It is our intent that all forward-looking statements regarding our expected financial results and commercial activity made during today's call will be protected under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties. Actual events or results may differ materially from those projected or discussed. All forward-looking statements are based upon current information available, and Illumina assumes no obligation to update these statements. To better understand the risks and uncertainties that could cause results to differ, we refer you to the documents that Illumina files with the Securities and Exchange Commission, including Forms 10-Q and 10-K.Before I turn the call over to Christian, I want to let you know we will participate in the Piper Jaffray Healthcare Conference in New York the week of November 28 and the Deutsche Bank Med Tools Investor Summit in Boston the week of December 5. For those of you unable to attend any of the upcoming conferences, we encourage you to listen to the webcast presentations, which will be available through the Investor Relations section of our website. With that, I will now turn the call over to Christian. Christian O. Henry Good morning, everyone, and thank you for joining us today. During today's call, I will review our third quarter financial results. Jay will then provide an update of our commercial progress and the state of our business and markets. Total revenue for the third quarter was $235 million, representing a year-over-year decline of 1%. Product revenue, which decreased 2%, was $220 million. Consumable revenue for the quarter was $145 million, compared to $133 million in Q3 of 2010 and $159 million in Q2 of this year. On a year-over-year basis, consumable revenue grew approximately 9%, primarily from the expansion of our sequencing instrument installed base. On a sequential basis, consumable revenue declined by 9%, driven by declines in both array and sequencing consumables. We believe the decline in sequencing consumables was the result of delays in sample availability and increased sequencing capacity per run. In addition, both our sequencing and microarray consumable businesses were significantly impacted by the uncertainty over government and academic research funding in Europe and the United States.
Annualized consumable revenue for HiSeq system was approximately $270,000, which is below our historically projected range of $300,000 to $400,000 per instrument. On the array side, annualized consumable pull-through across our installed base of microarray scanners was down sequentially but remained within our targeted range of $400,000 to $500,000 per system. The sequential decline in microarray consumables resulted primarily from a slowdown in all genome genotyping arrays.Instrument revenue for the third quarter was $72 million, down 18% over Q3 of last year and 33% sequentially. The year-over-year decline was largely a result of the Genome Analyzer upgrade program, which drove significant instrument volume in Q3 2010 and was not repeated in the third quarter of 2011. The sequential decline was a result of a significant decrease in upgrades of Genome Analyzers to HiSeq systems and what we believe to be an excess of sequencing capacity in the market resulting from the launch of our V3 sequencing chemistry. Service and other revenue, which includes genotyping and sequencing services as well as instrument maintenance contracts, was $15 million compared to $13 million in Q3 of last year. The primary driver of the year-over-year growth was the increase in maintenance contracts of -- for our growing installed base of sequencing systems. Before discussing our gross margins and operating expenses for the quarter, I would like to note that we recorded a pretax amount of $25 million related to non-cash stock-based compensation. This impacted our earnings per share in Q3 by a tax-adjusted amount of $0.12 per pro forma diluted share. As a reminder, we now include this expense in our presentation of pro forma net income and earnings per share. However, in our discussion of gross margin, operating expenses and operating margin, I will highlight both our GAAP expenses, which includes stock compensation expense and other non-cash charges and the corresponding non-GAAP figures. I encourage you to review our -- the GAAP reconciliation of non-GAAP measures, which is included in today's earnings release. Read the rest of this transcript for free on seekingalpha.com