Craig McHugh Inventory Quotations

We will continue to try drive down inventory level so that we are able to be nimble on pricing.

Even though we increased overall revenues 50 percent year-over-year, the lower-than-expected selling prices for MP3 players and the inventory write-down negatively impacted gross margins.

There was a drop in flash memory prices in the quarter, with a precipitous drop in prices at the end of the quarter. This had a significant adverse effect on our sales in the quarter, and resulted in lower revenues, lower gross margins and inventory write-downs in the period.