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Executives

Jeffrey Kang – Chairman and CEO

Will Davis – SVP, Business Development and Chief Marketing Officer

Analysts

Quinn Bolton – Needham and Company

Brian White - Ticonderoga Securities

Amir Rozwadowski – Barclays Capital

Nathan Johnson - Pacific Crest

Rahul Khanwalkar – Jefferies and Company

Adele Mao – OLP Global

Richard Safranek – Wafra Investment Advisory Group

Question-and-Answer Session

Cogo Group, Inc. (COGO) Q3 2009 Earnings Call Transcript November 4, 2009 4:30 PM ET

Operator

(Operator Instructions) Our first question comes from the line of Quinn Bolton with Needham and Company. Please go ahead.

Quinn Bolton – Needham and Company

Thanks, guys and good job on the numbers. Jeffrey, I was wondering if you could talk a little bit more about your SME outreach program you talked about 10,000 million targeted accounts. Are there certain attributes that you are looking at to decide whether you are going to target an SME account and are these geographically in the major manufacturing regions from China? Just a little bit more detail about how you intend to go after these new accounts?

Jeffrey Kang

Well, actually as you’re saying – that the current orders of existing customer, I mean, revenue customers that’s customer we generates revenue in every quarter from them. But, in order to expand our business, so we also have a much larger and a targeted customer in our category which means that some new customer. We are pursuing. We are doing the designing work. We are following them, but we haven’t generated revenue from them yet.

So, as you know, as Cogo we expanded into the new verticals even in the digital media segment which we still have something new segmented through targeting. So usually our first step is to meet (inaudible) our targeted customer. Usually the targeted customer used to be much larger than our revenue customers. And then using our platform to reach those customers and to provide us the following their every project they are doing, and to provide some design solutions to them. And you eventually try to convert those targeted customer to the revenue customer to us. So, at least, as we just explained, we currently already have over like 1300 revenue customer, but at the same time we already have the targeted customer in over like a 10,000 in our CRM database.

So, what are we trying to do is we are pushing our sales force and R&D team to pursuing those small medium sized customers, new customer, new possible customer and then try to follow any new project which we can help them to get in some of our module solution to get in to. So, that’s what we are doing now.

And basically, this number is a still – our current penetration rate is still below 1% of the SMEs total numbers. So, we feel very confident that it will give us a significant growth opportunity in the next few years by excluding – exclusion of our growth strategy [ph].

Jeffrey Kang

Go ahead, Will.

Will Davis

Quinn, I just wanted to expand maybe a little bit in terms of logistically how this might work in terms of – how you are looking at this opportunity. Let’s say you had one sales person handling a bunch of account you might have one sales person handling 20 SME accounts. Let's say each one, for argument sake, 50,000 that gives you a million in revenue. Then you strip out some gross margin for us in pretty limited R&D and then you have the cost of the sales person. It’s pretty easy you to see that if you can ramp the revenue like that it accelerates of getting close of that 10%.

I think the other thing to keep in mind is that when we are targeting these accounts, we’re typically not seeing a lot of competition from people like Cogo it’s mostly going in and then from the accounts we have something to offer, then we can increase the (inaudible) then we can increase their access to high quality semiconductors companies. So you streamline that channel and allow them to focus on their own business, whether it’s designing an e-book or designing a smart meter module or whatever it is.

So, we can streamline that process for them, and obviously, the semiconductor guys are thrilled to get these leads to and to help participate, I mean, that 10,000 customer list is obviously going to be something that our semi-conductors partners are going to be very interested in being able to pursue.

Quinn Bolton – Needham and Company

So with the current sales force that you have today, how many of those 10,000 accounts can you reach versus how many additional sales people would you have to bring on board to really track new projects at each of those 10,000 targeted accounts. I am just trying to get a sense of, just sort of a three-year plan or is it something do you think you can penetrate those accounts in the next 12 months?

And then, I’ve got a couple of quick follow-ons?

Jeffrey Kang

Well said, that the simple math, if we, like once fails through typically can cover the 20 SME accounts. So, what it means that 10,000 even if that the order of new 10,000 SME accounts that we are able to convert them to the revenue customers so that we might need to add in the sales force. So that’s quite simple, so if that one sales people cover through 20 SME accounts, we might have like a 500 and the new employees, the sales people to cover another of this new opportunities. Of course, that’s probably you have spend because we are going to ramp up this the customer base and the sales force together.

Unidentified Company Speaker

That’s important, I mean, you raised a good point in terms of it's not like we are going to go out and hire three or four dozen people when there is no business, right. I mean if this is going to be added profitability when we needed based on the ramp. So, except to comment on the inflection point, but obviously there is a lot of demand out there, and we feel like usually add people to meet the opportunities. So, I think that’s kind of a (inaudible) initiative to add the people profitability, I think, that’s the bottom line.

Quinn Bolton – Needham and Company

Great. And then just, it looks like the a industrial business got a big, kick-started if, you will, last year when you added component supplier such as Freescale, Maxim, I think you mentioned that now perhaps more recently. I guess I am wondering as you work in accelerating revenue growth in 2010, how (inaudible) beyond adding new sort of major supply partners, the likes of another Freescale or another Broadcom versus that sort of a…. another Freescale or another Broad.com versus that sort of a SME outreach program that you just discussed.

Jeffrey Kang

Yes actually they already have something in our pipeline. We knew that’s a very good progress in terms of having the new leading technology suppliers to us. So, I think that the investor is going to the same one and more and it is a global leading semi conductor companies waiting to watching with Cogo and by taking the advantage of Cogo’s data from penetrating these new opportunities.

For them as Will mentioned in specially our SME category is means that significant value for our U.S. entrepreneurs [ph]. So that’s why we are, we believe in that next few quarters, investor is going to say where we are going to add some often-yield increment in our supplier list. So, I think that it will give us – why we are also very confident to say we are going to ramp up our post industrial and this SME revenue in the next of few quarters.

Quinn Bolton – Needham and Company

Great. And then just lastly, on the fourth quarter guidance. Can you give us some sense by the diverse settlements digital media, telecom and industrial which are, we sort of what your (inaudible) in terms of growth rate reach of the three businesses. Thanks, and that’s my last question.

Jeffrey Kang

Sure, Quinn, thanks. Within the kind of traditional handset space, we would think that would be roughly flattish sequentially in terms of revenue, and then some continued growth in the industrial space and maybe a little bit better sequentially from the kind of the old digital media space. So, the combined digital media up a little bit, but the traditional handset the kind of flattish sequentially, and then a little growth in telecom. So, I think when you look at it you probably have the old handsets that’s 30% probably being flat and then the other 70% contributing that incremental $5 million or $7 million in sequential revenue.

Quinn Bolton – Needham and Company

Thanks Will. Thanks Jeffrey.

Operator

Thank you. (inaudible) Our next question comes from the Brian White with Ticonderoga Securities. Please go ahead.

Brian White - Ticonderoga Securities

Yes, I am wondering if you could talk Jeffrey a little bit about some of these emerging opportunities that are coming up in areas like netbooks and also some of the e-leaders as the cellphone providers out there actually moving in bigger markets, how does Cogo participate in this?

Jeffrey Kan

Well, we saw a lot of the new opportunities in the both the handset and other conversion device other than new type of things, the mobile internet device. So, because, as you know, that’s been one of the growth driver, growth catalyst for Cogo in the first 30 year (inaudible) till 2010, and we (inaudible) participate into this market in a very early stage. We follow, in this category we have a 100s, 100s of the new customers, or most of the new opportunity, find a new opportunity for our new customers almost every week. So, we believe in near term, heading to the next year, we are going to see the demand for this type of business. We are going to see a significant demand increasing, so that’s why we are, and also in this segment the customer base is quite fragmented, so which is pretty much fit into our business model. We are very confident we kind of grow this business significantly in the next few quarters?

Jeffrey Kang

Okay. Great. Thank you.

Operator

Thank you. Our next question comes from the line of Amir Rozwadowski with Barclays Capital. Please go ahead.

Amir Rozwadowski – Barclays Capital

Thank you very much, and good afternoon, Jeffrey, Will and Frank.

Jeffrey Kang

Hi, Amir.

Amir Rozwadowski – Barclays Capital

Just delivering a bit in terms of the industrial business. Jeffrey, you had mentioned some of the opportunities there in terms of the new markets that you folks are attacking. Now that you been in the business a bit now with the Mega Smart acquisition, I was wondering if you can give us any color in terms of what you think of longer term gross trajectory is there and how we should think about in terms of those various opportunity?

Jeffrey Kang

Well, in that field of business (inaudible) even before us is our profits of the growing segment – end of last year, and we are already integration of MegaSmart deal and we feel this is our big opportunity. So, as I said and we are very excited about it in a smart grade and as Smart Meter business in China because in terms of the market size or the capital expenditure, could be (inaudible) like many, many times bigger than the internet spend in China.

So, internet, as everybody know is one of the growth driver in past few years and at this time the smarter meter investment in China could exceed in the fact that the size of the investment or capital expenditure in the internet business. So that’s why I feel will give us quite a confidence. We don’t need to worry about demand in the next five years in this segment, just being a smart grade and a smart meter segment a lot.

In addition to this business we feel, there are opportunities in our industrial segments like the railway – has to the railway like the cleantech, like the (inaudible) here. So we see many new things come out. So we discuss how Cogo significantly expand our business in this new area. So in our conservative estimation, so far we in this quarter we already believe we can have like a 15% of our revenue coming from this segment in the comparative – almost build from scratch from last Q4. So we expect that our industrial business could contribute at least 20% or above percent of revenue next year. So that will give Cogo a tremendous growth opportunity in this segment in the next year.

Amir Rozwadowski – Barclays Capital

Great. Thank you, Jeffrey. And then you had mentioned that you expect 3G spending to be relatively healthy tracking into 2010. I was wondering if you can give us a little bit of color there because there seems to be some concern that sort of this year was a ramp up year in 3G spending, and perhaps we will see more tempered levels in 2010?

Jeffrey Kang

Well we don’t think so, and we still we believe the test of spending on the 3G equipment side will at least it should be next year the spending should be higher than this year. So as you know, China are adopted the three standards both the TDL–CDMA, WCDMA and CDMA Huawei are the three major carriers. So, that means that each of them kind of be a national wide network in order to offer their service. So as you know China is so big, the population is, the (inaudible) population. So they can, I believe they can – top most of the three spenders.

So, that means in that every carrier depends on the money for the national wide coverage. So, as you know, for the telco service in China the 2G service, the coverage is very good. So, if anyone wants to offer a 3G service, so the coverage at least should as good as the 2G, otherwise their consumer will not use the 3G service. So that will make – based on the current situation we don’t think that any of the existing 3G networks is mature enough to offer the national wide service. So, that means they can continue to spend money to build the networks in the next two or three years.

So, that’s why we don’t think that 3G equipment spending is going to be hold or slowing down in the next year, at least their spending is going to be higher than this year. So, that’s our view.

In addition to that, we are still seeing other opportunities in the telco spending from like the broadband access because Chinese internet viewers are increasing, the internet application increasing, video-over-internet the demand is increasing. So we see fiber-to-home, fiber like a (inaudible) application could become more and more popular in China. So investments or cut-throat expenditure in that area we are going to see another significant investment in the next year. So that’s why we still feel comfortable about the overall telecom spending next year which going to give us a stable in the next year.

Amir Rozwadowski – Barclays Capital

Perfect. Thank you very much for your incremental color, Jeffrey.

Operator

Thank you. Our next question comes from the line of James Faucette with Pacific Crest. Please go ahead.

Nathan Johnson - Pacific Crest

Yes, this is Nathan Johnson calling for James. Just a couple of quick questions. One, you talked quite a bit about your expectations for 3G spending increasing in 2010. I just was curious to your outlook on how you felt 2G infrastructure spending will trend next year? Additionally, you talked quite a bit about the industrial segment for next year. I was wondering in terms of the other segment, are you expecting moving out of a return to the growth teen, couple of years back but something along the lines of 15% growth, or do you think it’s going to be relatively tampered compared to previous years?

Jeffrey Kang

Well, as a company, we believe our growth was back to our like long-term normal mode since the 2010.

And in terms of the segment and our traditional segment like the telecom business which I think is a relatively mature in that business even though – so we expect reasonably and a stable growth from that segment, and digital media feel we think we have the highest growth with event in the telecom business which because just media – today we combined mobile handset and other mobile internet devices business together, so we see more opportunities in that segment, and next year, I believe, we have already seeing a catalyst as the growth catalyst in that area like a smart phone application, like e-book applications that's high definition set-top box in both the China domestic market and a global market.

So that area, we are going to see a stronger growth from that area. And, again, we think that largest [ph] the growth is coming from the industrial business. So, that’s our view about that the growth from these segments in general, the average settlement showed a good growth and at telecom relatively at the lowest (inaudible). Digital media is in the middle and the industrial (inaudible) doing a tremendous growth. So, that’s how our view about our growth prospective in next year.

Nathan Johnson - Pacific Crest

Okay great and then as far as the 2G infrastructure spending in China for 2010, or what’s your view there?

Jeffrey Kang

Well 2G spending, as you can say, Cogo telecom is only equipment is only a 25% of our total revenue space. And even we win, we telecom business only half of the business coming from the wireless line and half of them coming from like a broadband data transfer like other telecom business. So for us, we are not going to see a significant slowdown in the wireless investment in China.

So we are not going – we are still going to grow our – the top telecom business. So, even within the industry, even within the wireless business of our wireless business, we are not about a highly rely on any network 2G or 3G spending that much, because we still has our business that WiFi related infrastructure business which contributed revenue less. So, from that angle, we are optimistic about the telecom in expenditure. But it will also don’t think it will work (inaudible) any significantly revenue to us.

And on matter they are spending too much money or they are spending not a lot of much as people expected. So we don’t think that it will impact our growth pattern next year.

Nathan Johnson - Pacific Crest

That’s very helpful. One last thing from me, just I was wondering if you could talk about the recent order trends in each of the business segment kind of throughout the quarter and then also as it trended into the fourth quarter?

Jeffrey Kang

I think the order pattern is very strong, so we can quite confident – interested in Q4 – it will still be another good quarter. So that’s why if you look at our guidance number we still believe we are coming in to grow the business. Even Q3 is very good comparing with our internal estimation, but we still believe that Q4 should better than the Q3. So that’s why we would give the Q4 growth number today as our guidance. So, we believe this good trend at least can carry over to the next Q1 not only just in the Q4 of this quarter. We still believe the next Q1 we see a very good pattern of the order track from our customers.

Nathan Johnson - Pacific Crest

That’s very helpful. Thanks for taking my questions.

Jeffrey Kang

Well, thank you

Operator

Thank you. Our next question comes from the line Bill Choi with Jefferies and Company. Please go ahead.

Rahul Khanwalkar – Jefferies and Company

Hello, this is Rahul Khanwalkar calling in for Bill Choi. Jeffrey, could you talk a little bit about your smartphone strategy, you’re working on Windows mobile operating system Android? What kind of companies are you targeting, what kind of customers are you targeting for that, and what exactly will be value added from Cogo in those products?

Jeffrey Kang

Well, smartphone should be – I think that’s a good opportunity to us in the next year as our growth catalyst. In China, in the past the smartphone only can be produced by a very limited few blue-chip customers like Huawei, ZTE, (inaudible) and then all alike feel. So, the volume also very low and comparing with the normal cell phone. But I think since recently the technology barrier, I believe, because of a lot of design house like Cogo, we are working with our customers. So I think the overall and the smart phone, the technology barrier had been significant in (inaudible).

And at same time, because of many people working together and the cost could be go down significantly. So, for example, iPhone I like the cell phone. We are going to sell the $400 in the US market but we – our pocket is – we can help our customers to produce the $1000 an iPhone alike cell phone in China which has every functions that iPhone has. So that's basically a concept, and I also in terms of the customer base I believe most of our existing either side of the customer could have produced the smartphone since the end of next year. But that will give the – if you are asking me as a smartphone vendor, I can give you a 100 names in China since the next (inaudible).

So from that angle, I can say the smartphone will become one of the mainstream cell phone in China that’s produced by or designed by the Chinese vendors and in the market it could goes to Chinese domestic market as well as the global market as well. So, that's our view. So that’s why we believe the smartphone could be our growth opportunity. Within the smartphone what we are offering, we offered (inaudible) the cell phone business we provide the solution, the market solution (inaudible) and we offer like in the GPS solution we offer in autos like a Bluetooth module, WiFi module or all kinds of and functional solutions to help our customer to defend their products with others. So that’s what we are doing in this smartphone and we were very confident about the business in this segment in next year.

Rahul Khanwalkar – Jefferies and Company

Great and on the wireless infrastructure side. China obviously, has all three next generation technologies being deployed there. So do you have any idea or any visibility, which technology will be deployed much faster or on a much wider scale than the other, or do you think all three will be about the same in terms of revenue contribution for you?

Jeffrey Kang

I think that’s – we think that WCDMA and the CDMA (inaudible) adopting it could be faster. And because the true carrier China Unicom and China telecom they are more aggressive trying to have this – have the national wide networks for office surveys. So, comparing with the China Mobile they already have, they are already been a dominative player in the wireless segment. So that’s why we said part of their TV ramp should be, will be slower than the CDMA and/or the WCDMA in China. So that’s our view, but in terms of the revenue contribution we think, because our business will stick with our customer we are not in that (inaudible) that it speaks with any specific technology in itself. So we don’t say there is a tremendous difference, no matter it is the WCDMA ramp up faster than the TD. So, we will acknowledge this – they have the capital spending in the infrastructure investment, and we will benefit from that trend.

Rahul Khanwalkar – Jefferies and Company

Okay. Thank you, Jeffrey.

Jeffrey Kang

Next?

Operator

Thank you. (Operator instructions) Our next question comes from the line of Adele Mao with OLP Global. Please go ahead.

Adele Mao – OLP Global

Hi, guys. My first question is really the two – your SME contribution to total revenue. You mentioned that currently SME is contributing about 30% and you are looking to increase that number to 50% down the road. I was wondering if your SME revenue contribution is currently coming from all different business segments or is it more a concentrated in a particular business segment?

Jeffrey Kang

You are right. Currently 70% of our revenue coming from our blue chip customers, and the 30% are coming from like over 1300 SME customers. And in terms of the SME customers, most of the SME customers so far is from the digital media segment which is mobile and previously mobile handset and the digital media business. Also, a portion coming from the telecom related business, especially in the datacom segment, and I still believe in moving forward and we are going to see more and more industrial SME business. And so that’s why for the – currently we are most of SME in these two segments and the digital media and telecom. And going forward, we are kind of going to see the SME customer across all of our business segments.

Adele Mao – OLP Global

Great. That’s helpful. How is your pricing different for SME versus blue chip customers, and I guess how will the increasing revenue mix of SME revenue contribution impact your overall growth margin?

Jeffrey Kang

We think about because we – our strategy is that they are using us, taking solution from our large library which we have found for the tier one guys and then it's a little bit of tricky and change (inaudible) sales for in broad SME business. So to us, we don’t have the too many – like a too much of a deal incremental R&D cost to us when we sell to the SME business. But in terms of the margin I think the gross margin sale to the SMEs is higher than the gross margin we sell to that blue chip customers.

And at the same time because – but the operating cost to sale of SME is higher, because if you consider that logistic cost and other cost related, so the operating cost is higher than offsetting – higher than business which is the blue chip customers. But when we reach a certain level of the scale so I think our (inaudible) is the same in us. So we feel as a well set, we feel (inaudible) 10% of the operating margin when we sell to the SME business. So that’s our margin target in terms of the SME business.

Adele Mao – OLP Global

Great. Regarding the smart grade and railroad industry opportunities that you discussed earlier, who does Cogo compete with in these respected business segment?

Jeffrey Kang

In this segment, right now it is very fragmented. I think the most of the competition we have faced in our daily work is (inaudible) the smaller – the Chinese local companies, and as I said it is a new opportunity for everyone. And so, that’s why we haven’t seen too much of a competition from the international players. Most of the, because another I think difference with the telecom business is that, first is that they want the Chinese government a policy [ph] is try to convert this into smart grade business to help the local economy. So that’s why – and that they basically they pray for all the local technology suppliers. So that’s why we think our competitor in this area will be mostly the Chinese domestic vendors.

Adele Mao – OLP Global

Okay. Thanks so much for that details.

Jeffrey Kang

Thanks, Adele.

Operator

Thank you. Our next question comes from the line of Richard Safranek with Wafra Investment Advisory Group. Please go ahead.

Richard Safranek – Wafra Investment Advisory Group

Hi, thanks for the call. I just had a few questions regarding the Mega Smart acquisition. Did you make the $6 million payout in the quarter that was described in the filing when you made the acquisition did that payment hit this quarter?

Jeffrey Kang

Yes.

Richard Safranek – Wafra Investment Advisory Group

And in terms of the employees and retain the employees it seems that the real value of the acquisition was really the employees. What are your plans to retain those employees? Is it what we expect traditional through stock incentives down the road once the cash payments have been made within the next 12 months.

Jeffrey Kang

Well you are right the employee is a very valuable trust, what are we (inaudible) my value is not only just the employees, they still have (inaudible) mid customer base. They have the existing technology or servicing ready to sale, all of these in a (inaudible) guidable trust. Basically we are and the total is – as I said, we are running a platform business. We are not a direct bid on any single people. So, the reason why we are able to acquire a good company and if you generate the good business after that, is because we have the platform, we have the customer base. We have our own internal platform. So that’s why we will – historically it will be a risk and usually in the first few months it’s very important to keep those people, your first few quarter of the year. But after one year I personally don’t think any single individual won’t have a very significant role in our company. So we are running a business not depend on any single people. So that’s why I am very confident we are able to (inaudible) able retain the business we acquired.

Richard Safranek – Wafra Investment Advisory Group

Okay, thank you. The question I had was obviously you have the very strong balance sheet and you mentioned that there were no share buybacks conducted in the quarter, which price the share is about six bucks during the quarter, now you are shooting here at 5.60. I am just sort of curious, I mean given that you are presenting such a bullish case for 2010 and you are so optimistic on the business, can you give us some little insight in terms of how you balance out the decision on the share buybacks versus other uses of the cash in terms of acquisitions or dividends or what have you, got to say, given the picture that you are painting, you are suggesting that 2010 is going to be very optimistic. So you would be inclined to consider acquiring shares at these levels?

Jeffrey Kang

Yes, we have been in cash to both the acquisition and other share buyback. As Will explained we also see a lot of opportunities. We also want to use the cash that we are having right now to finance our working capital, to increase our working capital to finance other new business growth in the next year. So, we review all its opportunity, so stock buyback will have a (inaudible) legally we have few limitation. We are only able to buy the stock, (inaudible) there is no use of that information which is, they only have very limited window where you can give us to buy the stock. So, that's why we are – at the same time our company with – I think we are well view this opportunities – what I want to tell you that we are supposed to deal trying to do the both to use the cash to the stock buyback, to the acquisition and also use that, more importantly use the cash to finance our internal growth.

So in the next few quarters we feel well that the management feel well execute our strategy at a right timing.

Richard Safranek – Wafra Investment Advisory Group

Okay. Thanks.

Jeffrey Kang

I would just a bit – maybe add a little more color on the use of cash and then we certainly bought back shares in the past. We've – I think we have got about a million shares less than on our 5 million share authorization

Right now, we have been very successful in using the cash to drive new business. I mean this is an example, let's say we are working with a major component supplier and they needed the fund, let's say 5 million or 6 million US to mend inventory upfront. Before a project starts we will get that money back over time, but a fully capitalized to privately help the company probably wouldn’t be able to do that on a short term notice without any issues. So from that standpoint if – this may be a little bit more on unorthodox than buying back stock, but it’s been a huge benefit for driving growth, and I think we are probably a little too skittish in the first part of last year 2009. Because we are worried about the economic situation, and I think that now we are getting more aggressive. The other thing that statically on the buyback to the keep and manage that we’ve only got 38 million shares out, and the insiders on 35%. We need the balance kind of flattish [ph]issues to (inaudible) but with that M&A, we’ve done M&A in the last six months from the closing I guess smart reviews the working capital and we bought back shares may be not exactly recently. But we’ve been using cash in all three of those, and I think given the situation we will continue to like to look at all three.

Richard Safranek – Wafra Investment Advisory Group

Okay that’s fair enough. Thank you.

Jeffrey Kang

Okay. Sure, then.

Operator

Thank you. And there are no further questions in the queue. Please go ahead with any closing remarks.

Jeffrey Kang

So, thanks everybody, and I think thanks I am very, I am very encouraged by Cogo’s results posted in the third quarter. And our EPS grew nearly in 3% year-over-year. And I have increased the covenant in our penalty to accelerate revenue growth in 2010.

We are using our balance sheet to help drive growth, and we see tremendous new opportunity in both the investor segment and our SME strategy. I would like to reiterate that we believe the worst of China economic situation is behind us. And we are ready to move forward in to the higher growth mode in the 2010.

I want to take this opportunity to thank all our Cogo’s believers, employees, customers, partners and the long-term shareholders. You have given us tremendous opportunity to deliver the robust sustainable growth, and I appreciate you support as we move into 2010. Management is committed to driving a sustainable higher growth and providing significant returns to our shareholders.

Thank you again for joining this call. I look forward talking with you soon. Thank you.

Operator

Ladies and gentlemen, this concludes the Cogo Group Incorporated third quarter 2009 results conference call. This conference will be available for replay after 5.00 p.m. mountain time today through the 11th of November 2009 at midnight. Thank you for your participation. You may now disconnect.

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