Gross margin expanded 150 basis points (bps) year-over-year to 40.1%, benefiting from the shift to higher-margin products.

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But growth in these new markets has gone hand-in-hand with a shift towards lower-margin entry-point products, the firm conceded.

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He thinks product gross margin should expand slowly from 71.6% in calendar 2012 to 72.8% in calendar 2014, as mix shift away from high margin controllers seems to be slowing, and high margin software revenue picks up.

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