Third Quarter 2008 Financial Summary:
-- Total revenue in 3Q08 was US$20.0 million, down 48% year-over-year and
50% sequentially. Baseband revenue in 3Q08 was US$18.8 million, down
45% year-over-year and 52% sequentially.
-- Diluted loss per American Depositary Share (ADS) was US$0.71, compared
to diluted earnings of US$0.06 in 2Q08.
-- Gross margin in 3Q08 was 43.7% compared to 45.2% in 2Q08 and 45.6% in
3Q07.
-- GAAP net loss in 3Q08 was US$31.3 million, compared to net income of
US$2.6 million in 2Q08 and net income of US$6.1 million in 3Q07.
Recent Business Highlights:
-- In 3Q08, Spreadtrum began shipping its SC6600V mobile TV solution, an
integrated CMMB demodulator and source decoder chip that supports both
AVS and H.264 video decoding standards.
-- Spreadtrum received a gold award at the Futian Cup, a Chinese handset
design competition, for its work on the SC6600V and SC8800D chips.
-- Spreadtrum worked with Lenovo Mobile to enable Lenovo to deliver TD-
SCDMA handsets with mobile TV feature to China Mobile before the
Beijing Olympics.
-- The Company appointed Dr. Leo Li as President.
SHANGHAI, China, Nov. 7 /Xinhua-PRNewswire/ -- Spreadtrum Communications, Inc. (Nasdaq: SPRD; the "Company"), one of China's leading wireless baseband chipset providers, today announced its third quarter 2008 financial results. Under accounting principles generally accepted in the United States of America (US GAAP), diluted loss per ADS was US$0.71 in the third quarter of 2008 (3Q08), compared to diluted earnings of US$0.13 in the same period in 2007 (3Q07) and US$0.06 in the second quarter of 2008 (2Q08). Net loss for 3Q08 was US$31.3 million, down from net income of US$6.1 million in 3Q07 and net income of US$2.6 million in 2Q08.
US GAAP net loss for 3Q08 included US$2.4 million of share-based compensation expense, US$0.4 million of amortization of intangibles from the Quorum acquisition, US$6.6 million of in process research and development (IPR&D) expense related to the Quorum acquisition and US$17.5 million of impairment loss of long-lived assets. Excluding the impact of this share-based compensation expense, the amortization of intangibles from the Quorum acquisition, IPR&D expense related to the Quorum acquisition and impairment loss of long-lived assets, the Company's non-GAAP net loss for 3Q08 would have been US$4.3 million, down from net income of US$7.6 million in 3Q07 and net income of US$4.9 million in 2Q08. Diluted non-GAAP loss per ADS in 3Q08 was US$0.10 down from diluted earnings of US$0.16 in 3Q07 and US$0.11 in 2Q08.
Commenting on the results, the Company's Chairman and CEO, Dr. Ping Wu, said:
"Q3 was a challenging quarter for us. The slowing Chinese economy dampened domestic consumption, including demand for mobile phones in the Chinese market. This resulted in a negative impact on a number of our customers. Furthermore, we were affected by the delayed impact of product transition issues. We have since resolved these issues and customers are working on new designs.
With turmoil in the financial markets in September and October, the possibility for a dramatic rebound in our business in the fourth quarter has diminished considerably. While we still expect some improvement in the fourth quarter, it will be much more subdued than we previously expected. To cope with this adverse environment, we are taking steps to pare down expenses, to re-evaluate our business priorities, and to make sure that our resources are allocated to the most critical parts of our business. Despite these short-term difficulties, we believe the Chinese mobile phone market still offers very attractive growth potential in the longer term.
There are a few bright spots in the fourth quarter. Our mobile TV chip, which we made available to the market at the end of Q3, has received favorable feedback from customers and potential customers alike. We believe our mobile TV chip is very well positioned by having the right features at very attractive price points. We have also made progress with our RF products, which are already designed into approximately half of our customers' new mobile phones.
We remain focused on positioning Spreadtrum to capture the long-term growth opportunities in this market and improving our product development process and internal execution. To this end, we have recently appointed Dr. Leo Li as our President. Leo has more than two decades of experience in the wireless industry and has held product development, business development, and general management positions in a number of leading wireless semiconductor companies. His skill and experience are expected to be quite useful as we strive to improve our product quality and to better serve our customers."
Third Quarter 2008 Financial Review
Revenue
Revenue in the third quarter totaled US$20.0 million, representing a decrease of 48% from 3Q07 and 50% from 2Q08. Revenue from baseband semiconductors was US$18.8 million, or 94% of revenue, up from 89% of revenue in 3Q07 and down from 96% of revenue in 2Q08. Revenue from turnkey solutions was US$1.2 million, which represented 6% of revenue, down from 11% of revenue in 3Q07 and up from 4% of revenue in 2Q08.
Revenue from baseband semiconductors decreased 45% from 3Q07 and 52% from 2Q08 to US$18.8 million in 3Q08. Unit shipments of baseband semiconductors decreased 47% from 3Q07 and 53% from 2Q08. Nearly all baseband semiconductor shipments in the third quarter were 2G/2.5G related products. 3G products accounted for approximately 1% of the baseband shipments in 3Q08. The average selling price per unit for baseband semiconductors increased by 4% from 3Q07 and 3% from 2Q08 due to better product mix.
Revenue from turnkey solutions decreased during the quarter by 73% from 3Q07 and 20% from 2Q08 to US$1.2 million, as a result of the Company's ongoing plan to phase out its modules business.
Gross Margin
The gross margin for the quarter was 43.7%, down from 45.6% in 3Q07 and 45.2% in 2Q08. The non-GAAP gross margin was 44.3%, down from 45.7% in 3Q07 and 45.4% in 2Q08.
The cost of revenue in 3Q08 totaled US$11.2 million, representing decreases of 46% from 3Q07 and 49% from 2Q08. The year-over-year and sequential decreases were attributed to a decline in total sales volume.
Operating Margin
In 3Q08, the Company finalized its purchase accounting related to the acquisition of Quorum Systems. As a result, the Company recognized as an operating expense US$6.6 million IPR&D charge related to the Quorum acquisition. The Company also reviewed its long-lived assets for impairment when indicators of impairment occurred. The Company recognized US$17.5 million impairment loss in 3Q08, which included US$12.7 million of impairment loss in IP acquired from Quorum and US$4.8 million of impairment loss in other long-lived assets.
As a result of these expenses, the Company's operating margin was -159.0% in 3Q08, compared to 11.7% in 3Q07 and 4.2% in 2Q08. The year-over-year and sequential decreases in operating margin were primarily attributed to US$6.6 million of IPR&D expense related to the Quorum acquisition and US$17.5 million of impairment loss of long-lived assets together with a decline in sales volume. Excluding stock-based compensation expense, the amortization of intangibles from the Quorum acquisition, IPR&D expense related to the Quorum acquisition and impairment loss of long-lived assets, the non-GAAP operating margin in 3Q08 was -24.1%, down from 15.7% in 3Q07 and 9.8% in 2Q08.
Total operating expenses in 3Q08, which include selling, general and administrative (SG&A) expenses and R&D expenses, were US$40.5 million, representing increases of 210% from 3Q07 and 146% from 2Q08. Excluding stock-based compensation expense, the amortization of intangibles from the Quorum acquisition, IPR&D expense related to the Quorum acquisition and impairment loss of long-lived assets, total non-GAAP operating expenses in 3Q08 were US$13.7 million, compared to US$11.6 million in 3Q07 and US$14.3 million in 2Q08. Total non-GAAP operating expenses for the quarter represented 68.5% of revenue.
SG&A expenses increased in 3Q08 by 14% from 3Q07 and decreased 10% from 2Q08. The year-over-year dollar increase was driven primarily by higher stock-based compensation expense and higher professional fees, partially offset by lower employee salary and benefits expenses. The sequential dollar decrease was driven primarily by lower expenses in employee salary and benefits, investor relations and marketing, partially offset by higher stock-based compensation expense.
Recurring R&D expenses in 3Q08 increased 31% year-over-year and 4% sequentially. The year-over-year dollar increase was driven primarily by the Company's efforts to expand its product portfolio and the acquisition of Quorum Systems, which is primarily a research and development center. The sequential dollar increase was primarily due to higher software license and maintenance fees and stock-based compensation, partially offset by lower non-recurring engineering and amortization expenses.
Non-Operating Income
In 3Q08, the Company recorded net interest income of US$0.5 million, representing a decrease of US$1.1 million from 3Q07 and flat from 1Q08. The year-over-year decrease was primarily attributed to interest earned from investing a lower balance of cash and cash equivalents as well as declines in interest rates.
In 3Q08, the Company also recognized other income of US$0.3 million, approximately flat from 3Q07 and a decrease of US$0.7 million from 2Q08. The sequential decrease was primarily attributed to a decrease in foreign exchange gain.
Earnings
Diluted loss per ADS was US$0.71, down from diluted earnings of US$0.13 in 3Q07 and US$0.06 in 2Q08. Excluding stock-based compensation expense, the amortization of intangibles from the Quorum acquisition, IPR&D expense related to the Quorum acquisition and impairment loss of long-lived assets, non-GAAP diluted loss per ADS for 3Q08 was US$0.10, down from diluted earnings of US$0.16 in 3Q07 and US$0.11 in 2Q08.
The Company's net loss totaled US$31.3 million in 3Q08, compared to net income of US$6.1 million in 3Q07 and net income of US$2.6 million in 2Q08. The net margin was -156.5%, down from 15.7% in 3Q07 and 6.5% in 2Q08. Excluding stock-based compensation expense, amortization of intangibles from the Quorum acquisition, IPR&D expense related to the Quorum acquisition and impairment loss of long-lived assets, non-GAAP net margin was -21.6% in 3Q08, down from 19.7% in 3Q07 and 12.1% in 2Q08.
Balance Sheet and Cash Flow
As of September 30, 2008, the Company had US$66.3 million in cash and cash equivalents, which represented a decrease of US$2.6 million from June 30, 2008. The Company also had $6.6 million in term deposits with maturity dates over 90 days. In 3Q08, the Company generated US$0.2 million cash from operating activities, and used US$2.1 million cash on property and equipment and US$0.6 million on intangible assets.
Accounts receivable (A/R) decreased by US$6.0 million from US$17.4 million at June 30, 2008 to US$11.4 million at September 30, 2008. As a result of the decrease in sales, average A/R days increased from 21 days to 66 days. As of October 31, 2008, the Company has collected US$2.6 million of its A/R and US$5.6 million of the outstanding receivables was past due. The Company has received reassurance that the US$5.6 million will be paid in the fourth quarter. Inventory at September 30, 2008 was US$18.0 million, an increase of $0.2 million from June 30, 2008, and the inventory days increased from 73 days to 146 days as a result of the slower sales volume. Total assets as of September 30, 2008 were US$203.9 million, down 19% from US$250.6 million at June 30, 2008. The decrease in total assets was primarily attributed to reductions in intangible assets due to impairment and goodwill per finalization of purchase accounting.
Current liabilities decreased from US$32.6 million at June 30, 2008 to US$30.7 million at September 30, 2008, primarily due to a decrease in advance from customers as a result of slower sales volume, accrued warranty and accounts payable, partially offset by an increase in the current portion of long term notes payable. Long-term liabilities at September 30, 2008 were US$1.3 million, compared to US$16.9 million at June 30, 2008, primarily due to an adjustment in deferred tax liability per finalization of purchase accounting and reclassification from long-term notes payable to short-term notes payable, as a US$0.7 million interest-free loan becomes due in 3Q09.
Business Outlook:
As stated earlier in this press release, conditions in the Chinese mobile phone market remain challenging. In recent weeks, customers have turned more cautious in their business outlook for this quarter, as impact of the global financial crisis begins to spread. As a result, Spreadtrum currently expects fourth quarter revenue to be approximately flat or slightly better than the third quarter of 2008. Spreadtrum estimates its 4Q08 gross margin to be approximately 40% and its 4Q08 operating expenses to be in the range of US$15-16 million.
Webcast of Conference Call:
The Company's management team will conduct a conference call at 8:00 am US Eastern Time on November 7, 2008. A webcast of the conference call will be accessible on the Company's web site at http://www.spreadtrum.com . The conference call can also be accessed via the following telephone numbers:
USA (Toll Free): 1 888 680 0878
USA (Toll): 1 617 213 4855
Hong Kong (Toll Free): 800 962 844
China (Toll Free): 10 800 130 0399
Participant Passcode: 3627 9406
Pre-registration (optional):
https://www.theconferencingservice.com/prereg/key.process?key=PJFMME98R
A replay of the conference call will be available for seven days via the following telephone numbers:
USA (Toll Free): 1 888 286 8010
USA (Toll): 1 617 801 6888
Participant Passcode: 8068 4449
Discussion of Non-GAAP Financial Measures
In addition to disclosing financial results prepared in accordance with US GAAP, the Company's earnings release contains non-GAAP financial measures that exclude the effects of share-based compensation, amortization of intangibles from the Quorum acquisition, in process R&D expense from the Quorum acquisition, and impairment loss of long-lived assets. The non-GAAP financial measures used by management and disclosed by the Company exclude the income statement effects of all forms of share-based compensation, amortization of intangibles from the Quorum acquisition, in process R&D expense from the Quorum acquisition, and impairment loss of long-lived assets.
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for financial measures prepared in accordance with US GAAP. The financial results reported in accordance with US GAAP and reconciliation of GAAP to non-GAAP results should be carefully evaluated. The non-GAAP financial measures used by the Company may be prepared differently from and, therefore, may not be comparable to similarly titled measures used by other companies.
The Company believes that the presentation of non-GAAP gross margin, non-GAAP operating margin, non-GAAP net income, and non-GAAP diluted earnings per ADS provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. The non-GAAP diluted earnings per ADS is calculated by dividing non-GAAP net income by the US GAAP weighted average diluted shares outstanding.
Listed below are the share-based compensation amounts included in net income that management excludes in computing the non-GAAP financial measures referred to in the text of this press release. A reconciliation of GAAP to non-GAAP results is presented after the consolidated balance sheets.
Three months ended
September 30, June 30, September 30,
2007 2008 2008
(in thousands of US dollars)
Share-based compensation:
Cost of revenue $ 54 $ 89 $ 121
Research and development 582 773 1,185
Selling, general, and administrative 891 803 1,108
Spreadtrum Communications, Inc.
Condensed Consolidated Income Statements
(in thousands of US dollars, except per share data and percentages)
(unaudited)
Three months ended Change from
September June September
30, 2007 30, 2008 30, 2008 3Q07 2Q08
Revenue $38,570 $40,227 $19,977 (48%) (50%)
Cost of revenue 20,996 22,063 11,242 (46%) (49%)
Gross profit 17,574 18,164 8,735 (50%) (52%)
Operating expenses
Research &
development 8,997 11,316 11,756 31% 4%
Selling, general &
administrative 4,059 5,176 4,647 14% (10%)
IPR&D expense
acquired per Quorum
acquisition -- -- 6,612 N/A N/A
Impairment loss of
long-lived assets -- -- 17,484 N/A N/A
Total operating
expenses 13,056 16,492 40,499 210% 146%
Operating income (loss) 4,518 1,672 (31,764) (803%)(2,000%)
Non-operating income
(expense)
Interest income 1,676 535 530 (68%) (1%)
Interest expense (18) (42) (54) 200% 29%
Other income, net 347 944 289 (17%) (69%)
Total non-operating
income 2,005 1,437 765 (62%) (47%)
Income (loss) before
tax 6,523 3,109 (30,999) (575%) (1097%)
Income tax expense 465 496 259 (44%) (48%)
Net income (loss) $6,058 $2,613 ($31,258) (616%)(1,296%)
Income (loss) per ADS,
basic $0.14 $0.06 ($0.71) (607%)(1,283%)
Income (loss) per ADS,
diluted $0.13 $0.06 ($0.71) (646%)(1,283%)
Margin analysis:
Gross margin 45.6% 45.2% 43.7%
Operating margin 11.7% 4.2% (159.0%)
Net margin 15.7% 6.5% (156.5%)
Weighted average ADS
equivalent: [1]
Basic 42,005,199 44,252,776 43,935,121
Diluted 46,940,325 46,226,362 43,935,121
ADS equivalent
outstanding at end of
period 42,191,367 43,872,135 43,991,458
[1] Assumes all outstanding ordinary shares are represented by ADSs. Each
ADS represents three ordinary shares.
Spreadtrum Communications, Inc.
Consolidated Income Statements
(in thousands of US dollars, except per share data and percentages)
(unaudited)
Nine months ended Change
September 30, September 30,
2007 2008
Revenue $96,924 $99,702 3%
Cost of revenue 53,493 55,051 3%
Gross profit 43,431 44,651 3%
Operating expenses
Research & development 22,945 34,039 48%
Selling, general & administrative 12,128 14,597 20%
IPR&D expense acquired per Quorum
acquisition -- 6,612 N/A
Impairment loss of long-lived assets -- 17,484 N/A
Total operating expenses 35,073 72,732 107%
Operating income (loss) 8,358 (28,081) (436%)
Non-operating income (expense)
Interest income 2,414 1,860 (23%)
Interest expense (30) (131) (337%)
Other income, net 794 1,870 136%
Total non-operating income 3,178 3,599 13%
Income (loss) before tax 11,536 (24,482) (312%)
Income tax expense 665 1,385 108%
Net income (loss) $10,871 ($25,867) (338%)
Income (loss) per ADS, basic $0.59 ($0.59) (200%)
Income (loss) per ADS, diluted $0.26 ($0.59) (327%)
Margin analysis:
Gross margin 44.8% 44.8%
Operating margin 8.6% (28.2%)
Net margin 11.2% (25.9%)
Weighted average ADS equivalent: [2]
Basic 18,307,807 43,784,579
Diluted 41,531,113 43,784,579
[2] Assumes all outstanding ordinary shares are represented by ADSs. Each
ADS represents three ordinary shares.
Spreadtrum Communications, Inc.
Condensed Consolidated Balance Sheets
(in thousands of US dollars)
December 31, June 30, September 31,
2007 2008* 2008*
(audited) (unaudited) (unaudited)
Cash and cash equivalents $157,038 $68,930 $66,285
Term deposit -- 6,561 6,600
Accounts receivable, net 2,198 17,412 11,368
Inventories 25,054 17,799 18,021
Deferred tax assets 392 392 345
Prepaid expenses and other current
assets 5,650 6,767 8,206
Total current assets 190,332 117,861 110,825
Property and equipment, net 23,046 25,875 26,209
Acquired intangible assets, net 14,220 48,465 22,191
Goodwill -- 46,789 32,345
Deferred tax assets 1,222 1,227 1,361
Other long term assets 8,102 10,404 11,009
Total assets 236,922 250,621 203,940
Current portion of long term loan 685 2,916 3,667
Accounts payable 24,857 13,307 12,607
Advances from customers 1,210 1,265 308
Income tax payable 3,088 3,392 3,737
Accrued expenses and other current
liabilities 13,773 11,728 10,385
Total current liabilities 43,613 32,608 30,704
Long term loan 3,423 729 --
Deferred tax liabilities 37 14,365 37
Other long-term obligations 1,954 1,823 1,308
Total long term liabilities 5,414 16,917 1,345
Total liabilities 49,027 49,525 32,049
Shareholders' equity 187,895 201,096 171,891
Total liabilities & shareholders'
equity $236,922 $250,621 $203,940
* The financial information at June 30, 2008 includes preliminary
valuation of Quorum, while the financial information at September 30,
2008 includes final valuation of Quorum.
Spreadtrum Communications, Inc.
Supplemental Information
(in thousands of US dollars, except percentages)
Revenue (US$000) 4Q06 1Q07 2Q07 3Q07
Baseband Semiconductor $22,645 $20,589 $27,357 $34,161
Turnkey Solutions 8,317 5,578 4,830 4,409
Total $30,962 $26,167 $32,187 $38,570
As % of Total Revenue
Baseband Semiconductor 73% 79% 85% 89%
Turnkey Solutions 27% 21% 15% 11%
Gross Margin 46.4% 42.9% 45.5% 45.6%
Revenue (US$000) 4Q07 1Q08 2Q08 3Q08
Baseband Semiconductor $44,971 $35,532 $38,713 $18,765
Turnkey Solutions 3,571 3,966 1,514 $1,212
Total $48,542 $39,498 $40,227 $19,977
As % of Total Revenue
Baseband Semiconductor 93% 90% 96% 94%
Turnkey Solutions 7% 10% 4% 6%
Gross Margin 45.5% 44.9% 45.2% 43.7%
Spreadtrum Communications, Inc.
Reconciliation of GAAP to Non-GAAP Results
(in thousands of US dollars, except per share data and percentages)
(unaudited)
Three months ended
September June 30, September
30, 2007 2008 30, 2008
Cost of revenue $20,996 $22,063 $11,242
Adjustment for share-based
compensation (54) (89) (121)
Cost of revenue (non-GAAP) $20,942 $21,974 $11,121
Operating income (loss) $4,518 $1,672 ($31,764)
Adjustment for share-based
compensation within:
Cost of revenue 54 89 121
Research and development 582 773 1,185
Selling, general, and
administrative 891 803 1,108
Adjustment for amortization of
intangibles from Quorum
acquisition within research and
development -- 600 435
Adjustment for IPR&D expense
acquired per Quorum acquisition -- -- 6,612
Adjustment for Impairment loss of
long-lived assets -- -- 17,484
Operating income (loss) (non-GAAP) $6,045 $3,937 ($4,819)
Net income (loss) $6,058 $2,613 ($31,258)
Adjustment for share-based
compensation within:
Cost of revenue 54 89 121
Research and development 582 773 1,185
Selling, general, and
administrative 891 803 1,108
Adjustment for amortization of
intangibles from Quorum
acquisition within research and
development -- 600 435
Adjustment for IPR&D expense
acquired per Quorum acquisition -- -- 6,612
Adjustment for impairment loss of
long-lived assets -- -- 17,484
Net income (loss) (non-GAAP) * $7,585 $4,878 ($4,313)
Income (loss) per ADS, diluted $0.13 $0.06 ($0.71)
Adjustment for share-based
compensation 0.03 0.04 0.05
Adjustment for amortization of
intangibles from Quorum
acquisition -- 0.01 0.01
Adjustment for IPR&D expense
acquired per Quorum acquisition -- -- 0.15
Adjustment for impairment loss of
long-lived assets -- -- 0.40
Income (loss) per ADS, diluted (non-
GAAP)* $0.16 $0.11 ($0.10)
Gross margin 45.6% 45.2% 43.7%
Adjustment for share-based
compensation 0.1% 0.2% 0.6%
Gross margin (non-GAAP) 45.7% 45.4% 44.3%
Operating margin 11.7% 4.2% (159.0%)
Adjustment for share-based
compensation 4.0% 4.1% 12.1%
Adjustment for amortization of
intangibles from Quorum
acquisition -- 1.5% 2.2%
Adjustment for IPR&D expense
acquired per Quorum acquisition -- -- 33.1%
Adjustment for impairment loss of
long-lived assets -- -- 87.5%
Operating margin (non-GAAP) 15.7% 9.8% (24.1%)
Net margin 15.7% 6.5% (156.5%)
Adjustment for share-based
compensation 4.0% 4.1% 12.1%
Adjustment for amortization of
intangibles from Quorum
acquisition -- 1.5% 2.2%
Adjustment for IPR&D expense
acquired per Quorum acquisition -- -- 33.1%
Adjustment for impairment loss of
long-lived assets -- -- 87.5%
Net margin (non-GAAP)* 19.7% 12.1% (21.6%)
* The non-GAAP adjustment does not take into consideration the impact of
taxes.
About Spreadtrum Communications, Inc.:
Spreadtrum Communications, Inc. (NASDAQ: SPRD; the "Company") is a fabless semiconductor company that designs, develops, and markets baseband processor solutions for the mobile wireless communications market. The Company combines its semiconductor design expertise with its software development capabilities to deliver highly-integrated baseband processors with multimedia functionality and power management. The Company has developed its solutions based on an open development platform, enabling its customers to develop customized wireless products that are feature-rich and meet their cost and time-to-market requirements.
Safe Harbor Statements:
This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, statements regarding diminished possibility for a rebound in the Company's business in the fourth quarter, expectations for some improvement in the fourth quarter that will be much more subdued than previously expected, the Chinese mobile phone market still offering attractive growth potential in the longer term, our mobile TV chip being well positioned by having the right features at very attractive price points, our expectation that Dr. Leo Li's skill and experience will be useful as we strive to improve product quality and better serve our customers, $5.6 million of outstanding receivables being paid in the fourth quarter, the Company's expectations with respect to revenue, gross margin, and operating expenses for the fourth quarter, and efforts to improve quality, customer service, reducing expenses, allocating resources, and re-evaluate priorities. These statements are forward-looking in nature and involve risks and uncertainties that may cause actual market trends and the Company's actual results to differ materially from those expressed or implied in these forward-looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to, continuing competitive pressure in the semiconductor industry and the effect of such pressure on prices; unpredictable changes in technology and consumer demand for mobile phones; the Company's ability to integrate Quorum's operations into its own; the Company's ability to successfully produce and market Quorum's RF transceivers in volume; the rate at which the commercial deployment of TD-SCDMA technology will grow; market acceptance of products utilizing TD-SCDMA technology; the Company's ability to sustain recent rates of growth; the state of and any change in the Company's relationship with its major customers; and changes in political, economic, legal and social conditions in China. For additional discussion of these risks and uncertainties and other factors, please consider the information contained in the Company's filings with the U.S. Securities and Exchange Commission (the "SEC"), including the registration statement on Form F-1 filed on June 26, 2007, as amended, and the annual report on Form 20-F filed on June 30, 2008, especially the sections under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and such other documents that the Company may file with the SEC from time to time, including on Form 6-K. The Company assumes no obligation to update any forward-looking statements, which apply only as of the date of this press release.
