Cogo Group, Inc. (

COGO

)

Q3 2010 Earnings Conference Call

November 4, 2010 4:30 PM ET

Executives

Wanyee Ho – IR

Jeffrey Kang – Chairman and CEO

Frank Zheng – CFO

Will Davis – SVP, Business Development and Chief Marketing Officer

Analysts

Brian White – Ticonderoga

Mike Walkley – Canaccord Genuity

Amir Rozwadowski – Barclays Capital

James Faucette – Pacific Crest

Mike Driller – Heartland Capital

Wayne Brown – Private Investor

Question-and-Answer Session

Operator

Compare to:
Previous Statements by COGO
» Cogo Group, Inc. Q2 2010 Earnings Call Transcript
» Cogo Group 1Q10 Earnings Call Transcript (Prepared Comments)
» Cogo Group 1Q10 Earnings Call Transcript (Q&A Session)
» Cogo Group Inc. Q4 2009 Earnings Call Transcript

Ladies and gentlemen, at this time, we will begin the question-and-answer session. (Operator Instructions). And our first question does come from the line of Brian White from Ticonderoga, please go ahead.

Brian White – Ticonderoga

Hi Jeffrey. Wondering if you could talk a little bit about the tablet market on terms of the margin profile we should think about this, the ASP to COGO, and also what type of operation systems are you seeing in this market?

Jeffrey Kang

Thanks Brian. We announced our tablet contract with our customers and design wins with our customers in aftermath. We actually work through with like over 20 customers. They have – they develop a couple of type of the tablet products. In general, some people are using Android, some people are using like a Windows platform, still some customers are using very link their own operating system.

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So we are – we’ve already seeing these products already finished and is starting to ship to the market. So we expect that this market has a very strong growth since next year. Our average ASP actually is quite high, I think anywhere from $5 to $20 even more depends on how much solution our customer has adopted from what we provide.

Brian White – Ticonderoga

And Jeffrey, in the margin profile, how did they compare to COGO’s average?

Je

ffrey Kang

I think it should be, because it’s a new market, and we are like a first mover – the early stage solution provider. So I think – I believe the margin structure shouldn’t be above in a normal corporate average.

Brian White – Ticonderoga

Okay. And just finally Jeffrey you said – obviously there are a lot of operating systems out there. What operating system is most prevalent with these customers that you’re talking to, is it Android or is it Microsoft?

Jeffrey Kang

Actually it’s hard to tell at this moment. In my experience, I think both should have market in China, because given the size of the market. We’ve heard a lot of people taking about Android a lot. But if we look – if we look at the results – the shipping to the market still we’re seeing Windows still have a certain market there. So that’s why we are – what we’re seeing is that both operating systems should have like decent market share in China.

Brian White – Ticonderoga

Great, thank you.

Operator

And our next question does come from the line of Mike Walkley with Canaccord Genuity. Please go ahead.

Mike Walkley – Canaccord Genuity

Great, thank you.

Jeffrey Kang

Hi Mike.

Mike W

alkley – Canaccord Genuity

Hi, congratulations on your first $100 million quarter, it’s a nice milestone for the company.

Jeffrey Kang

Thank you.

Mike Walkley – Canaccord Genuity

Yes, just still on those questions on the tablets, demonstrating the success of your diversifying business model, can you share with us difference I guess between maybe a $5 design win and then $20 plus if it’s different content that some of your customers might be taking? And then also do you see other opportunities in digital media group to grow into new market segments?

Jeffrey Kang

Yes, I think that’s the – this market actually is a very good case study to lead us to show investors how COGO helps our SME customers especially in China, which to address those are faster growing and faster changing market. And as a matter of fact, most of the customers who is designing and producing the tablet business are those customers previously in the PC market or in the laptop market.

As you know, because the PC market has relatively standardized the market, so which is normally not within our coverage. But when these customers are starting to shifting from the PC business to the tablet business, and then suddenly they need a company like COGO to give them the solution, to help them to design the new futures products, and then ship to the market quickly.

For example, I’ll give you an example, if some customer wants embedded the Wi-Fi – Wi-Fi module into their tablets, so there are a lot of porting in the software works – we needed to be ready there. So that’s why we’re working with our customer and based on their software, based on their platform, we embedded the Wi-Fi module into the tablet. So that’s – and then if they then later then do the design work by themselves, maybe takes a half a year to get everything done. But for us we have experience in this whole area. So for us it’s just like a work of a one week.

So that’s how we try to leverage COGO as a platform to offer the customized design solution to the tablet market. So for example, the reason why the cost [ph] varies from the $5 to anywhere higher to the $20, $25 depends on how advanced the tablet product or customer to define their products. For example, some customers use a Wi-Fi function, some customers wants to even embedded a digital [inaudible] module into their tablet products. So depends on how much of features they want to integrate into that tablet product. So that’s why to do our ASP ranges from anywhere from $5 to $20, $25

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