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Executives

Mario Ruscev – CEO

Jean Vernet – SVP and CFO

Analysts

C.J. Muse – Lehman Brothers

Brian Lee [ph] – Citigroup

Gary Hsueh – Oppenheimer & Company

Jim Covello – Goldman Sachs

Kevin Vassily – Pacific Crest Securities

FormFactor, Inc. (FORM) Q1 2009 Earnings Call Transcript April 29, 2009 4:30 PM ET

Operator

Thank you. And welcome, everyone, to FormFactor’s first quarter 2009 earnings conference call. On today’s call are Chief Executive Officer, Mario Ruscev, and Chief Financial Officer, Jean Vernet. Before we begin, let me remind you that the company will be discussing GAAP P&L results and some key non-GAAP results to supplement understanding of the company’s financials. A schedule that provides GAAP to non-GAAP reconciliation is available on the Investor portion of FormFactor’s website.

Also, a reminder for everyone that today's discussion contains forward-looking statements and that FormFactor's actual results could differ materially from those projected in our forward-looking statements. For more information, please refer to the risk factor discussions in the company’s Form 10-K and subsequent Form 10-Q and the press release issued today.

With that, we will turn the call over to Mario.

Mario Ruscev

Thank you. And hello, everyone. The economic weakness continued in our first quarter, resulting in total revenues that were lighter than our internal target of in the low $30 million range. Also, this was disappointing. We did have products shipped to customers in the quarter that were approximately $32 million. Jean will spend time discussing our financial in more detail later in the call, but first I’ll discuss our market and performance during the quarter.

The overall probe card market is still under considerable stress. Weak end market demand for PC and cell phones is resulting in lower memory consumption, as indicated in recently revised 2009 bid growth [ph] projections. Slowing bid growth itself will not be a content for our business as long as customers were driving toward their own efficiency through technology strengths to drive growth on profitability.

Given the current situation of operating loss, weak end demand and capacity utilization at record lows, memory customers are much more cautious about moving on node shrinks and overall design in volume, especially outside of the commodity DRAM. In addition, an important component of the market, Taiwan, remains idle without the much needed resolution. Taiwan is an important manufacturing hub within the overall memory market. And we consider consolidation of the memory companies Taiwan as a healthy development for the DRAM industry and for FormFactor in particular.

One of the more encouraging aspects of the last few months has been the recovery net income DRAM prices. DDR2 1 GB spot price for DRAM producers at the leading edge of 50/50 nanotechnology nodes are close to cash cost according to our analysis and validated through third-party research. Also demand is still weak. The customers should be in improved financial conditions heading into 2010 due to sufficient capacity coming offline over the past six to nine months.

Improvement in our customer’s profitability is critical to drive them to higher volume designs. The move to our efficiency would result in a more broad-based recovery in the DRAM advanced probe card market in 2010 and beyond. Also clearly, there are still many concerns. We consider the improvement in DRAM prices as the reason for optimism.

Let's quickly review the performance of our market segments starting with DRAM. The DRAM business remained weak, declining quarter-over-quarter. The weakness reflects our customer hesitancy to invest in node shrinks due to uncertainty about end demand. We originally anticipated more DDR3 activity in our first and second quarters. But the orders have been pushed out due to weak demand. So the overall ramp in DDR3 activity has shifted out in time.

As DRAM prices get above cash costs for our customer, which we anticipate will occur by the second half of the year, we will start to see an improvement in design activities and volume, especially around DDR3 and 50 nanometer designs. In flash, revenue remained weak in both NOR and NAND. Overall end-user demand for memory consumption is down compared to 2008. But solid-state drives, which would be a significant long-term driver for flash business, is continuing to show robust growth, also for a very small basis.

During our first quarter, we did introduce Harmony OneTouch ATC for evaluation in high-density testing as well as for our new testing platforms. We believe this evaluation has a potential for creating demand in the second half of the year. From a new design standpoint, we see another driver for the NAND business over the next year. Migration to 3X nanometers in late Q2 and Q3, adoption of eight-level cells in the later part of '09, entry of 64 gig sales toward the end of ’09. These drivers combined with our new product introduction into NAND in the second half of 2009 will position us well in the flash market for 2010.

In SoC, test capacity utilization is at very low level. SoC customers are not reordering high probably than probe cards, which is (inaudible) what FormFactor says to SoC market. We have seen orders from the automotive market drop to nearly zero, reflecting the severe downturn in the industry. And orders from our Japanese customer also dropped significantly, reflecting the severe downturn in Japanese consumer product exports.

The high end of the flip chip markets continue to move to smaller pieces [ph] with 160 micron design becoming dominant at leading companies. FormFactor remains the leading provider of advanced probe cards so that they are [ph] integral part on flip chip SoC markets. From a competitive perspective, we are strengthening our position in core markets such as DRAM and flash, with product enhancements and new product architectures on the horizon as we addition to our differentiation. We believe we are gaining market share with leading customers.

To summarize, we see end demand across all business segments as currently weak. However, we do see a few potential signs that supply and demand are coming back into balance in both NAND and DRAM. This would provide some stabilization at current revenue levels with a potential for improved activity later in the year. We have made considerable progress in improving our cost structure and limiting our cash usage. We will continue to manage cost efficiently to ensure financial staying power through this historic downturn and ensure a return to profitability as the business recovers.

With that, let me turn the call over to Jean for more details on the financials.

Jean Vernet

Thank you, Mario. Let me start with a summary of our first quarter results. Revenue was down due to weakness across all segments. Total revenue was $27.4 million, down 31% sequentially. Product built and shipped to customers totaled $32 million during the quarter. First quarter revenue for DRAM was $25 million, down 20% from the fourth quarter and a decline of 38% versus the first quarter a year ago.

Revenue in the Flash business was down due to a weak NOR market. Flash revenues for the first quarter were $300,000, down 86% from the fourth quarter and 98% versus the first quarter a year ago. Revenue in the SoC business was down due to weakness in the microprocessor and handset markets leading to a reduction in order activity. Logic revenue was $2.1 million, down 68% versus the fourth quarter and a decline of 78% year-over-year. Revenue in all geographies declined year-over-year.

GAAP gross margin was a negative 13.4%. On a non-GAAP basis, gross margin was minus 10.7% for the first quarter. The gross margin deterioration compared to last quarter and compared to our guidance was mainly due to the lower than expected revenue level and product mix weighted towards the low end. As we responded to reductions in demand, we scaled back costs across functional groups.

On a GAAP basis, operating expense totaled $40.4 million before restructuring charges. This GAAP operating expense was lower by approximately $2 million from the fourth quarter. On a non-GAAP basis, operating expenses were $36.6 million, down approximately $2 million from the fourth quarter.

On both a GAAP and non-GAAP basis, operating expense included a reserve of $5.2 million against accounts receivable for potential losses related to bad debt reserve. Without this reserve charge, total operating expenses would have been $31.4 million on a non-GAAP basis, which were in line with our plan.

In a separate category for restructuring charges, expenses were approximately $7.7 million. The restructuring was related to the cost reduction completed in January. Our effective tax rate for the first quarter was a benefit of 26%, which was lower than our anticipated rate of approximately mid-30s, 30%, primarily due to a non-cash, non-recurring reduction in our long deferred tax assets. This reduction was a result of the California law change in February 2009. This change in law impacted GAAP EPS by $0.08 after tax.

Total cash investments comprised of cash and short-term investments ended the quarter at $519 million, approximately $4.2 million lower than the previous quarter. Capital spending was $5 million. Operating cash flow was approximately $750,000 negative during our first quarter. We did receive a one-time IRS refund of $29 million on a loss carryforward and $6.3 million refund on our Singapore long-term lease, net of tax.

As we turn now to the outlook for the second quarter, we continue to have limited visibility over the near-term. We are not providing any revenue guidance, but internally, we are currently planning our business for second quarter revenue to be similar to that of our first quarter, plus or minus a few millions. Based on our currency of the markets, we expect non-GAAP gross margin for the second quarter to be in line with our first quarter results. Although as the quarter unfolds, changes in demand levels and pricing of products could impact mix and unit costs and potentially create an additional several points of margin variability.

Non-GAAP spending for R&D and SG&A in the second quarter should be approximately $27 million to $28 million, down $3 million to $4 million from the first quarter if you back out the $5.2 million charge against accounts receivable. We are making solid progress toward our $50 million cash breakeven target. We will continue to drive costs lower over the near-term to strengthen FormFactor financial staying power in these challenging times.

Given our outlook, we are scaling back capital spending intentions and now expect capital expenditures to be below $20 million, down more than 34% when compared to 2008 levels. We expect cash usage to be around $25 million in our second quarter. We have been in severe market conditions for well over a year now and through it, have been able to maintain our financial health, and still invest in next generation architectures and position ourselves well for a recovery. Strong balance sheet and the focus we continue to have on improving efficiency will allow us to withstand these downturn.

With that, let’s open the call for Q&A. Nany?

Question-and-Answer Session

Operator

(Operator instructions) We’ll go to C.J. Muse from Lehman Brothers.

C.J. Muse – Lehman Brothers

Yes, good afternoon. Thank you for taking my question. I guess first question, could you identify 10% customers and what the percentages were?

Jean Vernet

We had in this quarter two customers about 10%. And you will see the detail of that in our 10-Q.

C.J. Muse – Lehman Brothers

Okay. And then just looking for some clarity on the 1Q results in terms of pro forma. You talked about I guess the $750,000 pro forma expensed out on the gross margin side or COGS side, what were the pro forma SG&A and R&D?

Jean Vernet

Sorry, the $750,000 we mentioned was the operating cash flow negative.

C.J. Muse – Lehman Brothers

No, I’m just doing the math on the 10.7% minus (inaudible) gross margin.

Jean Vernet

What was the question again, sorry?

C.J. Muse – Lehman Brothers

So, if you could help us understand pro forma was COGS and R&D and SG&A.

Jean Vernet

All right. On the gross margin, essentially what we have been seeing in the first quarter is primarily a soft revenue level versus our internal plan. So the COGS in itself is pretty much in line with what we expected. The fact that we have the revenue levels means that the under-absorption is higher and the fixed costs have a bigger impact. What we have been seeing within manufacturing cost structure is that as the mix of the product was more towards the standard type of products in the quarter, essentially the margin was further impacted by that. For standard products, and knowing that we are increasing our market share in various key accounts, these sales are subject to most price pressure. So that impacted a little bit further the margin. In terms of our OpEx, essentially our OpEx, if you back out the $5.2 million of bad debt, was $31.4 million, which was roughly in line with what we expected. I mean, R&D is $13 million of that amount. And you have to remember that in the SG&A we still have a sizable amount of ITC legal expense. It’s about $3 million for the quarter. And this should drop significantly – actually almost entirely in the second quarter.

C.J. Muse – Lehman Brothers

Okay. I mean, I apologize. For the GAAP results, you said R&D was $14.11 million and now you just said $13 million. So I guess was there a $1.11 million charge related to the write-down? Is that coming out of R&D?

Jean Vernet

No, sorry, the $13.1 million is non-GAAP. The GAAP R&D is $14.1 million. The difference is about $1 million of SBT charge.

C.J. Muse – Lehman Brothers

Okay. So pro forma R&D is $13.1 million.

Jean Vernet

Non-GAAP, yes, pro forma non-GAAP R&D is $13.1 million, yes.

C.J. Muse – Lehman Brothers

And how about pro forma non-GAAP SG&A?

Jean Vernet

$23.5 million. In this, you have $5.2 million of that reserve.

C.J. Muse – Lehman Brothers

Okay, that’s helpful. Thank you. And I guess last question, considering the debts and the downturn here and I guess you are seeing some signs of a glimmer of hope. But I guess considering perhaps things could take a while before they get better, do you think you have the R&D bandwidth to continue to focus across DRAM, NAND and SoC, or do you think you’d be better off focused on one or two of those segments?

Mario Ruscev

We are in typical situation. We are with dilemma, you know. On one side, it’s obvious that our structure is obviously not right for the amount of business that we are now. And it’s very obvious that our structure is not set for this kind of business. The other side, one of the big things we have to start seeing is, 2010 is – on that, who knows what, but should be a year where we recover and we want to make sure that when this business recovers, we can take the maximum out of it. So like I said, all of that is about one quarter too many, one quarter not enough. And what we do is we try to monitor the best [ph] and take the decision as they go. So certainly, I said that before, like I said, the goal for us was a $50 million breakeven on cash because we assume that was the right business. If we realize that timing is still going away, we will have to act on it. But for now (inaudible) that during all these downturns, we always said we tried to do two things to make sure that this company can really take full advantage of the recovery. One, keeping our technology advanced and making sure we advance. We invest so that we can bring the new technology and take full advantage. The other one is being able to serve all our customers and support our customers. That’s what we have been trying to do as we go. It’s also very important in the technology. One of the big issues that we had in 2008 was that we are very heavily weighted toward only one business. And it’s very important for the long-term future of our company that we become less sensitive to only one business. So this is what we are trying to play with all the time really.

C.J. Muse – Lehman Brothers

Sounds good. Thank you.

Operator

Next we’ll go to Tim Arcuri from Citigroup.

Brian Lee – Citigroup

Hi, guys. This is actually Brian Lee [ph] calling in for Tim. I had a couple of things. I guess a clarification on the last question. Is bad debt reserve, is that embedded in your SG&A or is that in COGS?

Jean Vernet

Bad debt reserve is embedded in SG&A, yes.

Brian Lee – Citigroup

Okay, okay. That clears that up. And then I guess you talked in the prepared remarks about DDR3 being delaying here. Could you elaborate a bit more on what you are hearing from your customers on that ramp? And specifically, I guess, are you seeing any difference in tone around design activity, especially in the past few weeks?

Mario Ruscev

You have to remember for all our customers now – I try to step back just to come back to that. It’s only recently and till now many of our customers were still trying to settle the debt and did not really know exactly how much cash they will have to basically invest and put their plan on together. And even now in many of our customers, this is not totally resolved yet. So we have seen an incredibly – we have seen our customer really trying to adapt very fast to any little changes in the market, which means that we have seen – you know, we have seen in some cases DDR3 being pushed back to take some opportunity in DDR2 et cetera. And we have really seen for Q1 a lot of opportunities as we are going through the quarter, in fact. In orders changing, the order change in design, et cetera, et cetera. So there was a lot of this, which really made the visibility even less. The global result of that, if you look at, I’d say, we have seen some pushback from DDR3, which we don't believe it's dramatic or very long, but we certainly see that activity we expected to have in DDR3 in Q2. Part of it has been pushed back, probably so that people can take care of some opportunities that they have seen in DDR3, in fact.

Brian Lee – Citigroup

Okay, okay, that’s helpful then. And then I guess on the inventory, did you have any write-off in the quarter or take any incremental reserves relative to what you took last quarter?

Jean Vernet

Yes. We had to take some reserve on inventory really related to what Mario just talked about. A combination of product substitution from one type of product to another. And as you know, our inventory is very customized. And our policy for reserve of inventory is quite conservative, which means that if you don’t have either appeal or a very highly probable business opportunity in the short-term, we reserve the components of our inventory. So due to that order substitution type, we took a reserve in Q1. We also have somehow an impact of some push-outs of those DDR3 orders. But overall, on the net gross margin, this effect was minimal because we had other things offsetting that. To your earlier question on design, we actually have seen at the very end of Q1 and we see that in Q2 definitely an increase in new designs. So this in itself is both a little bit of a hurdle on Q2, but also a good news. So the hurdle being that all those new designs come up with incremental engineering costs to them. They also are limited series, which means that minimum order quantity will tend to drag the cost up. But the good sign is that these are further, I would say, the first time in a while. We see that as positive signs of possibly further business down the road, further in the year.

Brian Lee – Citigroup

Okay, great. Just so I’m clear on that color, is that increase in new design specifically related to DDR3? And also is it I guess – is it concentrated among one or two customers, or are you seeing that from a broad array of customers?

Mario Ruscev

Overall, we have – obviously, we are more weighted over some customers than others. But we see as an increase in design altogether. And we see increase in DDR3 designs. We also see some increase in specialty DRAM designs, which come and which some of our customers become more secure about that, which we are not seeing for a while also. So it’s really a mix. And overall, we can see that it’s really – it's very recent, so nobody knows if this will stay, but we do see a little increase in activity in design. Also we come from such a low level that we really need any hope.

Brian Lee – Citigroup

Sure. That’s right. Great. And then one last thing for me and I’ll get back in the queue guys. With all the cost reduction activities you guys have implemented recently, is there any way I guess looking longer term at the model that you can help us with getting an idea of how the model will look at different revenue levels, say, to get back up to 40 and even into the $60 million run rate range? Can you give us a sense for what the margins would look like at that point?

Mario Ruscev

Listen, I think it’s overall slightly too early to go into that. All I want to say is that what we are focusing on really is obviously – everybody knows how 2009 is and it’s coming. What we really want to make sure in everything we do is that when the recovery comes and everybody expects it to be at least – you know, it's not a huge recovery. There is going to be some recovery in 2010. When recovery comes in 2010, we are definitely and very obviously profitable.

Brian Lee – Citigroup

Okay. Thanks, guys.

Operator

(Operator instructions) And we’ll go to Gary Hsueh from Oppenheimer & Company.

Gary Hsueh – Oppenheimer & Company

Hi there. Thanks for taking my question. If I got this right, the mix relative to your internal target that you basically gave as your set guidance was basically a rev-rec timing issue? Your shipment level was 32 million. So I guess if you had rev-rec’d 32 million, that would be a little bit better. Just what happened there? Were more customers actually trading up to newer products, maybe the Sequoia product? And in terms of rev-rec, that takes a little bit longer. And just to help us out on apples-to-apples basis, what do we expect for shipments there in Q2?

Jean Vernet

There are different elements in your question. The first thing is indeed if we had recognized all the deal shipments, this would have had an impact on the margin. And we would have probably bridged about. I mean, a significant portion of the GAAP we had versus our internal forecast. But on top of that, the revenue actually came a little bit softer altogether than internal assumption. And then we had this adverse mix more towards the standard product versus leading edge technology, which led to a further deterioration in margin for this particular quarter.

Mario Ruscev

Just to come back, in this situation, as you – if you think of it, if you look at Taiwan, the overall activity in Taiwan is less than well below 40% of the total activity. And really if you take away one or two of the guys, which are running pretty high, I mean, the average activity in Taiwan is more like 30%. And overall, there is quite a lot of oversupply of testing capacity with our customers. So when we add that, also there are high, I would say, the advanced theory [ph] probe cards that we are also – they will still give a better cost. The handset is not that much to efficiency. So what we do see in these times when you have plenty of (inaudible) is that people don’t – go less, I would say, with this advanced theory probe cards and go to more standard products, which makes it a slightly different mix. When the market improves, obviously this would change back to this higher efficiency and more advanced probe cards. So we will see this impact coming as people pick up some activity in fact. But we certainly – in this quarter we have certainly seen this impact. On top of that, like I said, we did get market share with all of our leading customers, I would say.

Gary Hsueh – Oppenheimer & Company

Absolutely. I just wanted to see if your outlook for shipment guidance in Q2 was flat like your outlook basically for revenue guidance in Q2. Are we continuing to build that deferred revenue account number on the balance sheet further in Q2 coming from I guess $9 million in Q1?

Jean Vernet

I would say this is probably a fair picture of the situation. But we also expect as we build history with some of this deferred revenue, we will be about to recognize some revenue from prior periods. But this is not factored in this revenue number. So yes, there is some upside. And I would it looks fairly similar to the first quarter.

Gary Hsueh – Oppenheimer & Company

Okay, perfect. Thank you.

Operator

(Operator instructions) And we’ll go to Jim Covello from Goldman Sachs.

Jim Covello – Goldman Sachs

Great. Good afternoon, guys. Thanks so much for taking the question. Couple of things. We talked a lot about DDR3 and some delays in DDR3. There was one big customer that at least publicly has committed to a significant ramp in DDR3. And there is one big DRAM company. Has there been any share issues at that big customer that might impact your ramp to go along with their ramp?

Mario Ruscev

I know there is one very large customer to make a big announcement on DDR3 not long ago. And to remember now, we have just recently been qualified with all the DRAM manufacturers. We always said that also we are increasing all our markets. So some processes just take time. So I would say these big announcements also, they will have an impact. I mean – you know, you just take time to go for it. We speak of a different customer.

Jim Covello – Goldman Sachs

I guess maybe I had a bit different impression of where your existing relationships stood. I mean, there have been times in the past when FORM did have good revenue with the biggest DRAM supplier, but that doesn’t seem to be the case today.

Mario Ruscev

But this is coming back. Let’s reiterate. You spoke about share. We did not lose any market share with any customer. And in fact, we have gained market share with all major customers that we have, as much as we know.

Jim Covello – Goldman Sachs

Okay, okay.

Mario Ruscev

Does that answer the question, Jim?

Jim Covello – Goldman Sachs

Yes, yes. No, thank you. (inaudible) bit, if I could go onto the cash. There was a thought a little while ago that FORM could end the year with maybe a $500 million cash balance and that was kind of a goal for the year. Does the current environment change that at all? Do you still think you could be able to keep the cash balance at that number existing the year?

Jean Vernet

The numbers we communicated a quarter ago had embedded some scenarios of revenue in the second half. Now if the revenue scenarios are lower than expected, obviously this will make this goal more challenging. On the other hand, if the revenue scenario is better than our breakeven, then it will be greater than that. At this point, we have very little visibility for the later part of the year. I see this $500 million as a very healthy milepost for us to compare ourselves against on our performance for the rest of the year.

Jim Covello – Goldman Sachs

Great, thank you.

Operator

(Operator instructions) Next we’ll go to Kevin Vassily of Pacific Crest Securities.

Kevin Vassily – Pacific Crest Securities

Yes, hi. Can you guys provide an update on the ITC proceedings? Where are you – at what point do you expect some of the costs on the legal side to begin to dissipate as you move through that process, maybe if you could give an update there?

Mario Ruscev

Sure. Under ITC to be – I have it written so I can make sure that – you know, with legal stuff, you better be precise. So we had a – under ITC action against MJC and Phicom, we had a nine-day trial, hearing, which concluded in March 6. We expect to receive a determination from the judge mid-June. The target for the final determination is October 19, 2009. On the cost, I think, basically, as Jean said, these costs should go dramatically down in Q2.

Jean Vernet

Yes. We expect a little bit of legal costs related to ITC in Q2, but this is the tail end.

Kevin Vassily – Pacific Crest Securities

Okay. And that’s running at, you said, about $3 million a quarter. Is that right?

Jean Vernet

That was $3 million in the first quarter. We expect a number, which is below $500,000 for the second quarter.

Kevin Vassily – Pacific Crest Securities

Okay. Is that the primary delta between your Q1 OpEx and the forecast for Q2?

Mario Ruscev

(inaudible). No, it’s $2 million.

Kevin Vassily – Pacific Crest Securities

No, well, the non-GAAP OpEx.

Jean Vernet

This is a big portion, but continue to expect some reduction in other lines as well – you know, in R&D as well as general other house accounts in SG&A.

Kevin Vassily – Pacific Crest Securities

Okay. And then with regard to potential remedies, let’s assume that in the initial determination, judge rules in your favor. What kind of remedies are available in this circumstance, given that MJC and Phicom have limited exposure here in the US? What’s the impact here for you?

Mario Ruscev

I think it’s much too earlier to discuss that. But overall – in anyway, look, even if we win something like that, it puts you in a position, in a very good position altogether with most of the customers. Because no customer wants to very basically deal with these things. Many of them have been burned in the past also. So I think it’s too early to speak about the next step. We are just looking at it step-by-step. But I think it’s really important for us that just on a question of image and what it means on the way you deal with a customer, I think it’s very important.

Kevin Vassily – Pacific Crest Securities

Great. To your knowledge, do MJC or Phicom have any meaningful share in the US right now?

Mario Ruscev

Not really.

Kevin Vassily – Pacific Crest Securities

Okay. Okay, that’s helpful. Thank you very much.

Operator

We will take a follow-up question from .J. Muse from Lehman Brothers.

C.J. Muse – Lehman Brothers

Yes, thank you. Just quick follow-ups. I guess first, you talked about $27 million, $28 million OpEx for Q2. Does that fully reflect all the cost-cutting efforts that you’ve made or should we see that go head down in the September and December quarters?

Jean Vernet

You should see keeping these going down. I mean, if anything, on a daily basis, we are being very aggressive with coming up with new ways of cutting costs in OpEx as well as in manufacturing, by the way. Because we are in a situation where the key is for us to come up with new, short-term – with immediate impact cost reduction action. We are also in parallel working on measures, which take a little bit more time to implement such as reducing our real estate footprint in the US, for example, which requires us to get out of some commitments. So this takes a little bit longer. We expect that down the line both on OpEx and manufacturing, the way we address this more fundamental cost structure will take effect to actually a bigger order of magnitude. That’s what we have been doing until now. And overall it will complement those short-term measures. So to your question, we absolutely are factoring some further cost reduction and you see that level that I mentioned for Q2 as a step in the right direction. Especially as long as the revenue stays very low, we are even more aggressive to cut costs.

C.J. Muse – Lehman Brothers

Got you. And then one last follow-up. Historically, you’ve provided a geographic breakdown of revenues. Could you do so here as well?

Jean Vernet

Yes, this is given on our website. I can give that to you after the call if you want, no problem.

C.J. Muse – Lehman Brothers

Okay, thank you.

Unidentified Speaker

Operator, we will take one more call.

Operator

And gentlemen, it appears there are no further questions at this time.

Unidentified Speaker

Great. Thank you very much. We’d now like to conclude the call. Thank you for joining us today and we look forward to speaking with you again soon.

Operator

Ladies and gentlemen, that does conclude today’s call. Thank you for your participation.

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