John, I think we had a strong indication that something was fishy with OEM in the last quarter, or at least somewhere. We had an extensive discussion about possible "stuffing of the channels" to the tune of some $20 MM. Right now, the DSO seems quite reasonable, meaning IMHO, that the OEM have regained some control of their inventory. The slight problem is a sharp increase in inventories by close to $30 MM. It is my guess that only half of that is due to OEM not taking products, the other half, IMHO, is actually positive, I think it is merchandise on retailer's shelves, possibly already sold (in the last two weeks of the last quarter) but not yet reported and paid to SNDK, because of the delay between the actual sale to the customer and the reporting of the retailers.
Unless the retail business falls completely out of bed in this quarter (and think it might actually grow a little), the next quarter could very well be within $10 MM of the current quarter. Earning wise, however, we might have a big swing down of royalties (I would guess between $3 to $5 MM), and that is where we are going to be hit on the bottom line in the coming quarter (these are "pure bottom line numbers).
Zeev |
