Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Comtech Group First Quarter 2008 Results Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. If you have a question, please press the star followed by the one on your touchtone phone. Please press star, zero for operator assistance at any time. For participants using speaker equipment, it may be necessary to pick up your handset before making your selection. This conference is being recorded today, Wednesday, May 7th, 2008.

I would now like to turn the call over to Wanyee Ho, Investor Relations Director. Please go ahead.

Wanyee Ho: Thank you and good afternoon to everyone. I'm Wanyee Ho, Comtech’s Investor Relations Director, and I'd like to thank you all for joining us today to participate in Comtech Group's 2008 First Quarter Earnings Conference Call.

After the bell today, Comtech issued a press release reporting final unaudited financial results for the quarter ending March 31st, 2008. This release can be accessed in the Investor Relations section of Comtech's website at www.comtech.com.cn and on most other financial websites.

The discussion today will be hosted by Jeffrey Kang, Chairman and CEO, who will discuss the company’s business operations, and our CFO, Frank Zheng, who will report the company’s financials. We would also like to introduce to you our new President, Mr. Yi Yuan, who joined the company recently to strengthen our management team.

Before we begin, I'd like to remind everyone that the call today may contain forward-looking statements regarding future events and financial performance of the company. We wish to caution you that such statements are just predictions, and actual results may differ materially as a result of the risks and uncertainties inherent in the company's business. We refer you to documents that the company files periodically with the SEC, specifically the company's Form S-1 and the most recently filed Form 10-K, as well as the Safe Harbor statement made in today’s press release. These documents contain important risk factors that could cause actual results to differ materially from those contained in the company's current projections. Comtech assumes no obligation to revise the forward-looking information contained in today's call.

At this time, I'd like to turn the call over to Jeffrey Kang, Chairman and CEO of Comtech. Jeffrey, the floor is yours.

Jeffrey Kang: Thank you, Wanyee, and thanks to everyone for joining this earnings call. I am delighted to report that we have achieved the best first quarter in the company’s history. We have done this while continuing to improve the gross and operating margins of our business and drive profit growth faster than the top line growth.

During the first quarter of 2008, our revenue grew over 35% year-over-year to reach $60.2 million US, and the non-GAAP EPS Diluted was $0.19, representing a growth of around 27% from the same period last year. The results are in line with our projections and reflect better than normal seasonality.

The revenue breakdown in first quarter is as follows. Mobile handset comprised 41% of total sales, delivering an increase of 37% year-over-year and a decrease of 26[%] quarter-over-quarter. Digital media made up 29% of total sales, it grew 57% year-over-year and down 4% quarter-over-quarter. Telecom infrastructure represented 27[%] of total sales showing an increase of 13% year-over-year and down 26[%] quarter-over-quarter. Service business represented 3% of total sales, increasing 36% year-over-year and down 39% quarter-over-quarter. The New Industrial Business segment, which is mainly comprised of auto electronics, started to contribute to the company’s revenue, representing almost to 1% of total business.

Now, let me provide some highlights from the first quarter and give you an update on our business outlook for the rest of 2008. We continue to experience robust revenue growth with above-expectation performances across all our key business areas during the first quarter. We are very confident we will achieve approximately 30% growth target this year. Based on existing visibility and new business in the pipeline, management is providing an updated 2008 full year guidance of $290 million in revenue and a non-GAAP EPS of $0.92. We’ll be able to achieve this aggressive goal despite a downturn in the US economy because our business mainly targets the Chinese domestic and newly emerging markets, which we expect to continue on their robust upward trajectories. First quarter results demonstrated our growth is intact and we suffered no negative impact from the US.

We believe that the handset market outlook for 2008 will remain strong with around 25% growth in the Chinese domestic market and 30% in exports although we recognize the Chinese handset market can prove volatile from time to time. Contrary to the investment community’s concerns over inventory problems and weak demand, the industry’s performance and COGO’s business performance have exceeded expectations in the first quarter of 2008. We believe the strong growth momentum will carry on throughout the year, with overall economic optimism and robust consumer spending in China. COGO’s strength lies in its more than 100 handset customers which represent virtually all tier 1, tier 2, and tier 3 players in this market. COGO addresses the market volatility and the rapidly shifting market shares among key handset players with its customer-centric focus on providing timely, value-added solutions and addressing customers’ demand for quick time-to-market delivery. We are confident we will continue to improve our market share in this dynamic market and target 20-30% growth with this stable margin in 2008.

Let’s turn to our digital media business, the fastest growing end market for COGO. The digital media business comprised almost 30% of our total business in the first quarter of 2008. We believe the existing businesses of Home Gateways, set-top boxes, and GPS will continue to grow, and that the new solutions such as the Mobile TV and the Digital Photo Frames, which we introduced in the first quarter, are expected to generate strong business in the second half of 2008. We feel confident about the projected growth in the digital media business and forecast an increase of 40% in this sector for the whole year 2008.

Next, let’s review the telecom equipment business, which [comprised] 27% of our total business. Here we estimate our major customers, Huawei and ZTE, will demonstrate a more than 40% annual growth in 2008. We project a stable 15% growth from this segment in 2008 as, one, we plan to focus especially on growing business with meaningful margins such as Datacom, Broadband and Wireless.

A month ago, we announced a $10-million telecommunications module solutions contract with ZTE. This deal is important because it secures sustainable revenue growth in this sector and it fuels management confidence in the company’s growth outlook, despite the prospects of a US recession. We expect to continue our strong growth pattern in 2008.

We expect capital expenditure in China’s telecom infrastructure to continue its steady growth going forward. In particular, 2008 promises strong results in part fuelled by the upcoming Olympic Games and calls for widespread mobile internet access and multimedia streaming. The eventual launch of 3G is also expected to kick off billions of dollars of network gear purchases and accelerate growth in the industry. To be conservative, we have excluded most of the 3G business in China from our guidance, although we believe 3G business will certainly come this year and will add significant boost to the company’s growth.

While COGO strives to deliver strong performance in its existing key markets, this year we also expect to generate the revenue from the new industrial businesses, such as the auto electronics and green energy, which we categorize them as industrial applications. We estimate that the new business will contribute over 5% of total revenue in 2008 and become another long-term growth driver for COGO. In the first quarter, we generated nearly 1% of our revenue from this new sector.

Next, let’s look at the service segment. It experienced an increase of 36% year-over-year for the first quarter 2008. We continue to be confident that this will be a high-growth, high-margin proportion for COGO and will deliver over 30% growth in 2008.

Finally, I’d like to elaborate our M&A development. We have entered an MOU to acquire Mega Smart, a leading digital media solution design service company in China. We are currently in the final stage of the due diligence and the business integration process and expect to close this deal in the second quarter of the year. The company has run a profitable business since inception and focuses on providing solutions targeted at the digital media and auto electronics market. The acquisition is expected to capture a new customer base in China. Leveraging COGO’s business model, Mega Smart is expected to create a strong platform and increase product solution offerings and market share in this new high-growth market. This will certainly be another accretive acquisition with potential to boost our growth in the coming years.

We expect more deals similar to Mega Smart in the near future. The principle behind our acquisitions is to place integration ahead of closing a deal. Consequently, we usually spend a significant amount of time ensuring a smooth transaction prior to concluding an agreement. Although the deal process may take longer than expected, the quality and the synergy driven acquisitions have provided a solid foundation for COGO’s long-term sustainable growth. KA, a company we acquired last summer, is a good example of our acquisition strategy at work. An extended transition ensured seamless integration, and I am proud to report that […] this KA company now comprises 10%of our revenue. That’s a success.

Recently, the board is planning on changing the US holding company’s name from Comtech Group, Inc. to COGO Group, Inc., by the end of May. We will continue to use the Comtech brand in China for existing business and then retain acquired companies’ names with their own inherent brand values. We believe the new COGO brand leverage the company’s extensive customer base and expertise in the value-added solutions while providing a powerful umbrella under which all brands in the group will thrive. Management expects more acquisitions down the road to boost the growth outlook in the near future.

Last but not the least, since there were very few insider trading days until Q1 earnings release was issued, we have not yet executed the stock buyback program the board authorized back in February. Management will use its best judgment to determine the right timing and schemes based on the evaluation of the market conditions and in the best interests of our stockholders to protect shareholder value.

With that, I would like to turn the call over to Mr. Frank Zheng, our Chief Financial Officer, to report Q1 unaudited results. Frank.

Frank Zheng: Thank you, Jeff. Good afternoon, everyone. For clarity, all the figures I’m discussing here, unless otherwise noted, are in US dollars.

Now, let me review the line items for first quarter. Revenue was $60.2 million, an increase of 35.1% year-over-year. Gross margin was 19.5% compared to 19.1% reported during the same period last year. This was due to a more favorable product mix, [specifically] the growth in high-margin product offering such as the digital media.

Operation expenses was 11.7% of total revenue, which includes R&D expenses of 2.3% and SG&A expense of 9.4% of total revenue. Operation margin for the first quarter was 7.8% versus 9% for the same period in 2007. However, excluding the effects of stock-based compensation and acquisition-related costs including amortization of purchased intangible assets, Non-GAAP operation margin would have been 12%.

Net income for the fourth quarter was $5.3 million, representing GAAP EPS Diluted of $0.13 cents. Non-GAAP EPS Diluted was $0.19 cents. The weighted average number of shares used in the calculation of the EPS Diluted was 40 million.

Capital expenditure was $4 million and depreciation was at $0.3 million reported in the first quarter.

Balance Sheet. We have maintained a healthy balance sheet. COGO completed the quarter with $123 million in cash with no bank borrowings. It continues to be in a strong financial position with a current ratio of 4.9 to 1. Shareholders’ equities as of March 31st, 2008 was $210.4 million US. Inventory turnover days have shortened to 27 days. Average number of days receivables outstanding was 99 days. Operation cash flow was positive $1.3 million. We are confident that we will continue to deliver strong performance with robust organic growth and accretive acquisitions.

This [concludes] my comments. Thank you, everyone, for joining the call to discuss our 2008 first quarter [unaudited] results.

Before opening up the floor for the questions, I would like to take this opportunity to welcome our new President, Mr. Yi Yuan, who joined our management team last month. Yi —

Operator: Mr. Yuan, your line is open. Please go ahead.

Yi Yuan: Thank you. Thank you, Frank.

Frank Zheng: Okay. I’m sorry, I don’t know what’s happened to the call.

Yi Yuan: Can you hear me?

Frank Zheng: Yeah.

Yi Yuan: Thank you, Frank, and hello, everyone. COGO holds a unique position in China’s technology industry with its broad client base, deep customer relationships, and customer-oriented culture. These assets provide a unique, ideal platform on which we will be able to capitalize, striking more relationships, partnerships with leading global technology vendors, expanding solution offerings in the digital media and other new growth segments. I look forward to working with the management team to continue to deliver strong organic growth and reinforce COGO’s leadership in China’s technology industry. Thank you.

Jeffrey Kang: (Inaudible). So, thank you, Yi. So we are [thrilled] to have you with us at COGO. So at this time, let’s turn the call to the operator to open up the floor for questions. We will look to end this call around 5:30. Operator?

Operator: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you have a question, please press the star followed by the one on your touchtone phone. If you would like to withdraw your question, press the star followed by the two. If you are using a speakerphone, you will need to lift the handset before making your selection.

Our first question comes from Charles John with Piper Jaffray. Please go ahead.

Charles John: Hi, Frank and Jeffrey. Congratulations on a good quarter.

Jeffrey Kang: Thank you.

Frank Zheng: Thank you, John.

Charles John: Had a couple of questions, so I’ll just start off with the Mega Smart acquisition. I realize you can’t talk much about the details of the deal at this point, but if you could just talk about how much this will contribute to additional media segment revenues for the year and how we should think of the ramp within the segment for the remainder of the year.

Jeffrey Kang: Well, for this project, we started it, you know, we started this project almost a couple of months ago, and right now we think we are in the final stage, so we expect to close this deal around the end of this quarter. So basically, we, this is a profitable business focused on the digital media segment, so their solution is mostly for the, you know, can be used two categories: one is in the digital media segment such as digital, like, high-end digital photo frame segment; another can be used in auto electronics segment which is, for like […] like a car monitoring system. So this is a company, because they say they are already profitable, and after, you know, if we finally close this deal, so we are able to take this solution and products to sell in front of our digital media customer base, and as well as the new auto electronics manufacturing customer base as well. So it has certainly increased our shareholder base and also we will have the leverage from our existing customers from this digital media segment.

This business, we expect, you know, so it’s an immediately accretive deal. Because currently we haven’t finalized all the deals so we cannot tell you exactly what’s the final size of that deal. But it’s similar to our KA deal which we believe, you know, we will started to have certain revenue contribution in the second half, mostly in the fourth quarter, and I think that the major accretive contribution will start in 2009. So that’s the brief introduction about this deal.

Charles John: Great, thanks. And longer term, you know, right now we have the digital media segment at around 30% of total sales. Do you see this becoming a much more significant piece of COGO in ’09. or do you expect those percentages to stay pretty much the same?

Jeffrey Kang: You know, certainly, we’ll have them relatively bigger percent of our business coming from the digital media segment because in this segment, our projected growth rate this year is around 40%, [which] is higher than our average […] company growth rate. So that’s why we actually, you know, estimated the digital media segment in the end of […] the, in 2008 that probably going to be [close] to like a 30% of total revenue.

Charles John: Okay, great. Just switching to the TD-SCDMA, do you think just based on all the rumors out there for the Olympics and how prepared the 3G network is right now, have the expectations for TD-based handsets come down slightly for 2008 and more (inaudible) for ’09, or do you think they’ll stay the same? And if you could just talk about the impact to your handset business.

Jeffrey Kang: Well, as we just mentioned in our, you know […] we’re quite optimistic about the 3G rollout this year, you know, before Olympics and after Olympics. But you know, to be conservative, we haven’t put that number in our, you know, this ’08 guidance yet. So in other words, those, our ’08 existing guidance excluding the 3G business in China. So we believe it’s certainly will come, it’s just a matter of time. So frankly, the reason why we haven’t put that number in our guidance is […] just because we’re not sure when it will have a material impact to us. So, some, you know, if we’re a little bit optimistic, those impact could come in around, like, the fourth quarter. But it’s also possible that the, you know, this positive impact will be postponed to the next year. So at this moment, […] what we can say is that, you know, in the long run, it’s certainly an optimistic segment but we haven’t put that into our ’08 number yet. It will become another catalyst for us to boost our result in this or next year.

Charles John: Okay, great. And real quick, if you could just give some commentary on, you know, the recent press about Huawei moving, pulling out of the handset business. They’re a pretty big customer for COGO. How do you see this playing out next several quarters?

Jeffrey Kang: You mean, Huawei Mobile or—

Charles John: Yeah.

Jeffrey Kang: Huawei Mobile business.

Charles John: Yeah.

Jeffrey Kang: You know, Huawei actually, and their mobile business is a very profitable and a strong, you know, kind of high-growth business not only in China because their major […] mobile handset customers [… are] not from the Chinese domestic market. So then, they’re more like 80-90% exporting to the new international emerging markets. So we are seeing a very strong, you know, demand from our customers. We see Huawei grew that business very dramatically in the last two years. COGO certainly, you know, we benefit from this trend. For example, you know, the reason why in the fourth quarter last year, and even in the first quarter of this year, the reason why COGO was, you know, in a very strong mobile handset business even though sometimes there is a rumor about it, a weak Chinese demand. So, I think, you know, that the strong order from a company like Huawei and ZTE, which they’re in the market mostly targeting the new international market actually help us to lift our overall business outlook. So that’s why I think it is certainly a well, you know, a very positive driver to us, to drive COGO’s mobile handset business growing in the next couple of years.

Charles John: Okay, great. And one last question, Frank, for you. I missed the cap ex number. Could you just repeat that for me, please?

Frank Zheng: Cap ex number is $4 million US.

Charles John: 4 million. Okay. And could you spell the Mega Smart, the name of the company, if you don’t mind?

Jeffrey Kang: Mega is spelled M-E-G-A S-M-A-R-T.

Charles John: Okay, perfect. Thank you.

Operator: Our next question comes from Amir Zwadowski with Lehman Brothers. Please go ahead.

Amir Zwadowski: Good afternoon, folks. Thank you very much for taking the question. Jeffrey, I just wanted to touch upon some of the topics you’d mentioned about end demand in the Chinese handset market. Certainly, we’ve seen some volatility out of some of the domestic Chinese handset suppliers, and some concerning news out of the MII in terms of tempering growth from the handset market there. Can you give us a little bit color, a little bit of color around your visibility into the market and what gives you confidence that the market is growing at the rates you had highlighted?

Jeffrey Kang: Well, as we mentioned in our earnings [speech], so that mobile handset market, you know, in the first quarter, you know, if you remember back to January, the investors feel quite wary about it, that the Q1 performance, because everybody’s talking about the inventory problem and weak demand. But if you look at it, overall, Q1, the industry performance is definitely much better than the investors’ estimation. So because we are seeing a very quite strong rebound since March, that it really helped, you know, deliver quite a strong Q1 number. And coming to the fourth quarter, you know, because for the Chinese market for the handset, it’s quite volatile from time to time, but overall, you know, it’s like a 20-30% growing industry. So the strategy, it’s very hard for a single company, a single customer can continue to keep up sustainable growth in the segment because this is a time-to-market and […] mass-market [oriented] business. So the way COGO addressed this business is we are covering […] almost everybody in the same industry, and so that’s why our business can now reflect in overall industry growth rather than with one or two key customers.

From the demand perspective, so we still see quite a strong demand in April, so that’s why in general, we estimate our cell phone business and will have the quarter-over-quarter [increase] in the Q2. What we’re seeing, the quarter-over-quarter increase is certainly over, like, 10-15%. So you know, from that angle, we still see a very strong industry demand down the road, and we are confident we are able to deliver quite a strong business performance in this quarter or next couple of quarters.

Amir Zwadowski: Great, that’s very helpful. And then, on the industrial side, your industrial revenues, I assume you’re expecting a fairly healthy ramp, sort of, leading to 5% of total sales in 2008. Any chance we can get a little bit more visibility in how you see that progression on a quarterly basis?

Jeffrey Kang: You know, because we just started this new business, so in the first quarter, the most, you know, the revenue is coming from our organic business which is, you know, like, the auto electronics-related business. And as you know, so the reason why we are so confident that we are able to have over 5% of our business which coming from both organic and acquisition as well. So, you know, mostly from organic. So as you know, we struck a deal with Freescale just a couple of months ago, so most of the solution we are targeting for the Chinese auto electronics business. We have won a lot of design-in in the last few months, so that’s why we are so confident in that second half, especially in Q3 and Q4, we feel very strong that, you know, that business ramp up from those auto electronics business from our organic operation.

Also, we have one or two deals in our pipeline which is also in the green energy, an industrial application-related, which also already in our pipeline for a while. So I think, you know, it’s just a matter of time for us to close those deals. So that will definitely will increase our business visibility in this segment. So that’s why I personally feel, you know, 5% is a very reasonable estimation in terms of our existing overall business.

Amir Zwadowski: Great, that’s helpful. And then, one other thing, just a housekeeping question. Do you have the breakout of share-based compensation by line item?

Jeffrey Kang: I think, you know, Frank, I don’t know if you have it, but I have the things is more like the, you mean the stock compensation (inaudible)—more like R&D, I think R&D is more like 30%; and sales, marketing, and SG&A, you’re at, like, 70%.

Amir Zwadowski: Great. Thank you very much. I’ll turn the queue over to other folks. Thanks again, guys.

Operator: Our next question comes from Ramesh Misra with Collins Stewart. Please go ahead.

Ramesh Misra: Good morning, Jeffrey and Frank and Yee. My first question is in regards to Mega Smart, Jeffrey. Can you provide a sense of the rough range of revenues that Mega Smart recorded in ’07? And also, how large is this acquisition? Very roughly again, just to help up put our arms around this.

Jeffrey Kang: Okay. Well, you know, right now, we cannot give you a very detailed number about their, you know, because this deal, we’re actually in the final auditing process. But what I can tell you is that, you know, that every deal like this. So we, usually, you know, in the first two quarters after closing a deal is a slightly accretive deals to us, but even after two quarters after closing a deal, so it will contribute like a 5-10% of our total business. So it’s quite like the KA deal. For example, when KA, we closed the deal in last August. But in this first quarter, KA contributed like 10% of the whole group’s business. So I think that’s a typical example or signature case for our M&A target. So I think with every deal, we expect like a 5-10% contribution from our total business.

Ramesh Misra: Okay, that helps, Jeffrey. In regards to the new industrial business, is the gross margin profile here pretty similar with the rest of Comtech, or is there any meaningful difference?

Jeffrey Kang: Actually, the overall, you know, it’s in line with our digital media segment. It’s kind of over 20-30% growth margin range, so it’s slightly higher than our combined, to the group average gross margin.

Ramesh Misra: Got it. In regards to the service business, it’s still under 5%. What kind of growth profile are you anticipating in services going forward? Do you see it basically as a 5% kind of a business, or do you think a point will come when it can break the, say, the 10% level?

Jeffrey Kang: I think, you know, the service business is mostly related to our, you know, the product selling. After product selling, we get one more, you know, maintenance business these days. So that’s why we don’t think it will become like another 10% business, and I think the growth rate for the service business is still, kind of, around 30% in this year. So that’s why in end of this year, so I think our service business could be around 5% of our total revenue.

Ramesh Misra: Okay. And you said that the industrial business is expected to be 5% exiting the year, or is it for the full year ’08?

Jeffrey Kang: Full year of ’08.

Ramesh Misra: I see. Okay, so in Q4 it could actually be running, at a run-rate well in excess of that 5% number.

Jeffrey Kang: Yes, correct.

Ramesh Misra: Okay. All right, thanks, Jeffrey. That’s it for now.

Operator: Our next question comes from Adele Mao with Susquehanna International Group. Please go ahead.

Adele Mao: Thank you. I have a couple of questions. First of all, it’s related to your gross margin. Jeffrey, with more higher-margin digital media contribution, do you expect your gross margin, the overall gross margin expanding from here above the 20% level for the year?

Jeffrey Kang: It’s possible. And even though a company, you know, we don’t officially give the gross margin guidance, but we, you know, the management team realize the gross margin is one of the very important, you know, financial metrics to our investors. So our internal strategy is we want to expand our gross margin slightly, you know, quarter-over-quarter and year-over-year like what we did in the past. So there is no magic. We don’t expect, like, a significant gross margin expansion, so we think our gross margin is around 19.5% to like 20% in this year. So we’ll be, you know, increasing gradually quarter-over-quarter. But taking, because we have a strong operating leverage, so you are going to see our operating margin improvement is much higher than our gross margin improvement this year.

Adele Mao: That’s great. Did you see, just during the last quarter, are there any margin pressure from the mobile handset or the telecom equipment areas? You know, these are typically lower-margin than the digital media business.

Jeffrey Kang: I think this, you know, the price pressure has been always there since day one, not just in the fourth quarter or this first quarter. So we have to deal with that, you know, the price pressure from our customers, from our suppliers, and from the market as well. So because of COGO’s business model as a design-win driven business, so typically, when we get a win in design-in, so in the, you know, product life cycle, we’re kind of being protective in terms of our gross margin because we, you know, we already fixed the price to sell to our customers, and also sometimes fixed the price we are purchasing from our suppliers. So that’s why, so we are certainly facing the price pressure for each of our customers, but we, as we did before, we’re still able to, you know, manage this business well and even the new solution and the new design wins to make sure we always have the high margin and the business from the new products to offset the certain other business that the margin-down to make sure the overall margin structure still looks healthy quarter-over-quarter.

Adele Mao: Okay, that’s very helpful. The other question I have is related to Mega Smart. Do you say that the size or the revenue is similar to the KA deal? I kind of missed that.

Jeffrey Kang: You know, because KA is a very successful kind of deal, you know, so it’s kind of in our the high-end range of the size of acquisition. So usually, as I’ve said, for every deal we expect like a 5-10% of our total business. If you say in COGO, if you think ’08 business […], our guidance is 290 million, so I think that 10% is like, you know, closer to 30 million, so I think that acquisition in terms of the contribution is anywhere from 15 to 30 million.

Adele Mao: Okay. Where is Mega Smart based?

Jeffrey Kang: Mega Smart base is a Chinese company and they have a couple of locations in China, mostly in Shenzhen, but they also have operations in Shanghai and in Beijing as well. So as we did in similar deals we usually acquire their parent company which is basically a, it’s a BVI (sp?) registered company.

Adele Mao: Okay, the current company is a BVI, also registered. Got it. Okay, thank you.

Jeffrey Kang: Thanks.

Operator: Our next question comes from Quinn Bolton with Needham and Company. Please go ahead.

Quinn Bolton: Good morning, Jeffrey, Yi, Frank. I missed the first part of the call so I was just wondering if you could go through just the split of revenues again, and then any comments you made on just, sort of, linearity of orders you’ve seen in the handset market. I think there’s been some commentary from some other participants in the food chain that March was a pretty good month for handsets in China but April and May have slowed down again, and just wondering if you had any comments about, just, month-to-month order patterns that you’ve seen both for the domestic business as well as the export business. And then I’ve got a couple of quick follow ups. Thanks.

Jeffrey Kang: Okay, in terms of the revenue, our revenue is around $60.2 million US, and the non-GAAP EPS is $0.19. So for this first quarter, I think, you know, the mobile handset is around 41% of our revenue. In the first quarter, we have like year-over-year growth like 37% and quarter-over-quarter like 13%, you know, comparing with last Q1 and Q4. So we think this result is quite in line with our estimation. It’s not a too surprisingly good number or it’s certainly not a bad number given we delivered like a 37% growth rate year-over-year.

So you’re right, and the March demand is quite strong, so that’s one of the reasons lifted the overall industry outlook in the first quarter. Coming to April, I kind of see that the market’s come back to the weak demand, so I think in general, and April’s demand is quite reasonable because of, you know, there is a golden holiday is a little bit shorter than what it used to be. But also, well actually, in the second quarter, the cell phone industry still can grow in a quarter-over-quarter like 10-15% quarter-over-quarter. So that’s why we still view this industry quite healthy, and even, you know, a strong demand, they’re already the biggest size in the world so if you think about a quarter-over-quarter on a 10-15% industry growing, as a growth rate, is a quite healthy demand to a company like ours.

Quinn Bolton: Okay, but, so April is okay ahead of Golden Week and then you’ll see, I guess, typical seasonality in China with May and June sales being a little bit typically slower after the Golden Week holiday but still net up 10-15% quarter-over-quarter?

Jeffrey Kang: Yes, correct.

Quinn Bolton: Okay. And then if you look at, you know, I know that you’re not very much exposed into the US economy and you sort of cited that as one of the reasons you’ve continued to grow. I’m just wondering, have you seen any increased concerns from your customers about the sell-off in the China securities markets? You know, either the slowdown in housing prices or the increasing cost of commodity items such as rice or oil, and, you know, are you seeing any impact on that in terms of consumer spending in some of the emerging markets you’re participating in?

Jeffrey Kang: You know, I think because we are in this part of the world, so I think everybody has something to impact others. So certainly, we see the US impact, but you know, it’s just in our industry, like you know, telecom infrastructure, mobile handset, and the digital media segment, happen to be the growth driver for the customer we are serving, is driven by China’s domestic and other new emerging market rather the US consumer [demand], so that’s why we haven’t seen this, you know, strong kind of negative impact to our business. But some, you know, like low-end manufactories in China which producing, like, the electronics to sell to the US market, that business facing a lot of challenge in this year.

But you know, the thing could have some material impact to us is China’s consumer spending. So you’re right. You know, China’s consumer spending certainly will be impacted by a couple of factors, for example, like the CPI, like the, you know, Chinese domestic stock exchange, stock performance as well as the real estate price. So I think right now, the Chinese consumer spending is still quite healthy. In general, the growth rate is not as high as it was in last fourth quarter, but it’s still, you know, because this whole market just started, so from our perspective, China’s consumer spending is still quite healthy. But because government placed quite a strict tightening lending policy, so that’s something, you know, it has a little bit of negative impact on some consumer spending. So we already factored that, we still, you know, can say next year, the Chinese GDP can grow 10%, consumer spending could be far beyond 10% in this kind of growth rate. So that’s why we are confident to our business will not be impacted by the overall economies.

Quinn Bolton: Okay, great. And then just last point on the Mega Smart, it sounds like since you haven’t closed that transaction yet, that we should, that Mega Smart is not included in the guidance raise that you discussed the press release going to 290 million of revenue and $0.92, right? That excludes the impact from Mega Smart?

Jeffrey Kang: Yes. You can think of that way because usually, when we, we only put into our guidance number after we finalize the whole deal, so that’s why, this time, we’re placing most of the [revenue will be coming from] organic growth.

Quinn Bolton: Okay, but as you said, Mega Smart, the first couple of quarters after you close, it will have more limited impact. It will have a larger impact in 2009.

Jeffrey Kang: Yes.

Quinn Bolton: Okay, great. Thank you, Jeffrey.

Operator: Our next question comes from James Faucette with Pacific Crest. Please go ahead.

James Faucette: Thank you very much. Just a couple of follow up questions. First, on the other acquisitions that you have in the pipeline after Mega Smart. Should we think about those also having similar timelines to really having an impact on your numbers, that is, that we should expect those to be accretive to earnings, say, 9-12 months after the acquisitions are completed?

Jeffrey Kang: Yes. So, I think the typical acquisition, we are, COGO targeting is not to acquire a company which already are very, very profitable. If that’s the case, the valuation is going to be very high. So we typically acquire a company which have, you know, which have the new products and a solution which we are able to utilize our existing platform and customer base to generate incremental value. So that’s our, you know, kind of, acquisition focus. So typically, after the acquisition, in the first one or two quarters, it’s a, certainly there’s no negative impact or diluted impact to us. But overall, so don’t expect too much contribution in the next, say, you know, three to six months. But after that, we’re going to see a more, like, explosive revenue growth after that because our, the design-in cycle typically have like a three to six months.

James Faucette: Okay, great. That’s very useful. And then just a, I guess, an accounting and business question. It looks like your days of inventory are about at the lowest, one of the lowest levels they’ve been in the last few years, but at the same time, your day sales outstanding on accounts receivable are actually at one of their highest levels maybe ever. Can you talk a little bit about what’s going on there? Is that just because of the linearity of the quarter, or are there other things at play there?

Jeffrey Kang: Well, we think that both our inventory and AR level is actually in our, you know, the normal range. Our typical AR level is around 90 days to, you know, 100 days. That’s a normal AR level. And the inventory level, usually it’s below 30 days. So that’s, you know, our normal business pattern. So you know, the AR, because we actually give this credit to mostly the blue chip customers, so we have a very good AR quality. The reason why sometimes the AR, you know, is higher or lower is mostly because of the revenue mix from the different customers. So if we generate more revenue from the tier 1 customers, our AR base is longer. But if we generate more revenue from the second tier customer base, AR base is lower because we don’t grant the credit line to the second tier or third tier customers. So, you know, that’s the typical pattern. In this quarter, because a couple of the key customers like ZTE had quite a slump in their revenue contribution, so that’s why our AR base is relatively high in the range of our mobile business.

James Faucette: Great. And then as far as, like, the inventory, especially the sequential takedown on that is, I mean, you feel like that’s within their normal range and you’re not really—so you’re not suffering from component shortages or anything like that that would’ve driven down inventories?

Jeffrey Kang: I think the inventory is slightly lower. You know, you are right, because in the first quarter, especially in the telecom segment, we are seeing quite a, you know, a strong demand for the, like, Broadcom related business. So that’s why, you know, we are seeing that the inventory level is relatively, slightly lower than what we, what our normal range. But in general, we do not see too much of unreasonable changing in terms of the supply or demand pattern in the first quarter, except (inaudible) such as the broadband-related business.

James Faucette: Great. That’s very useful. Thank you very much.

Operator: Ladies and gentlemen, if there are any additional questions, please press the star followed by the one at this time. As a reminder, if you are using a speakerphone, you will need to lift your handset before making a selection. One moment, please.

At this time, I am showing no further questions in the queue. I’d like to turn the call back over to management for any concluding remarks they may have.

Jeffrey Kang: Thank you. Thank you to everyone for joining. Our focus over the past five years has been on creating a pattern of sustainable and solid growth for the company. We believe providing long-term, robust growth has been much more valuable than having one or two high performing years, and we are optimistic about maintaining our consistent growth pattern. I would like to take this opportunity to thank all COGO’s believers, employees, customers, partners and long-term shareholders. We have provided COGO with the opportunities to deliver robust and sustainable growth in the past and going forward as we will move into the second half of 2008. We believe we are in the right industries and the right markets to be able to capture and capitalize on the tremendous opportunities in China. Management is committed to driving sustainable high growth in the next five years and providing significant returns to our shareholders.

Thank you again for joining this call. I look forward to talking with you soon. Thank you..

Operator: Thank you very much, sir. Ladies and gentlemen, this does conclude the Comtech Group First Quarter 2008 Results Conference Call. You may now disconnect, and have a pleasant day.

About Comtech Group, Inc.:
Comtech Group, Inc. (NASDAQ:COGO) is a leading provider of customized module and subsystem design solutions in China. The Company believes it acts as a proxy to China's technology industry as it works with virtually all the major ODMs and OEMs in China. Comtech leverages these relationships and combines their IP to create designs that Comtech then sells to electronic manufacturers. These designs allow manufacturers to reduce their time to market for new products and ultimately increase sales. Comtech Group focuses on the digital media, mobile handset and telecommunications equipment end- markets for its customized design modules while also offering business and engineering services to its large telecom equipment vendor customers. Over the last eleven years, Comtech has grown its customer list to include more than 200 of the largest and most well known manufacturers across the mobile handset, telecom equipment and consumer markets in China, covering both multinational Chinese subsidiaries and Chinese domestic companies.