8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 16, 2003

RADISYS CORPORATION
(Exact name of registrant as specified in its charter)

Oregon	0-26844	93-0945232
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

5445 NE Dawson Creek Drive Hillsboro, Oregon	97124
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code: (503) 615-1100

No Change
(Former Name or Former Address, if Changed Since Last Report)

Item 7. Financial Statements and Exhibits.

     (c) Exhibits.

          The following exhibits are furnished with this report on Form 8-K:

Exhibit Number	Description
99.1	Press Release, dated July 16, 2003
99.2	Text of conference call held July 16, 2003

Item 9. Regulation FD Disclosure (pursuant to “Item 12. Results of Operations and Financial Condition”).

     In accordance with the instructions of SEC Release Nos. 33-8216 and 34-47583, the following information, intended to be furnished under “Item 12. Results of Operations and Financial Condition,” is instead furnished under “Item 9. Regulation FD Disclosure.” The information in this Form 8-K and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or any proxy statement or report or other document we may file with the SEC, regardless of any general incorporation language in any such filing, except as shall be expressly set forth by specific reference in such filing.

     On July 16, 2003, RadiSys Corporation issued a press release announcing its results for the fiscal quarter ending June 30, 2003. A copy of this press release is attached hereto as Exhibit 99.1. Additionally, on July 16, 2003, RadiSys Corporation held a conference call discussing its results for the fiscal quarter ending June 30, 2003. A copy of the text of this conference call is attached hereto as Exhibit 99.2.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RADISYS CORPORATION an Oregon corporation
Date: July 17, 2003	By:	/s/ Julia A. Harper
	Name:	Julia A. Harper
	Title:	Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release, dated July 16, 2003
99.2	Text of conference call held July 16, 2003

EX-99.1

Exhibit 99.1

NEWS RELEASE

IR Contacts:
Julia Harper
Chief Financial Officer
1-503-615-1250
julia.harper@radisys.com

Brian Bronson
Corporate Controller and Treasurer
RadiSys Corporation
1-503-615-1281
brian.bronson@radisys.com

RADISYS ANNOUNCES Q2 RESULTS – REVENUE OF $48.9 MILLION AND
EARNINGS OF $1.8 MILLION, OR $.10 PER SHARE

     HILLSBORO, OR — July 16, 2003 — RadiSys Corporation (Nasdaq: RSYS), a leading global provider of embedded systems, reported revenues of $48.9 million for the quarter ended June 30, 2003, a 1% increase from $48.4 million last quarter, and down 6% versus the same period a year ago. Net income for the quarter was $1.8 million, or $.10 per diluted share, versus a net loss of $4.2 million or $.24 per share last quarter, and a net loss of $3.1 million, or $.18 per share, a year ago.

     “The results for the quarter are a testament to the dedication of our team in returning the Company to profitability,” stated Scott Grout, CEO. “We grew our revenue sequentially in the quarter and delivered our strongest earnings performance in over two years, while generating over $4 million in cash flow. We also continued to diversify our revenue base. Design wins this quarter include solutions for products such as: wireless security switches, clinical diagnostic systems, security monitoring systems, medical imaging systems, and test and measurement systems.”

     RadiSys achieved nine new design wins in the quarter. A design win is defined by RadiSys as a project estimated at the time of the design win to produce more than $500 thousand in revenue per year assuming full production. Three of the wins are estimated to produce more than $2 million each in revenue per year, assuming full production. Of the nine wins, seven are in Commercial Systems, one is in Enterprise Systems and one is in Service Provider Systems. Design wins that ramp into production do so at varying rates, on average the ramp begins about twelve months after the win occurs.

     RadiSys is also pleased to announce that Kevin C. Melia has been elected to serve on the RadiSys Board of Directors effective July 15, 2003. Mr. Melia is currently Chairman of the Board of Lightbridge Corporation, a global enabler of mobile and online business solutions and Iona Technologies, a leading middleware software company. He is also a member of the Board of Directors of Horizon Technologies, a European systems integration and distribution company. Most recently, he was the Co-Founder, Chairman and CEO of Manufacturers’ Services Ltd. (MSL), a leading company in the Electronics Manufacturing Services Industry. Prior to establishing MSL, he held a number of senior executive positions over a five-year period at Sun Microsystems, initially as their Executive Vice President of Operations, then as President of Sun Microsystems Computer Company, a Sun Microsystems subsidiary, and finally as CFO of Sun Microsystems Corporation. Mr. Melia also held a number of senior executive positions in operations and finance over a sixteen-year career at Digital Equipment Corporation. Mr. Melia is a Chartered Accountant and holds a joint diploma in Management Accounting from the Accounting Institutes of the U.K and Ireland.

     “We are very pleased to have Kevin join our board,” said Scott Grout, President and CEO of RadiSys. “Kevin’s deep experience and knowledge in enterprise systems, global operations, corporate finance and in pioneering new customer-focused business models will be of significant value in guiding RadiSys’ growth.”

Business Outlook

     The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially.

     Commenting on the outlook, Scott Grout, CEO, said “We currently expect revenue and earnings for the third quarter to be similar to that of our second quarter.”

     “We are pleased with the results for the quarter and the progress we’ve made. The goal of the Company will continue to be profitable growth, while spending significant resources on both design wins and standard products that are aligned with our three strategic markets.”

     RadiSys will provide more details about second quarter results and current outlook during a conference call scheduled for 5 PM Eastern Time today. The public is invited to participate in the conference call by either calling 1-800-362-0571, password is RadiSys, or listening via live audio webcast on the RadiSys web-site at www.radisys.com. Replays of the call will be available through September 9, 2003 at 1-888-566-0186 or via audio webcast at www.radisys.com.

     RadiSys is a leading global provider of embedded solutions to the Commercial Systems, Enterprise Systems, and Service Provider Systems markets. RadiSys focuses on industry-leading architecture while working in a close “virtual division” relationship with its customers — improving their time-to-market advantage and reducing cost. The broad range of RadiSys product offerings include board-level embedded computers; blade servers; motherboards; network interfaces and packet processing engines; communications middleware and software such as SS7/IP internetworking and protocol stacks; platforms based on PCI, CompactPCI, CompactPCI 2.16 and ATCA; turnkey gateway systems and professional services.

     For more information, contact RadiSys at info@radisys.com or http://www.radisys.com or call 800-950-0044 or 503-615-1100. For press information only: Lyn Pangares, RadiSys Corporation, 503-615-1220.

     RadiSys is a registered trademark. All other products are trademarks or registered trademarks of their respective companies.

# # #

This press release contains forward-looking statements, including the statements concerning estimated revenue from design wins, and the typical production volume ramp of design wins. Investors are cautioned that not all design wins actually ramp into production, and, if ramped into production, the volumes derived from such design wins may not be as significant as the Company had originally estimated. The determination of a design win is somewhat subjective and is based on information available to the Company at the time of the determination. The Company assumes no responsibility to update investors on the status of announced design wins. Statements about the Company’s guidance for the third quarter, particularly with respect to anticipated revenues and earnings in the third quarter, also constitute forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements as a result of a number of risk factors, including the cyclical nature of our customers’ businesses; the Company’s dependence on a few customers; schedule delays or cancellations in design wins; the Company’s dependence on a few suppliers; intense competition; execution of the development or production ramp for design wins; political, economic and regulatory risks associated with international operations, including interest rate and currency exchange rate fluctuations; the inability to protect RadiSys’ intellectual property or successfully defend against infringement claims by others; disruptions in the general economy and in the Company’s business, including disruptions of cash flow and the Company’s normal operations, that may result from terrorist attacks or armed conflict, particularly in the Middle East, and other risk factors listed from time to time in RadiSys’ SEC reports, including those listed under “Risk Factors” in RadiSys’ Annual Report on Form 10-K for the year ended December 31, 2002, a copy of which may be obtained by contacting the Company’s investor relations department at 503-615-7797 or at the Company’s investor relations website at http://www.radisys.com. Although forward-looking statements help provide complete information about RadiSys, investors should keep in mind that forward-looking statements are inherently less reliable than historical information.

All information in this release is as of July 16, 2003. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.

RadiSys Corporation
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2003			June 30, 2002			June 30, 2003			June 30, 2002
Revenues	$	48,898		$	52,152		$	97,302		$	104,851
Cost of sales		32,945			37,022			66,152			75,008
Gross margin		15,953			15,130			31,150			29,843
Research and development		5,733			7,715			11,273			15,101
Selling, general, and administrative		6,783			8,962			13,331			16,872
Intangible asset amortization		765			765			1,530			1,543
Restructuring charges		—			4,281			1,829			4,281
Income (loss) from operations		2,672			(6,593	)		3,187			(7,954	)
Gain on repurchase of convertible notes		—			1,504			825			2,859
Interest expense, net		(595	)		(642	)		(1,001	)		(1,450	)
Other expense, net		(297	)		(188	)		(789	)		(410	)
Income (loss) from continuing operations before income tax benefit		1,780			(5,919	)		2,222			(6,955	)
Income tax benefit		(9	)		(3,247	)		—			(4,022	)
Income (loss) from continuing operations		1,789			(2,672	)		2,222			(2,933	)
Discontinued operations related to Savvi:
Loss from discontinued operations		—			(889	)		(4,679	)		(1,759	)
Income tax benefit		—			(489	)		—			(967	)
Net income (loss)	$	1,789		$	(3,072	)	$	(2,457	)	$	(3,725	)
Net income (loss) per share from continuing operations - (basic)	$	0.10		$	(0.15	)	$	0.13		$	(0.17	)
Net income (loss) per share from continuing operations - (diluted)	$	0.10		$	(0.15	)	$	0.12		$	(0.17	)
Net income (loss) per share - (basic)	$	0.10		$	(0.18	)	$	(0.14	)	$	(0.21	)
Net income (loss) per share - (diluted)	$	0.10		$	(0.18	)	$	(0.14	)	$	(0.21	)
Weighted average shares (basic)		17,785			17,492			17,728			17,450
Weighted average shares (diluted)		18,098			17,492			17,967			17,450

RadiSys Corporation
Consolidated Balance Sheets
(in thousands)

ASSETS
	June 30, 2003 (unaudited)			December 31, 2002
Current assets
Cash and cash equivalents	$	30,700		$	33,138
Short-term investments		54,398			72,661
Accounts receivable, net		29,464			27,473
Inventories, net		26,962			24,864
Other current assets		2,520			4,361
Deferred tax assets		7,454			7,521
Total current assets		151,498			170,018
Property and equipment, net		23,355			25,882
Goodwill		27,521			29,969
Intangible assets, net		7,963			11,159
Long-term investments		28,875			13,128
Long-term deferred tax assets		21,212			21,437
Other assets		1,713			2,706
Total assets	$	262,137		$	274,299
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	17,530		$	18,933
Accrued wages and bonuses		4,278			4,879
Accrued interest payable		1,421			1,643
Accrued restructuring		3,873			5,178
Other accrued liabilities		8,674			6,911
Total current liabilities		35,776			37,544
Long-term liabilities
Convertible subordinated notes		67,443			77,366
Mortgage payable		6,544			6,588
Total long-term liabilities		73,987			83,954
Total liabilities		109,763			121,498
Shareholders' equity
Common stock, 100,000 shares authorized,
17,839 and 17,605 shares issued and
outstanding		162,819			161,485
Accumulated other comprehensive income:
Cumulative translation adjustment		1,960			1,230
Unrealized gain on securities		77			111
Accumulated deficit		(12,482	)		(10,025	)
Total shareholders' equity		152,374			152,801
Total liabilities and shareholders' equity	$	262,137		$	274,299

EX-99.2

Exhibit 99.2

RADISYS
Second Quarter Earnings

July 16, 2003
4:00 pm CT

Conference Coordinator: Welcome to the RadiSys Second Quarter Earnings Conference Call. All lines are in a listen-only mode. I will now turn the call over to today's moderator, Mr. Scott Grout. Go ahead, please.

Scott Grout: Thank you, operator. Good afternoon, everybody. And thank you for participating in the RadiSys Second Quarter Conference Call. In this call, we will review our results for the second quarter, as well as our outlook for the third quarter, and then open the call up for questions.

Participating with me today on the call are Julia Harper, our Chief Financial Officer; Ron Dilbeck, our Chief Operating Officer; Brian Bronson, our Treasurer and Corporate Controller; and, of course, myself, Scott Grout, President and CEO.

Before we get started, I’d like to turn the call over to Julia for a caution regarding forward-looking statements.

Julia Harper: Thanks, Scott. Any statements on this call regarding future expectations for the business of RadiSys constitute forward-looking statements that involve a number of risks and uncertainties. We caution you not to place undue reliance on these statements.

Factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in our press release today, which may be found on our Web site at www.radisys.com, and in our SEC filings, including our 2002 Annual Report on Form 10K.

All information in this call today is as of July 16. The Company undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in the Company’s expectations.

Now I’ll turn the call back to you, Scott.

Scott Grout: Thank you, Julia. The results for the quarter are a clear testament to the work of our team in returning the Company to profitability. We grew our revenue sequentially in the quarter to $48.9 million and delivered our strongest earning performance in over two years, finishing at 10 cents per share. The team continued to deliver strong balance sheet performance, generating over $4 million in positive cash flow for the quarter.

As you have seen from our design win breakdown, we continue to diversify our revenue base. Design wins in the quarter included solutions for products such as wireless security switches, clinical diagnostic systems, security monitoring systems, medical imaging, and test and measurement systems.

Revenues for the quarter were divided across our three diverse end markets as follows. Forty percent or $20 million of our second quarter revenue was from the Commercial Systems segment, which includes medical systems, transaction terminals, test and measurement, semiconductor and manufacturing capital equipment. Medical Systems represented 13% of total revenues for the quarter. Part of the increase in the Commercial Systems this quarter came from higher sales to Diebold for transaction terminals.

Thirty-two percent, or $15.4 million of our revenue was for the Service Provider System segment, which includes public network infrastructure, such as wireless, enhanced services, advanced messaging, and wireless — with wireless networks representing 19% of total revenues.

Finally, 28% or $13.5 million of our revenue was derived from Enterprise Systems segment that includes storage systems, network security, datacom, IT infrastructure, and enterprise networking and communications.

Our top five customers for the quarter were as follows — Avaya, Diebold, IBM, Nokia, and Nortel. Collectively, the top five represented about 54% of our revenue for the quarter. Diebold, Nokia, and Nortel were 10% or higher customers.

From a geographic perspective, approximately 60% of our revenue was based in North America, 34% in Europe, and 6% in Asia-Pacific. As a percentage of our revenue, Asia-Pacific business doubled from last quarter. The increase is due primarily to an uptick in China with some of our existing customers. We intend to continue to focus on building a growing funnel of new opportunities in the Asia-Pacific region, as we have discussed before, with specific focus on China.

We continue to make progress in building a diversified revenue base, as evidenced by the quarter’s design wins. Specifically, the team was able to achieve nine new design wins for the quarter. As always, we define a design win as a project estimated to ramp to more than $500,000 in annual revenue, assuming full production.

Of the nine new wins, three of the wins are of significant size, each of which is estimated to produce more than $2 million in revenue per year, assuming full production. Seven of the wins were in Commercial Systems segment, and one win was in the Service Provider Systems Segment and one in Enterprise Systems segment.

These design wins are based on leading new RadiSys embedded systems and technologies that provide high-end compute platforms, high speed packet and image processing, and secure network interfaces for our customers. Many of our embedded systems are hybrid hardware and software solutions that require fairly deep expertise and system level design and integration.

As discussed earlier, end market applications for this quarter’s design wins include wireless security switches, clinical diagnostic systems, medical imaging systems and test and measurement sytems.

As mentioned on last quarter’s call, we have tightened the acceptance criteria for declaring design wins and now require that programs progress further through our sales cycle before being classified as a design win. This change has impacted and will continue to impact the count and the timing of reported wins. And we believe that we have improved the overall quality and robustness of the design wins.

 In addition, we are investing more in standard products going forward, which will inherently have an impact on the custom product design wins going forward.

On a slightly different topic, I am very pleased to announce that Kevin Melia has been elected to serve on our Board of Directors, effective earlier this week. Kevin is currently Chairman of the Board of Lightbridge Corporation, a global mobile and online business solutions company and a member of the Boards of Iona Technologies, a leading middleware software company, and Horizon Technologies, a Europe-based systems integration company.

Most recently, Kevin was Chairman and CEO of Manufacturers’ Services Limited, a leading electronic manufacturing services firm. Prior to establishing MSL, he held a number of senior executive positions, including the CFO and the VP of Operations at Sun Microsystems.

Kevin’s deep experience, knowledge and expertise in enterprise systems, global operations, corporate finance, and in pioneering new customer-focused business models will be a significant value guiding RadiSys going forward.

With that, I’d like to turn the call over to Julia, who will cover more details of the second quarter’s financial results with you.

Julia Harper: Thank you, Scott. Revenues finished at $48.9 million, up about $500,000, or 1% sequentially from the first quarter. Net income for the quarter was $1.8 million or 10 cents per share.

Our gross margin percentage increased again this quarter, finishing at 32.6% versus 31.4% in the previous quarter. The increase came equally from favorable product mix and reductions in material costs. We currently believe that gross margins will continue to be in the 32% to 33% range at similar revenue levels moving forward.

Operating expenses, excluding intangible amortization, totaled about $12.5 million, up $400,000 from last quarter. However, if you take a look at operating expenses on an apples-to-apples basis, we were actually flat with the prior quarter. Specifically, last quarter, we had $400,000 of operating expenses that were moved down to Discontinued Operations, due to the sale of our Savvi business.

As a percentage of sales, R&D was 11.7%, up from 11.4% last quarter. And SG&A excluding goodwill was 13.9%, up from 13.5%. We expect to maintain operating expenses at similar levels in the third quarter.

Intangible amortization this quarter was $765,000, consistent with the prior quarter. Non-operating expenses were just under $900,000 for the quarter, also at about the same level as prior quarter.

We elected to book a zero tax rate again this quarter and are expecting to book a zero tax rate for the full year. Based on our projected pre-tax income for 2003, including the $4.3 million loss in the first quarter, and our current estimate of permanent book tax differences, we feel it’s likely that we won’t have a significant tax liability this year.

In addition, there’s a possibility that we will sell one of our real estate properties at a book loss during the second half of the year, which would further reduce our taxable income. Longer term, we expect our tax rate to be in the mid 20‘s.

Our basic share count was 17.8 million and fully diluted equals 18.1 million. At current stock price levels, we expect our diluted share count for the third quarter to be slightly higher, between 18.2 and 18.3 million shares.

Now I want to talk a little bit about the balance sheet. Cash and investments in total finished at $114 million, up $4.1 million from the prior quarter balance, primarily due to cash flow generated from operations this quarter.

Our net cash position continued to grow, finishing at $45 million, up from $41 million last quarter. Net cash is defined as cash and investments, less our convertible debt at face value.

 Our trade receivables decreased $400,000 to just under $29.5 million. DSO for the quarter was 55 days, down one day from the prior quarter. And we’re targeting to keep our DSO in the low to mid 50‘s moving forward.

Net inventory levels decreased $600,000 to $27 million. And inventory turns increased slightly from 4.8 to 4.9 this quarter. We expect to see inventory levels decrease again in the third quarter.

Our capital expenditures were $600,000 during the quarter. And we recorded depreciation expense of about $1.5 million. For Q3, we expect to see capital expenditures ranging between a half a million and $1 million and depreciation expense to continue at the same run rate.

Before I turn the call back over to Scott, I’d like to formally invite all of you to come to our headquarters in Hillsboro, Oregon, to participate in our Analyst Day, scheduled for August 14 from 2:30 to 5:30 pm.

We’ll have presentations by key members of our Management Team, outlining our business and strategies. Invitations will be sent out shortly. We’re looking forward to seeing you here.

With that, I’ll turn the call back to Scott, who will talk about our outlook for the third quarter.

Scott Grout: Thank you, Julia. Before we open the call up to questions, I’d like to talk briefly about our outlook for the third quarter. Please note that this is our view as of today and that this view is a forward-looking statement subject to risks and uncertainties, as discussed earlier and in our press release made available earlier today.

For the third quarter, we currently expect to see revenue and earnings to be similar to our second quarter’s results. We continue to be encouraged by our growing diversification, customer penetration, and competitive products and technologies.

We are seeing our solutions used across a broader set of end market systems. And we are tightly coupled with our customers as they bring their new product offerings to market. Our continuing goal is to drive for profitable growth by leveraging our value proposition of enabling our customers to bring better products to market faster and more economically.

We are clearly pleased with our financial performance for the quarter, the strength of our balance sheet, and our overall market position. With that, I think we’re ready to open up the call and take questions.

Conference Coordinator: Thank you. If you would like to ask a question, press the star and 1 on your touchtone phone. If you would like to withdraw that question, press the pound key. Again, if you would like to ask a question, press the star and 1.

Our first question will come from the site of (David Duley) of Wells Fargo. Go ahead, please.

(David Dooley): Congratulations on a nice quarter.

Scott Grout: Thank you, (David).

Julia Harper: Thanks, Dave.

(David Dooley): Hey, could you talk — when you look at your design win totals for the quarter, are there any ones that particularly stand out that you’re excited about? And maybe just give us a little bit of flavor in that respect, which areas or which wins that you think are most significant.

Scott Grout: I guess one comment I’d make, first of all, (Dave), is — we’re pretty excited that the level of diversification for design wins remains pretty strong. That ends up being somewhat of an indicator for us as business on a go-forward basis. We’re seeing commercial pick-up with our investment there and enterprise and service provider. So in general, we’re pretty happy with the level of diversification.

Medical imaging’s doing well. And the security theme in general has been performing pretty well for us in terms of new design activity, as well as current business.

(David Dooley): And you've talked historically about Agilent. I was just wondering if you could help us understand when the ramp on that piece of business is happening. Has that already happened? Or is it about to happen or kind of where we are in the product cycle there?

Scott Grout: Okay. (Dave), we have to be a little bit reserved in terms of guidance on a per-customer basis. I can tell you it has not happened yet. We feel pretty good about our position with Agilent, as well as other test and measurement companies, and are well positioned as they start to see a bit of business lift in some of their new generational products coming out.

(David Dooley): Were there any other customers in the commercial area that were significant or are doing well here, besides Diebold, I think, is the one you mentioned?

Scott Grout: I think in general we see pretty good strength in commercial. Diebold, I think, is worth mentioning specifically. But again, we’ve been making an investment for the past four or five quarters and getting that sector to a good position.

Julia Harper: Yeah, we also saw a pretty nice bump this quarter from IGT, (Dave). And one thing that I’ll point out in the current quarter design wins — in the commercial space, four of those seven wins were in the medical space.

(David Dooley): Okay. And yeah, IGT's got a new gaming system out. Are you - you guys are embedded in that. I think it's called the Elvis.

Julia Harper: Yes, we are.

(David Dooley): Okay. Hey, thank you and congratulations.

Scott Grout: Thanks, (Dave).

Julia Harper: Thanks, (Dave).

Conference Coordinator: Thank you. Our next question comes from (Matt Petkin) of DA Davidson and Company. Go ahead, please.

(Matt Petkin): Good afternoon. The first question is — Scott or Julia, could you just generalize on the average life span of the design wins in your various end markets? I would assume that — at least one might hope that the Commercial Systems could be a little bit longer life span. But that may not be true. And they could be equally as short as the other markets.

Scott Grout: No. So, on average, I’d say we’re probably three to five year kind of life span, once we get into ramp, until it sort of begins to tail off. Commercial Systems are not less than that. I think there’s many situations where it might last a little bit longer, particularly if you get into some of the equipment like medical where requalifying design change or requalifying new systems takes quite a bit of effort.

(Matt Petkin): Okay.

Scott Grout: We see pretty long life runs on some of those categories.

(Matt Petkin): Okay, and then, Scott, you had mentioned wanting to ramp up to standard products as the total portion of your business. Going forward, let’s say you do have an arrangement with a customer where you use standard products. And it’s been arranged that they would buy that off-the-shelf product for their needs.

Would you expect to be reporting that in the form of a design win or something like that? Or would it just — would it be coming into the overall revenue mix outside of the design wins?

Scott Grout: Yeah, most likely to come into the overall revenue mix.

(Matt Petkin): Okay. So going forward, could you maybe break out, once that becomes significant - standard products from the total?

Scott Grout: Yeah, we'll take a look at that. I would think we can do that.

(Matt Petkin): Okay. And then, I guess in conjunction with that, should we expect an inventory build as you continue to push those standard products with your customers?

Julia Harper: No. So - will there be some inventory build with those standard products -probably. But we're really pushing on moving the other stuff down that would offset that or maybe even taking inventory down in the aggregate, (Matt).

Scott Grout: Yeah, we are pursuing a net decrease in inventory.

(Matt Petkin): So for the rest of the year, that's something we should be looking for.

Julia Harper: Yes.

(Matt Petkin): And are you working with suppliers on that? Or how does - what sort of arrangements do you have with your suppliers right now that can enable you to be a little more in-time with inventory?

Julia Harper: Well, we're moving more and more to a just-in-time environment on both our customer side and our supplier side. And I think that's probably going to generate the biggest impact.

(Matt Petkin): Okay. Any way to break out the overall percentage of revenue that came from Systems business versus just boards?

Scott Grout: Probably not, (Matt).

(Matt Petkin): Okay. Okay - oh, one more thing, Julia. I missed it - sorry - cap ex and depreciation for this last quarter.

Julia Harper: So cap ex was $600,000 and depreciation was $1.5 million.

(Matt Petkin): Okay, and going forward.

Julia Harper: Next quarter, it'll be probably a little higher, maybe closer to $1 million on cap ex and depreciation run rate should be roughly the same - million and a half.

(Matt Petkin): Okay, great, thank you.

Scott Grout: Thanks, (Matt).

Conference Coordinator: Thank you. If you would like to ask a question, please press the star and 1 on your touchtone phone. Our next question or comment comes from the site of (Chris Kincaid) of SG Cowen Securities. Go ahead, please.

(Chris Kincaid): Yes, I was wondering if you could tell us about where head count is at right now and also what your plans are for the remainder of the year.

Julia Harper: Sure, head count is roughly flat. It's 516 this quarter. I think that's up about five heads over last quarter. And don't expect to see that move significantly for the rest of the year.

(Chris Kincaid): Okay. And then also on capacity utilization for the quarter.

Julia Harper: Well, so, it sort of depends on how you define it, (Chris). We are pretty close to 100% utilized on a one-shift basis. But we’re only running our factory one shift right now. So if the question you’re asking is from an absorption standpoint, we are not in an under-absorbed position today.

(Chris Kincaid): Okay, great. Thanks a lot.

Julia Harper: Thanks.

Scott Grout: Thanks, (Chris).

Conference Coordinator: There are no further questions at this time.

Scott Grout: Okay. So thank you for your continued support of RadiSys. And we look forward to seeing many of you on Analyst Day here at our facility on August 14. So thank you again.

Conference Coordinator: This has concluded today's teleconference. You may disconnect at this time.

END