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Cogo Group, Inc. (COGO)

Q1 2010 Earnings Call Transcript

May 6, 2010 4:30 pm ET


Wanyee Ho – Director, IR

Jeffrey Kang – Chairman and CEO

Will Davis – Chief Marketing Officer

Frank Zheng – CFO


Brian White – Ticonderoga

Amir Rozwadowski – Barclays Capital

Mike Walkley – Piper Jaffray

Quinn Bolton – Needham & Company

James Faucette – Pacific Crest Securities

Bill Choi – Jefferies & Co.

Scott Searle – Merriman

Question-and-Answer Session


(Operator instructions) Our first question does come from the line of Brian White with Ticonderoga. Please go ahead.

Brian White – Ticonderoga

Yes, good morning, Jeffrey. I'm wondering if you could talk, Jeffrey, a little bit about what you're seeing. These results are phenomenal, I think, relative to what people were expecting. Doesn't indicate that there's any slowing in China, obviously there's a lot of concerns about the macro environment in China. Could you talk a little bit about what you're seeing in terms of the consumer market, in terms of the enterprise market in China right now?

Jeffrey Kang

Well, as I just mentioned, what we are seeing is in China the demand is improving. It’s quite consistent and for both consumer spending – and I think the consumer spending – we are seeing are a significant consumer spending increase in the past few months and quarters. Like I just said – so we are seeing a tremendous consumer spend increase in past one week. I think that’s a good indication to say how strong the Chinese economy, which have a very strong growth in past few month and quarters.

So, we're very confident about both the consumer spending, like the auto sales, and like the cell phone and the IPTV set top box or the digital graphics as well as the enterprise spending, and we talk to many of our customers like Huawei, ATV, HP, 3Com what we heard about is almost everyone is talking about less than impressed in the flat growth this year. So in our sense this year, it’s quite a very good year for us, no matter from the macro environment as well as the Chinese consumer spending.

Brian White – Ticonderoga

Okay. And Jeffrey, on the Intel relationship, obviously a milestone for Cogo, the biggest chip vendor, you never worked with them. How should we think about the ASP opportunity? And also you mentioned several different markets where you may participate with Intel. I'm curious what your thoughts on what the biggest opportunities are in terms of the end markets? And finally, could Intel be a 10% partner in 2011?

Jeffrey Kang

It’s hard to say if Intel will be 10% partner in 2011, but certainly Intel will become one of the major partners with us in embedded solution sectors. We are working with Intel in mostly two segments; one is industrial segment. For example, like security, smart ray. And equipment segment, that’s the one area we are targeting right now, at the same time, for the consumer business. So we are also targeting the business like (inaudible), like also electronics, like in MID.

So basically I think all the directions that Intel try – that's the new area Intel try to touch, which as you know, typically in the past Intel has the major market yet. So I think that’s why by leverage Cogo’s broad customer base and our embedded solution design capabilities, and I think that we’ve already have a lot experience working with Microsoft for Windows embedded OS. So I think it’s natural match for us to working with Intel, along with our software capability to target those new and exciting segments.

I am very excited about this partnership and I believe – and this is a very strong growth for us, and the fiber, also, four or five years ago. I think that (inaudible) Intel certainly cannot be a 10% partner to us.

Brian White – Ticonderoga

Okay. And ASP, Jeffrey, is there any ASP that we should think about?

Jeffrey Kang

Right now I think the ASP certainly is – for each ASPs over $10 [ph]. I think. I think that’s because Intel, right now is pretty much focused on high-end applications. So that’s why I think all this Intel related ASP will be (inaudible).

Brian White – Ticonderoga

Okay. Congratulations. Thanks.

Jeffrey Kang



And our next question comes from the line of Amir Rozwadowski with Barclays Capital. Please go ahead.

Amir Rozwadowski Barclays Capital

Thank you very much and good afternoon Jeffrey, Frank, and Will.

Will Davis

Hi, Amir.

Amir Rozwadowski Barclays Capital

I was wondering, certainly strong results for the quarter, particularly in looking at them, as well as in looking at your guidance. I was wondering if you could give us a little bit more clarity in terms of sort of year-over-year growth trends. Now that the Company's returning to sort of high-growth mode, do you see this as sort of sustainable over the next several quarters? And is that really driven by sort of a recovery in demand, or more so by some of your new initiatives?

Jeffrey Kang

Well, I think yes. We have a very – we are very confident that this year Cogo is going to return to our high-growth mode. As you noted that you are gone about for many years. So in the past we always like under the 30% growth rate. So I think this year – even though we don’t feel that in the full-year guidance that we believe we are moving back to our high-growth mode. And I believe that growth is certainly is sustainable, not only just the one quarter, not only this year, I am pretty much sure this is quite sustainable in a couple of year.

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