.M. Thanks and take care. Bye-bye.

That does conclude today's conference. We do thank you for your participation.