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Executives

John East - President & Chief Executive Officer

Maurice Carson - Executive Vice President & Chief Financial Officer

Analysts

Gary Mobley - Noble

Richard Shannon - Northland Securities

Neil Gagnon - Gagnon Securities

Actel Corporation (ACTL) Q3 2009 Earnings Call October 27, 2009 4:30 PM ET

Operator

Welcome to Actel Corporation’s conference call regarding its results for the third quarter of 2009. A replay of this call will be available for one week at 1-800-642-1687, conference ID number 80688170. You can also access this call on Thomson CCBN through a link on Actel’s website at www.actel.com.

This call is being recorded. To ensure that the question-and-answer session proceeds in an orderly manner participants will be returned to the queue after one question and one follow-up question. All forward-looking statements during this call are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in the forward-looking statements.

Information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements are contained in Actel’s most recent form 10-K or 10-Q, which is available on Actel’s website. At this time, all parties have been placed on a listen-mode. The floor will be opened for questions and comments following the presentations.

It is my pleasure to hand the floor over to your host, Mr. John East, President of Actel.

John East

Thank you, Ashley. Good afternoon, I’m John East, President and CEO of Actel. With me is, Maurice Carson, our Executive Vice President and CFO. As most of you know, in August, Maurice joined the company as our CFO. Prior to this, he spent six years at Kulicke & Soffa as their CFO, before that, seven years in various positions at Cypress Semiconductor, finishing as Vice President and Corporate Controller.

Now, Maurice is going to take you through the quarter from our financial perspective, then I’ll talk about our current business environment and give you a brief update on some of our product plans and finally, we will open up the call for questions. Now, I’d like to turn the call over to Maurice.

Maurice Carson

Thank you, John. Hello, everyone. Welcome, good afternoon and I’m very happy to be here at Actel. Let me jump on right in. Before I talk about the financial details for the third quarter, let me tell you how we will provide financial information regarding the fourth quarter of 2009. We will give guidance on the call today. The guidance will be our targets for sales, gross margin, operating expenses, other income, tax provision and share count for the fourth quarter of 2009.

Next we expect to provide a financial update in early December. In the absence of a material change, that will be the only financial guidance the company will give during the quarter. For replay of this call will be made available, please access the company’s website for the replay information.

As will generally be the case, my remarks today will include non-GAAP measures as a supplement to our GAAP results in order to provide a more comprehensive view of our financial results. A reconciliation of non-GAAP to GAAP statement of operations is included in our earnings release and is posted in the pressroom of the company’s website.

I will focus on comparisons of the third quarter with the second quarter. Now, to the financials; third quarter sales were $47.2 million, which was just above the high ends of updated revenue guidance for the quarter. This represented an increase of 4.5% compared with last quarter. This quarter, the details around the revenue are included in the press release, so I will not read them here.

The key takeaway is the 5% shift of revenue from consumer to Mill Arrow. Overall units sold decreased by 347,000 to $3 million, compared with last quarter and ASP increased 16.2%. Overall book-to-bill was close to 1%. We have made a change in the way we calculate the book-to-bill. In the past, we used all revenue to determine the bill amount. This included revenue from items such as royalties, for which there’s no corresponding booking. This quarter and for quarters going forward, we will use only silicon revenue in booking.

Let’s spends a few minutes on the income statement. Non-GAAP gross margin in the quarter was 60.3%, compared with 57.2% in the second quarter of 2009. Improvement in gross margin is primarily driven by three factors. First is the shift between consumer and Mill Arrow that I mentioned earlier and second, is better factory utilization. We also have $400,000 in revenue from shipping products that were fully reserved.

Operating expenses for the quarter were $25.7 million, compared with $26.6 million in the second quarter of 2009. R&D spending was $13.4 million compared with $14.1 million and SG&A was $12.4 million, compared with $12.6 million and other income was $0.7 million, compared with $0.8 million.

Non-GAAP net income was $2.4 million, compared with $14,000 last quarter. Diluted share count was $26.2 million, and this all resulted in earnings per share on a non-GAAP basis of $0.09 per share compared to $0.00 last quarter. It’s a good quarter for cash, with cash, cash equivalence in investments at $145.7 million, an increase of $6.2 million from the end of the previous quarter.

This was driven primarily by net income plus non-cash charges that got us $6.1 million, changes in the balance sheet net it close to zero. Accounts receivable decreased by $3.1 million to $22.8 million. DSO decreased by 8 days to 44 days, net inventory decreased by $2.1 million to $38.4 million. This includes $0.8 million worth of legacy wafers purchased as a part of the last time described by John last quarter.

We will purchase approximately $1.8 million of legacy wafers each of the next few quarter, and this inventory will support our customers with these very key products for approximately ten years. Even with this purchase, net days of inventory decreased by 4 days to 187 days.

Capital expenditures were $1.2 million during the quarter, and we recorded $3.1 million of depreciation and amortization. Largely as a result of the transaction of certain consultants in India to Actel payroll, headcount increased sequentially by 48 to 563. Now, I’ll give a little bit detail on the financial outlook of the fourth quarter of 2009.

Taking into considers all the information currently known by us, we are projecting revenue to be up about 2 to 6%. For the rest of the P&L, please remember that these are non-GAAP numbers. Gross margin is expected to be about 59% to 60%. This is down from the results in the third quarter, but still higher than the last four quarters as we continue to reach the benefits of the cost initiatives we’ve undertaken in the last few months.

Operating expenses come in about $26.9 million, which does not include non-cash charges for equity comp, amortization of intangibles or restructuring costs. Other income will be about $7.7 million, the non- GAAP tax rate for the quarter is approximately 30%, and the fully diluted share count is expected to be $26.3 million shares.

Let me give you some additional color on the quarter and the guidance. We have previously given very specific guidance concerning the financial model for the third quarter of 2010. We committed to reduce our overall spend by $6.5 million, with approximately $1 million coming from the cost of goods sold and $5.5 million coming from operating expense given a revenue number of around $54 million.

We are on track to meet the $6.5 million in savings, although the split between cost of goods sold and operating expenses may shift. The operating expense number, up in the fourth quarter, as we have spending associated with the completion of the large engineering projects that we committed to finish. Non-linear spending, on items such as NRE, IP and Maps, this does take us off the straight line forecast for cost improvement we’ve given in the past.

In the prior quarters, we were ahead of plan and some much projects related spending came do. We did take two significant steps in getting to the total savings. In the third quarter we opened a new development and support center in Hyderabad, India that will eventually house engineering marketing and operation employees.

Although this center was initially staffed primarily with employees had previously been contractors, it will allow us to grow in a low cost area. Early in the fourth quarter, we completed reduction in force of 33 employees. This is expected to save approximately $3. 6 million per year and it cost around $1.2 million. The savings will be split between cost of goods sold, $1.2 million, and operating expenses $2.4 million.

Thanks and I’d like to turn the call back to John.

John East

Thanks, Maurice. First, let’s talk about Q3. As Maurice told you, the sales were up 4.5% from the fire quarter. Bookings followed what I would call a typical summer pattern. July and August were nothing to write home about, and then September improved. The overall book-to-bill was just about one to one although bookings were better towards the end of the quarter. Bookings so far this quarter have been okay, neither great nor awful.

Maurice also told you, that we beat our margin forecast and we came in under our expense forecast. All that feels good or at least it felt good until we had to compare those very good Q3 numbers with good Q4 numbers. I think that our long term trend and margin will be up and our long term trend in spending will be down. In Q4, it will be tough to match what I thought were very good results in Q3.

Now let me give you some more details on Q4. You’ll recall that in Q2, our book-to-bill was quite a bit above one. You’ll also recall that great deal of this business aged into Q4, and as a result, our backlog shippable in Q4 as we entered the quarter was higher than the equivalent Q3 beginning backlog. It’s good to have a higher beginning backlog in Q4 because often orders can suffer during in the holidays.

On balance, we’re going to call Q4 revenue at somewhere between up 2% and up 6%. To make a midpoint of that range, we’ll need fewer turns than last quarter. Now, I’ll talk briefly about some new developments in our product portfolio. I’ll start out by observing that we did not fall as far or as fast as most of the high tech market when the recession hit last year. One of the biggest reasons for that was our satellite business. Our satellite business didn’t fall off at all during that time frame.

Extrapolating that train of thought, I’m looking forward over the next few years, I believe that we’re going to be able to achieve substantial growth in this very profitable business, so let me describe how we plan to do that. Today, the bulk of our satellite business comprises two product lines RTSX-S, and RTAX-S. I described both of these families to earn several occasions.

Both of them are based on our second generation antifuse processor. The most common use of our current products in satellite involves IGLOO logic applications as opposed to data pathapplications. As you would expect, the data path market is considerably bigger than the IGLOO logic market guy market and also requires parts that are different than as usually required for IGLOO logic applications. That will cause you to ask, what is Actel doing to capture a bigger piece of the satellite area path.

Answer that, you have to under the reasons that, we don’t play heavily in the data path today. Data path applications usually demand parts that are bigger, faster, and reprogrammable. So what are we doing about that? In late 2008, we announced RTG3, this is our first reprogrammable space part, it’s based on Flash technology. It’s not big enough and fast enough to capture mulch of the data path market, but will allow customers to become comfortable with putting our reprogrammable Flash technology into space.

Last month, we announced the availability of prototype units of RTAX-DSP. The RTAX-DSP family is essentially our two and four million gate antifuse FPGAs combined with hard Digital Signal Processing Blocks that’s usually referred to at DSP. The hard DST blocks increased the effective speed and gate count of the resulting products. We’re sampling RTAX-DSP silicon today and we have software couple with the day

Third, we’re well underway with a development of a very large DSP oriented flash based FPGA aims primarily at the data path in satellites. Let me just represent the pot of gold at the end of the rainbow. In my view, the market for this product will eclipse that for all of the satellite products that we offer today.

That concludes my form remarks. Ashley, would you please open the lines for questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Gary Mobley with Noble.

Gary Mobley - Noble

Hi, guys congratulations on a good quarter. I had a couple of questions relating to the gross margin. Given the variable involved in your expense reduction path, how should we think about the long term gross margin for Actel and as well, Maurice, could you help us understand what the future benefits of, zero cost inventory might be for the gross margin sales the next couple of quarters?

John East

Your first half your question was the long term trends in margins? I believe the long term trends in margins will be up. I’d like to get to the range we ran in a couple of years ago. I think our cost cutting has to happen to order make that happen, and I think also we need to get volumes so little closer to what they used to be, but if we’re able to do those two things. I think the margin trend will be up. Maurice you want to get the second half the question.

Maurice Carson

Gary, first of all, we don’t forecast at any point zero cost, zero fully reserved inventories. If we did, unreserved it, but so I wouldn’t anticipate a whole lot the 400K that came through this quarter was unexpected right up until the partway into the quarter and I wouldn’t anticipate a whole lot of that in the next quarter.

Gary Mobley - Noble

Regarding your backlog, I think you answered the fourth quarter with higher shippable backlog and you didn’t third, but bookings have been okay. So, I assume you exit the fourth quarter with lower studying backlog and it bookings aren’t all that great now, and probably won’t be there the holiday season. How do you herself, head into the first quarter and what the likelihood is of generate some sequential revenue growth concerning decrease backlog and weak booking trends for the balance of the quarter.

John East

Little all the bigger leap than I would have cautioned you to. I won’t assume that our backlog is lower in January. We’re only three weeks into this quarter and when I said they were neither great or awful, that’s what I meant, you might of thought that was quote for bookings have been weak but the reserve of bookings so far this quarter have been enough to do one-to-one and if we booked, had an one-to-one this quarter, and started out with a healthy backlog, I think the math of that says it backlog would be healthy in Q1.

So I wouldn’t all leap towards the backlog is going to go down. Not ideal a little more spin into that Q4 is the strangest of all quarters in the bookings point of you, because bookings typically do taper off classically bookings between Christmas as New Year’s for example are really, really low, but I have seen half lot of Q4 is were November bookings are really, really high.

I didn’t concede have seen fourth quarter where that not either so, I would just cautioning to don’t go forward with this assumption our backlog is going to be down I have made that. I dint encode anything or encrypt anything to make you think that, without saying but I don’t think I believe that so Gary, we’ll call that enough for this time, but feel free to get back in the queue. Ashley, can you take the next question please.

Operator

Our next question comes from the line of Richard Shannon with Northland Securities.

Richard Shannon - Northland Securities

Hey, John, how are you?

John East

Great, how are you doing?

Richard Shannon - Northland Securities

Just fine, thanks. I guess the first question surrounds the revenue guidance for the quarter I wondering, if you could handicap that in a couple of ways for us, both from and then markets perspective, which one will be up down or upper more than the guidance as well as what do you think you flash business within the fourth quarter?

John East

Good question. To begin with I has also you will eight missing guidance so, I wouldn’t give you guidance where the handicap would be high probably to missing that, you never give assurance of that, but I feel like we make this guidance, and are we at the high end or low end it depends on the booking that come and I just talk about that.

Now, with respect to where I expect ups and downs, we’ve been running in a channel with our consumer business for somewhere between 15% to 20% for maybe a year and a half something like; that and we were at the very low end of that in Q3. I don’t think that represents a new trend that says we’re going down.

In fact, I’d bet anything, it does not. So if the first bet I would make is the consumer would comeback somewhat. If consumer comes back, that’s virtually the same as saying flash comes back, because we don’t do much antifuse consumer anymore. So those two things to me feel like they’re going to happen.

We have a lot of RFQs, requests for quotes on satellite product, sometime we get RFQs and the orders don’t come in for three, or six, or even nine months. Sometime they come in right away, but there’s a chance to have a really nice satellite quarter. The orders have to come in. The backlog is not there yet. Places other than those, I’m going to put it in a too close to call or at least I can’t think of the argument now. So I won’t elaborate more. Do you got follow on?

Richard Shannon - Northland Securities

Yes, I do. John, you mentioned some opportunities coming here in the satellite market, which obviously has been very good one for Actel for quite sometime. Can I curious, if you can talk the about the timeframes, by which you expect products to get sampling, exist sampling, what’s the timeframe should we think about, where this can make a real impact on your revenues?

John East

Okay, good questions. If I answer literally are maybe do under the service. So let me backup a couple of steps. I’ve said many, many times over the years that Actel products tend to peak seven years, maybe seven of that, we have to announce some, that’s not quite true of satellite. Satellite has been a little harder thing to predict, but I think what we’re finding is that if we do a good enough job of telling the customers far in advance what the product is going to be like, and if we give them software far in advance, then I think we can beat that seven years.

Does it comedown to one year or of course not, not at all, but does it comedown to five? I think so. There’s some data point that might happen. So with that in mind, let’s talk about the products we have on the table already. RTSX was announced in ‘03, so by any of those standards, it ought to be running at peak already and my gut feel is that it is.

Our taxes, RTAX-S introduced in round figures in 2005, I say round figures because satellite more than anywhere else, there’s a big spread between when do we get the software out, when do we first sample, when are we first qualified.. I don’t think we actually shipped our first product until 2006.

So for RTAX, you’d say we’ll have products in neighborhood of three years old, maybe four years old, something like that. So you could conclude, there’s still some growth to be add on that product, I conclude that. It doesn’t mean that all, that I guarantee it, because life is tough, but in my view, there’s still some growth to be had there.

Now I mentioned earlier that we announced the first flash product coming up on a year ago, but I think the sales of that product will be small, won’t add that much to your model. “Why did we put it out?” Because we want to get a half dozen cases or so, people that will put it up in space, because one of the really big swing factors, and whether our new customers puts up a product or not is, as anybody else put it up and did it work? Nobody wants to be the first one. So if we can get half dozen guys to put it in space, I think it works really well, but it won’t affect your model at much.

Now the next product is RTAX-DSP, we got the software on that out, I don’t remember the exact date, but it was the better part of a year ago, maybe not all the way to a year ago, but some customers had it a long time ago. Samples have been going out for a few months now, and the total qualification will began roughly year from now and you’d say, “Oh! My god is that taking a long time to get it done”. Well, no longer than normal, the qualification for satellite products is excruciating. So it’s a right on plan. The plan was would be a long time.

So when could that start picking up? We’ve got a couple of customers that are saying, “As soon as you got that qualified, I want some parts.” and one of them is actually sort of reasonable volume, but for very guy like that, they’re going to a few others that want to wait around and want more data and want other people to fly it.

“So how would you predict the sales of that one?” I’d say you predict no sales until Q4 next year, because it won’t be qualified, and then Q4 next year, they will looks now as we’ll get some and I expect that to ramp to a peak, which would not be as high as our total satellite business today, but it would be a reasonable number, in neighborhood of four years, after we do the first shipment.

So Richard, that was a long answer to a short question, but I think it was a particularly good question. I think you all need to know that to figure out to what degree you want to get excited and over what timeframe you want to get excited. So Richard, I’ve talked so much much, I forgot if I give you follow-on, I think I did already.

Maurice Carson

That’s it was my follow-up John, thank you.

John East

Great, let’s Ashley, take our next question, please.

Operator

Our next question comes from the line of Neil Gagnon with Gagnon Securities.

Maurice Carson

Hi, Neil.

Neil Gagnon - Gagnon Securities

Hi, John, Maurice, continuing on space, how you get anyone to buy a product before it’s flown in space? These guys are very wary about flying something new.

John East

Yes, they are and we had a heck of a problem with that on RTAX, because we’re just coming off of what we described you guys as being a possible reliability problem, had happened in 2003-2004. By the way, best of my knowledge, not one part ever failed in space, so it was sort of a tempest in a tea pot, but whatever the menu that community got one of that might be a problem, then nobody wanted to use am X product, and everybody looks around to see if there’s something else using it, if there is somebody else is using it, they wanted to be up there for a year or two to prove it’s still running.

Neil Gagnon - Gagnon Securities

Sure.

John East

So that can happen, but on RTAX-DST, it’s basically an RTAX process with some hard logic put into it, and the hard logic is one thing that I believe, everybody knows how to do fairly well, and already give us credit for knowing how to do fairly well. So, it’s not a new process. It’s not even a new FPGA. The guts of the FPGA are the guts of what we’re shipping now. So I wouldn’t expect there to be that much concern in moving to the HXAX-DSP.

There could be more concern moving to flash, and that would be an interesting thing, because, yet more I’m talking so much, Maurice is looking at me kind of saying, are you ever going to shut up? I am on a role now, so no. If you look at the market for data paths and satellites, the thing about those is, that they have really big gate counts. So we think the typical gate counts are $10 million, $15 million a gate, and biggest thing we have that is $4 million, which once upon a time that was really big, but it is not.

Now one thing about gates counts getting bigger. Every time you move to a bigger gate count, you more want a reprogrammable solution. We were able to do pretty well with OTP solutions, not reprogram able solutions when we were shipping 1,000 gate products, and 8,000 gate products, but as you get more and more and more gates, the probability of our customer needing to make a change gets higher and higher and higher, and when you do 15 million gates, these customers just wants a reprogram able solution.

So basically, everybody that I talked to commence the fact that we’re going to come out with a reprogram able solution, and many absolutely demand that, so then you’d say that well I don’t mean they’re really anxious to take it up right away, but, in the case of that product, I think they will be a little nervous about being the first one to fly, because the technology is different.

Neil Gagnon - Gagnon Securities

John, staying on the same product, that the first flash product now, a year ago, that’s, is that flying in space now?

John East

I just got a summary on that here today day, there is one that I believe is just about to fly, in kind of a non-critical application, I don’t think it’s up yet. I’ll check on that, next time I talk to you, I’ll give the exact answer, but I don’t think it’s up yet. By the time, we get our big family out, I think there’ll be several things that will be up, and I cheerfully predict that they’ll have a good reliability record not to make it easier going.

Neil Gagnon - Gagnon Securities

So the way you make the third part you talked about work, is get the RTSX up and, if I get the first flash product up and then get the RTAX up with DSP so that works.

John East

Yes.

Neil Gagnon - Gagnon Securities

Then you hope to convince people that you have flash and DSP together and that will work.

John East

Exactly, although I’d word it more strongly than we hope to convince people, I’m going to convince people, okay there’s no question about it. We’re not doing this in a vacuum. It isn’t a build it and they will come. We’re not doing it, because this is what they’re asking for.

Neil Gagnon - Gagnon Securities

When does this last product you mentioned the RTAX-DSP fly?

John East

When does it fly? Fly, is a different question one we announced I haven’t put a schedule on the table of when we will announce it, but round figures, it’s a couple of years ago.

Neil Gagnon - Gagnon Securities

That’s what I was thinking in the couple of years.

John East

Then the question of getting it to fly is, yet another question.

Neil Gagnon - Gagnon Securities

Okay, let me take my second question, it would be totally different and if you would, please you and Maurice, go through and give us an idea, is not over the next few months, but the next year or so, what are the pluses here in this product line? What’s the stuff that we’re going to be really happy about and where should we have some questions?

John East

Well, I think we grow flash, and I believe we’ll grow satellite as well, although satellite may be lumpy. I think as the recession whereas behind us and flash grows a little bit, it allows our margins to come up some, and you can argue that, because the flash comes up too much since the margins on our new products are always lower than the margins on the old ones.

You can argue, that could pull down percent margin, but it won’t pull down earnings, it won’t pull down EPS and I don’t even think it will pull down our percent margin unless it grows sharply, which I think you’d all forgive us for, because the sharp growth, it would mean better EPS and we’re planning on making our cost cutting.

As Maurice described, we’ve got our sites firmly fixed on that 6.5, and we think we know where we’re going to get it, right now the wresting match is how much it comes above the line and comes below the line. I’d like to make the exact 5.5 below the line that we want to predict it, because it’s easier for you guys to see, but whatever, whoever it comes from that’s an upside.

So I’d look for recession to taper off, some growth in flash, some growth in satellite, margins increasing, although maybe grudgingly that we have to fight, but I’m looking for them to go up and costs still coming down. So you asked for the two sets of spins and again I hogged it all. You want to get anything in there, Maurice

Maurice Carson

Only thing I would say from being here three months is that, I do think we’ll sell more flash, but I think the way we will do it and the profitable numbers will be that will gone and find those customers, and I believe there are customers who want what our flash products have to offer and security and low power and we’ll go out and find the key customers that need and wants that in their products. That will allow us to grow our consumers business in a way that will bring significant dollars to the bottom line. Everything else I’m with John.

Neil Gagnon - Gagnon Securities

Thank you, both.

Operator

(Operator Instructions) We have a question from the line of Paul Cutright a Private Investor.

John East

Hi Paul, there was once a Paul Cutright that worked at Actel. Is this the same Paul Cutright?

Paul Cutright - Private Investor

It is the same one.

John East

Hey Paul, how have you been? I haven’t seen you forever.

Paul Cutright - Private Investor

I know. Who am I talking to?

John East

John East.

Paul Cutright - Private Investor

Hey, John, how are you doing?

John East

Well, I’m getting old.

Paul Cutright - Private Investor

You and me both.

John East

Good to hear your voice, Paul.

Paul Cutright - Private Investor

It’s good to hear you too. So I think you’re doing okay. I think it’s going to be a tough year, I think you have a tough business, sort off heavier and I wish you the best.

John East

Paul, thank you. That’s the easiest question to answer that I’ve ever had to answer.

Paul Cutright - Private Investor

I have one more question. So I’m into people, kind of stuff. How’s Jim Davis doing?

John East

I love Jim Davis, he’s a good man. I didn’t even know that you knew him.

Paul Cutright - Private Investor

I worked with him at tandem.

John East

That’s right.

Paul Cutright - Private Investor

A long time ago, yes.

John East

Well, Jim will be listening into this call in the other room, so if he were in this room he’d say (Inaudible) but he’s not.

Paul Cutright - Private Investor

And I actually still own some of your stock.

John East

Good.

Paul Cutright - Private Investor

So you’ve got a tough year, you’re doing good and I just want to call and say I wish you the best.

John East

Paul, good hearing from you, thanks a lot.

Paul Cutright - Private Investor

Okay, talk to you later.

John East

Ashley.

Operator

There are no further questions in queue sir.

John East

I’ll tell you what I’m going to do. I’m going to just fill about 45 seconds in case there is another question, because that always happens. Sometimes I feel the question that…

Maurice Carson

I have one though. I have one thin o say. I do want to let everybody know we’ll have a press release coming out in the next few days that we will be presenting two conferences in New York in the middle of November. We’ll get that out there, and we look forward to some good attendants, some people hearing the story at those two conferences and that information will be coming out to you in the next day or two.

John East

So that was just 20 seconds of your 45, quite enough. Ashley, if there are no more questions then we can end it.

Operator

We do have a question sir, in the line of Neil Gagnon - Gagnon Securities.

John East

Hi, Neil.

Neil Gagnon - Gagnon Securities

John, Maurice with your return to profitability, what’s the mind set within the company of warranting to stay there?

Maurice Carson

We’re planning on staying, there’s no question about that. There’s still almost a year before we get to our $6.5 million savings or $26 million annualized. So we’re still beating on that and having frequent meetings and deciding more things to do to get there, but in all the meetings we end with, we are not going to do that in Q3 and then turn right around and have to start going back up in Q4. So, we have to have plans made accordingly.

When you think that would be pretty easy if you have the right mind set, but by the time we get there, I think it would have been two years before anybody in the company had a raise and we’ll be due to give raises.

So, we actually have to make other things happen to a lot of self room to give raises that’s one example of a wrestling match we’ve, but we just don’t have any intention to turn it back around and again Neil, you wait at the bull and now you got the long answer.

One of the biggest things we did, in fact the biggest single thing we did when we decided we had to cut back our spending was to move from two ongoing major projects to one ongoing project, so by the time we get into next year, more or less all divestures of the second major project will disappear, and that’s biggest way were saving money.

So then you can ask well okay, now that you’ve got the money saved, are you going to ask a second major project and the answer is no, we are not next year or probably any year until our sales get high enough that they can bear it, and still run basically the same ratios that we’re running. So, now our goal is get more profitable and stay that revenue.

Neil Gagnon - Gagnon Securities

Just to remind us all, the $6.5 million per quarter kicks in at roughly $54 million a quarter in revenues?

John East

That’s correct.

Neil Gagnon - Gagnon Securities

In late 2010?

John East

Q3.

Neil Gagnon - Gagnon Securities

Q3 and I was right on the revenue number?

John East

That’s correct and right now, the wrestling matches that we get there the first day of Q3 of the last year Q3 if we get there the first day Q3 and that’s what’s you see when we announce earnings Q3 if we get their on a last day, we would argue moral victory because we’re at that rate, but we didn’t get there during the quarter. Maurice has a firm view on that. His view is by God we’re going to get there when the quarter begins and run that way and that’s what we’re trying to do right now.

Neil Gagnon - Gagnon Securities

Thank you.

John East

Okay, thank you for the asked question. Ashley, are there other questions?

Operator

There are no further questions at this time sir.

John East

Alright guys, ladies, I appreciate you joining us. We’ll see you same time, same place a quarter from today. Thanks, everybody.

Operator

That does conclude today’s conference call. You may now disconnect.

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Source: Actel Corporation Q3 2009 Earnings Call Transcript

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