Some highlights:

Cons (in no particular order):
1. "We expect the number of contracts contributing to gain share to be approximately constant over the next quarter." Convoluted way of saying they don't expect any new gain share contracts next Q.

2. Net Cash down about $4.7M ( $0.19 per share). Looks like working cap impact was $1.8M, o/w $1.3M was AR increase. CFO said $2.3M drain due to restructuring payments.

3. On service engagements (not gain share), decline of two engagements with two existing customers.

4. No guidance. I couldn't care less about guidance, but probably makes it harder for Wall St. monkeys to start pounding their chests about this one.

Pros:
1. Blew away Wall St. estimates at the top and bottom line. According to Bloomberg consensus, Sales est was 11.3M vs 13.9M actual (23% above). Non-GAAP EPS consensus was -$0.08 per share vs. actual of $0.02 per share. Put another way, Wall St. expected loss of about $2.1M, while "actual" was profit $0.5M.

2. Their near-100% gross margin gain share revenue was up over 100% q/q, and flat with last year. If something is growing, this is the area we want. An interesting note: I believe their biggest single quarter gain share revenue was on the order of $6-7M. So, even with a reasonable chance for continued growth on this revenue line, we're only 15-20% below the prior peak (in 4Q07...I think..getting this from my financial service, but haven't confirmed via historical 10Qs).

3. Again on gain share: revenue from 6 customers and 7 engagements, flat with last quarter. Maybe this one is in the "neutral" category (vs "pro" category).

4. On service engagements, signed new 32nm DFM engagement (pdBrix/Fabbrix stuff), extended a 32nm logic yield ramp contract, and extended another customer's 65nm yield ramp. Of these, think the DFM engagement is particularly interesting. I could be mistaken, but I think this is the first time they've expanded beyond IBM with the DFM stuff. Supposedly came about b/c a customer came to them w/ a problem (and a near-term deadline), and PDFS was able to demonstrate enough value here where a deal was signed in relatively short order. If I recall correctly, the IBM DFM deal was over a year in the making. We'll have to wait and see what kind of financial benefit accrues, and whether they'll add many more in 2010.

3. CFO's comments on cash balance:
"At the outset of the year, it was our goal to maintain our cash balances at a level consistent with our balances at the end of 2008 or approximately $40 million.

During the middle of the third quarter, we made a conscious decision to increase and accelerate the scale and scope of our cost saving activities above original plan. This will create long-term synergies for the company, but have had had a short-term impact on our current cash balances. We anticipate that the Q3 balances will be the low point of our cash balance going forward."

If correct, we should see cash building from here. With today's balance sheet, company has $1.27 per share in cash. Ended 2008 with $1.47. After what the economy, and their industry, has gone through in the past year+, burning < 14% of their cash was not a bad accomplishment. Let's see how quickly they can build from here.

Excluding restructuring payments of $2.3M, and working cap drain of $1.8M, cash drain would have been < $1M for 3Q.

(following post will have interesting snippets from Q&A)