REPORTABLE SEGMENTS AND GEOGRAPHIC INFORMATION

6 Months Ended

Oct. 31, 2011

REPORTABLE SEGMENTS AND GEOGRAPHIC INFORMATION

REPORTABLE SEGMENTS AND GEOGRAPHIC INFORMATION

10.          REPORTABLE SEGMENTS AND GEOGRAPHIC INFORMATION

The Company is a global telecommunications equipment supplier for voice networks. The Company develops, produces and sells voice quality enhancement solutions as well as voice applications solutions to telecommunication service providers worldwide. The Company’s voice quality enhancement solutions enable service providers to deliver consistently clear, end-to-end communications to their subscribers. The Company’s revenues are organized along two main product categories: products and services, which are comprised of the Company’s new voice applications offerings as well as services in support of its voice quality enhancement solutions.  The Company currently operates in two business segments: the voice quality enhancement segment, which includes service revenues related to delivery of these solutions; and the voice applications segment.  The segments are determined in accordance with how management views and evaluates the Company’s business and based on the criteria as outlined in the authoritative guidance. A description of the types of products and services provided by each reportable segment is as follows:

Voice Quality Enhancement Segment

The Company designs, develops, and markets stand-alone and system-based voice quality products for circuit-switched and Voice over Internet Protocol (“VoIP”) mobile networks throughout the world. The Company’s products feature high-capacity, high-availability hardware systems coupled with a sophisticated array of voice optimization and measurement software to enhance the quality of voice communications.  In addition to the hardware systems that comprise this segment, the Company also includes services such as maintenance, training and installation which support the hardware system sales.

Voice Applications Segment

The Company designs, develops, and markets value-added voice services that today are focused on messaging applications.  The Company’s goal is to expand the range of applications and services with the common goal of utilizing the human voice to interface with various aspects of day to day life which have been historically limited to keyboard interface.  The product portfolio may include voice based interface with the web and web-based applications, including social networking and calendar applications.

Segment Revenue and Contribution Margin

Segment contribution margin includes all product line segment revenues less the related cost of revenue, marketing and engineering expenses directly identifiable to each segment. Management allocates corporate manufacturing costs and some infrastructure costs such as facilities and information technology costs in determining segment contribution margin. Contribution margin is used, in part, to evaluate the performance of, and allocate resources to, each of the segments. Certain operating expenses are not allocated to segments because they are separately managed at the corporate level. These unallocated costs include sales costs, marketing costs other than direct marketing, general and administrative costs, such as legal and accounting, stock-based compensation expenses, acquisition-related integration costs, amortization and impairment of purchased intangible assets, restructuring costs, interest and other income (expense), net.

Segment Data

The results of the reportable segments are derived directly from the Company’s management reporting system. The results are based on the Company’s method of internal reporting and are not necessarily in conformity with accounting principles generally accepted in the United States. The Company measures the performance of each segment based on several metrics, including contribution margin.

Asset data, with the exception of inventory, is not reviewed by management at the segment level. All of the products and services within the respective segments are generally considered similar in nature, and therefore a separate disclosure of similar classes of products and services below the segment level is not presented.

Financial information for each reportable segment is as follows as of October 31, 2011 and April 30, 2011 and for the three and six months ended October 31, 2011 and 2010 (in thousands):

	Voice Quality Enhancement		Voice Applications			Total
For the three months ended October 31, 2011:
Revenue	$	2,120	$	1,084		$	3,204
Contribution margin	527		(1,535		)	(1,008		)
As of October 31, 2011: Inventories	4,637		—			4,637
For the three months ended October 31, 2010:
Revenue	$	2,748	$	904		$	3,652
Contribution margin	894		(1,411		)	(517		)
As of April 30, 2011: Inventories	4,689		—			4,689
For the six months ended October 31, 2011:
Revenue	$	4,809	$	2,084		$	6,893
Contribution margin	1,348		(2,973		)	(1,625		)
For the six months ended October 31, 2010:
Revenue	$	5,912	$	1,779		$	7,691
Contribution margin	1,888		(2,860		)	(972		)

The reconciliation of segment information to the Company’s condensed consolidated totals is as follows (in thousands):

	Three Months Ended						Six Months Ended
	October 31, 2011			October 31, 2010			October 31, 2011			October 31, 2010
Segment contribution margin	$	(1,008	)	$	(517	)	$	(1,625	)	$	(972	)
Corporate and unallocated costs	(1,851		)	(2,648		)	(4,033		)	(5,698		)
Stock-based compensation expense	(165		)	(394		)	(174		)	(742		)
Amortization of purchased intangible assets	(20		)	(20		)	(40		)	(40		)
Other income (expense), net	8			(15		)	(11		)	(24		)
Loss before provision for (benefit from) income taxes	$	(3,036	)	$	(3,594	)	$	(5,883	)	$	(7,476	)

Geographic Data

Geographic revenue information comprises (in thousands):

	Three months ended October 31,				Six months ended October 31,
	2011		2010		2011		2010
USA	$	2,784	$	2,938	$	6,096	$	5,612
Middle East/Africa	—		55		265		110
Europe	45		5		68		87
Canada	25		17		33		23
Far East	350		637		431		1,859
Total	$	3,204	$	3,652	$	6,893	$	7,691

Sales for the three months ended October 31, 2011 included sales to two customers that represented greater than 10% of total revenue (35% and 16%).  Sales for the six months ended October 31, 2011 included sales to two customers that represented greater than 10% of total revenue (39% and 17%).  Sales for the three months ended October 31, 2010 included sales to three customers that represented greater than 10% of total revenue (24%, 16% and 14%). Sales for the six months ended October 31, 2010 included sales to four customers that represented greater than 10% of total revenue (16%, 15%, 14% and 14%).

As of October 31, 2011, the Company had two customers that represented greater than 10% of accounts receivable (55% and 10%).  At April 30, 2011, two customers represented greater than 10% of accounts receivable (21% and 37%).

The Company maintained substantially all of its property and equipment in the United States at October 31, 2011 and April 30, 2011.