Apple tried to claim invention, but this patent dispels that. We are going to look at all the alternatives that the patent provides. We can look at legal remedies. |
Even though we increased overall revenues 50 percent year-over-year, the lower-than-expected selling prices for MP3 players and the inventory write-down negatively impacted gross margins. |
In the next few quarters, we plan to further lower our inventory, reduce our overall level of operating expenses and we will increase our focus on our higher-margin businesses. |
Of primary importance, we achieved our goal of returning to profitability. |
One of the key challenges we face in our MP3 business is an industry-wide shortage of 1GB flash memory. Industry demand for high-capacity flash memory currently outstrips supply and this will impact availability of our 1G-byte flash MP3 players for the holiday quarter. The shortage of flash memory, according to industry analyst speculation, is primarily a result of a special deal that Apple has secured from a key supplier for the holiday season. |
Our revenue in the quarter was the highest for any quarter in the past five years, with increased year-over-year sales in each of our key product categories. |
The patent application was to protect our invention. As you can see . . . the invention is significant. |
There was a drop in flash memory prices in the quarter, with a precipitous drop in prices at the end of the quarter. This had a significant adverse effect on our sales in the quarter, and resulted in lower revenues, lower gross margins and inventory write-downs in the period. |
This will make us a leaner, more agile operation. |
To be able to achieve that, we need to have margins at or above 20 percent. |
We are examining each of our product categories to determine how we can improve revenues, return gross margins to 20% percent or higher, and reduce operating expenses as we target a return to profitability in the second half of the calendar year. |
We are looking at all our alternatives right now. We have always been very vigorous in our defense of our patent portfolio. |
We believe we can get closer to break-even in the current quarter and that we can return to profitability by the end of this calendar year. |
We had set our targets higher for unit volume and average selling prices for our MP3 players than we achieved in the period. |
We had under invested in the marketing efforts of X-Fi as we focused on becoming No. 2 in the MP3 segment. |