Good afternoon. My name is Ellie and I will be your conference operator today. At this time I would like to welcome everyone to the ADC second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks there will be a question-and-answer session. (Operator Instructions) Mr. Borman you may begin your conference.

Thank you Ellie. Good afternoon and thank you for joining us today. Bob Switz, ADC’s President and CEO as well as Jim Mathews, ADC’s CFO are with me today. Before we get started I need to caution you that today’s conference call contains forward-looking statements and that future events and results could differ materially from the forward-looking statements made today. Actual results may be affected by many important factors including risks and uncertainties identified in our earnings release and in the risk factors included in Item 1A of ADC’s annual report on Form 10K for the fiscal year ended October 31, 2007 and as may be updated in Item 1A of ADC’s subsequent reports on Form 10Q or other reports filed with the SEC. This earnings release can be accessed at the Investor Relations section of ADC’s website at www.ADC.com/Investor. ADC’s comments will be on a continuing operations and GAAP basis. Bob will provide an update of ADC’s business developments. He will then turn the call over to Jim who will cover the financial results and forward looking financial model guidance. I will now turn the call over to ADC’s CEO, Bob Switz.

Good afternoon and thank you Mark. I want to begin today by congratulating all of the ADC employees worldwide on the fantastic results delivered in the second quarter. 16% year-over-year revenue growth demonstrates that we have successfully positioned ADC in the high growth segment of fiber based communications networks and the wireless, coverage and capacity segment of the market. Our customers worldwide are building networks that deliver broadband services to their business, residential and mobile subscribers and innovative, high quality ADC products are at the heart of those networks. Our success in the second quarter can certainly be characterized as global. Along with continued growth in the United States we are especially pleased with our outstanding growth in other regions. In the second quarter sales outside the United States were 42% of our total sales which is in the upper range of where we have been over the past six quarters. In Europe, Middle East and Africa sales were up 26%. In Asia Pacific they were up 64% and in Latin America they were up 62%, all over the same quarter last year. This reflects in part our expansion into developing country markets which positions us well for future growth and provides some level of protection against short-term economic slow downs in other parts of the world. Part of our strong second quarter results reflect the integration of our LGC wireless and Century band acquisitions which are both on target to achieve our sales and cost improvement goals. These two acquisitions demonstrate that ADC can successfully select and integrate businesses that complement our strategic priorities while simultaneously improving or growing our company organically. Even as we continue to grow revenues we believe our competitive transformation initiative has ADC achieving significant competitive advantages and establishing cost leadership in our businesses. You’ll recall that the competitive transformation initiative is streamlining and building modularity into our product portfolio to speed delivery times to customers and improve our cost position through supply chain efficiencies. These efforts have produced steadily increasing gross margins over the past two years and an adjusted 36.3% gross margin in the second quarter. So again thank you to the more than 10,000 ADC employees worldwide for your dedicated and consistent efforts in improving our performance. I would now like to review ADC’s two major long-term growth drivers in the context of our second quarter results. ADC’s first key driver is the dramatic growth of fiber optic deployment worldwide. Consider these recent statistics driving demand for fiber. AT&T operates the largest fiber optic network in the world. The IP traffic on their network has experienced a 60% compounded annual growth rate since 2003. This growth does not appear to be slowing. Additional infrastructure will be required by AT&T and other carriers to meet this type of demand. We have not yet begun to see the real impact of mobile TV and video delivered to cell phones. Requirements for 100 gbps transmission speeds are expected in the ultra long-haul and long-haul networks by 2010 to keep up with the growth of IP traffic driven by video. Due to increasing bandwidth applications everywhere long-haul bandwidth traffic is expected to triple between 2006 and 2011 while metro and last-mile traffic is expected to rise five-fold. ADC is well positioned to participate in this growth. In the second quarter our global connectivity sales grew 22% year-over-year and 32% sequentially from the first quarter due to strong growth in Telco’s central office, cable TV head-end and data center deployments. In the first half of 2008 our global fiber bookings continue to exceed our expectations due to the demand strength in the America’s and Europe. While North America has been a strong fiber market for us we have been gaining momentum in 2008 with fiber sales to Western European carriers for FTTX deployments. U.S. carriers expanding in that region and wireless carriers building back haul for bandwidth demanding applications. One exciting fiber growth opportunity for ADC is fiber in the multiple-dwelling units. The MDU market is an extremely large opportunity. Verizon has about 25% of the wire line, access line and MDU’s. Telephone companies like Verizon each defend and serve these existing MDU customers with voice, data and entertainment services or somebody else will. At a global level this pattern is expected to repeat itself to a much larger extent as 50% of Latin Americans and Europeans and 80% of Asians reside in multiple-dwelling units. ADC has a comprehensive line of fiber connectivity solutions specifically developed to serve MDU’s. For example our rugged, reduced band radius fiber facilitates growth in this market as MDU’s have more physical bends and challenging environments inside the building walls. ADC is currently shipping re-terminated cable assemblies with our reduced bend radius fiber in volume to several major carriers for use in MDU’s. We plan to introduce several new products and product enhancements in the second half of 2008 that are designed to further ease and speed carrier deployments in MDU’s around the globe. Let’s now turn to ADC’s second key growth driver, wireless coverage and capacity solutions. [Inaudible] research estimates total in-building wireless coverage will grow from $1.5 billion in 2007 to a $3 billion market by 2010. ADC primarily participates in the active in-building segment of this market which is expected to account for nearly 70% of the deployment by 2010 and it is estimated to grow at 33% compounded annual growth rate from 2007 to 2010. As a point of reference our LGC products grew at 38.5% during the second quarter. This demonstrates why our acquisition of LGC Wireless was critical to our strategy. The LGC product line is an important part of ADC’s total enterprise offering bringing wireless coverage solutions to complement ADC’s structured cabling and connectivity solutions. ADC is also seeing an increase in hybrid opportunities where ADC’s existing products complement the LGC in-building offerings to provide complete cost effective campus and near building coverage solutions. For example, we recently announced that an ADC solution has been deployed to provide wireless coverage and capacity for visitors and guests of the new 50 story Palazzo Hotel in Las Vegas and the 1.1 million square foot Venetian Palazzo Conference Center and Ballroom facility. This is the kind of application where ADC’s complete product line comes together to offer a unique and comprehensive solution for our customers. As global users around the world become more dependent on their mobile devices building owners and wireless carriers must increasingly rely on these types of micro coverage solutions to meet the demands of their customers. To conclude, we have a focused strategy to serve high growth segments of fiber based and wireless communication networks where our customers worldwide are investing to deliver broadband services to their business, residential and mobile subscribers. By focusing on these high growth segments we have been able to outperform expectations and deliver consistently strong results as we did in the second quarter. I’ll now turn the call over to Jim who will comment on our specific financial results. Jim?

Thanks Bob and good afternoon to everyone. It is my pleasure to share with you the highlights of our very solid second quarter operating results. These results continue the strong operating performance we have achieved for six straight quarters and in fact represents essentially five years of continuing improvement. Our second quarter sales were $403 million came in stronger than expected. Sales were up 16% year-over-year and 19% from the first quarter of 2008. Excluding sales from the LGC Wireless and Century Man acquisitions our second quarter 2008 sales were up 6% year-over-year and 17% from the first quarter of 2008. Gross margins remain strong at 36.3% which takes out the effects of a $3.5 million LGC purchase accounting adjustment. This 36.3% compared to 36% in the first quarter and 34.5% in last year’s second quarter so on an apples-to-apples basis year-over-year our gross margin actually improved by 1.8 percentage points. GAP diluted earnings per share was $0.14. This included $0.25 per share of charges that I will detail later on. Total cash provided by operating activities from continuing operations also was strong at $50 million in the quarter and it has been $132 million for the past 12 months. I’m going to go into our consolidated earnings in a bit more detail now. As noted, our GAAP diluted earnings per share from continuing operations was $0.14 in the quarter compared to a $0.24 loss per share in the first quarter and earnings of $0.73 per share in the second quarter of last year. This quarters $0.14 earnings per share includes $0.25 of charges comprising of the following: $0.12 for a non-operating securities impairment, $0.03 for an LGC wireless purchase accounting adjustment noted earlier, $0.01 for restructuring charges, $0.07 of purchased intangibles amortization and $0.02 of stock option compensation expense. Recall that the prior quarters to which we are comparing also had some notable items. For example the first quarter of 2008 loss per share of $0.24 included a $0.43 impairment for non-operating securities. Last year’s second quarter earnings of $0.73 per share included a $0.43 non-operating gain from the sale of stock in Big Ben Network. As noted, gross margins during the second quarter were very strong at 36.3% after adjusting for the $3.5 million LGC Wireless purchase accounting adjustment. Some gross margins continue to outperform expectations which is largely attributable to the significant progress in our competitive transformation initiatives. Selling and administration expense was $78 million in the second quarter compared to $74 million in the first quarter. Research and development was $22 million in the second quarter compared to $20 million in the first quarter. The higher sequential operating expenses in the second quarter were because our recent LGC and Century Man acquisitions were consolidated for the full second quarter compared to only a portion of the first quarter. Moving on to working capital, DSO’s were 56.1 days and improvement from 58.6 days in the first quarter of 2008. Second quarter inventory turns were 5.3 times up from 4.4 times in the first quarter. We generated $50 million in total cash from operating activities from continuing operations in the second quarter and $132 million for the 12 months ended May 2, 2008. Depreciation and amortization expense was $20 million in the second quarter which is the same as in the first quarter of this year. Property, equipment and patent additions produced a net expenditure of $13 million in the second quarter versus $7 million in the first quarter. ADC’s total cash, cash equivalents and available for-sale securities were $899 million as of May 2, which is unchanged from February 1. The $50 million provided by operating activities in the second quarter was offset by $13 million for capital expenditures, $16 million in LGC debt payments and an $18 million impairment on available for-sale securities. Based on our first half performance and outlook for the remainder of the year we are raising our annual sales guidance for 2008 to a range of $1.520 to $1.540 billion which would be up between 15-16% over 2007. We believe that sales in the third quarter of 2008 will be approximately flat with the second quarter that we just reported. As in the past three years we expect fourth quarter 2008 sales to be somewhat lower than the third quarter as customer’s capital spending near the end of the calendar year. In 2008 gross margins are expected to average around 36% however they are expected to rise and decline with sales level volumes from quarter to quarter. As a result of our large deferred tax assets which are substantially reserved our outlook presently assumes an effective tax rate of around 10%. Based on the annual sales guidance estimate of $1.52 to $1.54 billion and subject to sales mix and other factors, GAAP diluted earnings per share from continuing operations in 2008 is estimated to be in the range of $0.31 to $0.39 per share which includes the following estimated charges net of tax: The purchase accounting adjustment related to LGC Wireless of $0.03, amortization of purchased intangibles of $0.29, stock option compensation expense of $0.06, restructuring and operating impairment charges of $0.02 and the impairment of available for-sale securities that we reported this far of $0.54. This guidance excludes potential future restructuring impairment charges, incremental purchase intangible amortization, certain non-operating gains or losses or further adjustments of the deferred tax asset valuation reserve of which the amounts are uncertain at this time. So with that brief summary of our financials I’ll turn it back to Bob for a few final comments.

Thank you Jim. In summary I just want to reiterate how very pleased we are with our second quarter results as we further bolster the momentum we have established over the past year. Our performance over the past six quarters has grown operating income at a rate well above sales as well as generating strong cash flows. Our strategy is our focus on high growth segments where our global customer base is investing in their networks and our results are proving that we can successfully execute on those strategies. Once again I’d like to thank and congratulate the entire ADC team for these outstanding results over the quarter and the first half of the year. We’ll now open the call up for questions.

(Operator Instructions) Your first question comes from the line of Steven O’Brien – JP Morgan. Steven O’Brien: Could you talk through the…it seems like a lot of strength this quarter came from your fiber business. How much of that would you attribute to roll outs in urban areas, MDUs and maybe could you discuss how the metrics have changed for ADC’s potential revenue per home relative to its previous expectations now that carriers are moving into these urban markets?

That is a mouthful and if I don’t answer it all remind me what I missed. I think first of all the strength in fiber is not yet coming from this urban environment. That is kind of the beauty of our current rate of growth. It is really coming mainly from central office related upgrades and the overall upgrade of the fiber networks. We see the second item and also the strength we are seeing is not only in the U.S. market. We are now starting to see strength coming out of EMEA and I think you have heard me say in the past that was a target opportunity for us we have been working on a couple of years post-quota acquisition and we have finally begun to get traction in the European market particularly with some of the competitive carriers. We are really seeing this mainly right now focused on the central office side of the network. Down the road the MDU market, the urban market for the delivery of broadband is going to enhance at a very minimum sustain and extend the fiber growth rate that we are experiencing. Steven O’Brien: I think in the past you talked about $60-120 per home.

That has not changed. As you recall that is the blend that we use for the combination of fiber to the node and fiber to the prem builds with ADC’s fiber to the nodes participation near the lower end of that range and the FTTP being near the upper end of that range. Steven O’Brien: I guess what I’m trying to get after is if there is a shift to more urban areas especially in international markets could that skew towards the higher end of that range?

I would say probably not but what it will do is certainly extend quite significantly the market growth opportunity within that range. Steven O’Brien: A quick one on the guidance. The non-GAAP EPS guidance adding back the charges for full-year 2008 looks like $1.25 to $1.33. It seems like there is either a major element of conservatism or potentially higher expenses, mainly operating expenses I guess if gross margin roughly stays in the 36% range. Is your forecast assuming sort of an up tick in operating expense?

No, not necessarily. Keep in mind we are still going into the second half with the strong outlook we had before the second quarter results. Essentially we have adjusted our outlook to incorporate the upside that we have had and we’re still looking forward to fairly solid second half of the year. Obviously we don’t build into our forecast everything that we could possibly think would go right because the Board doesn’t allow for that but from where I think you guys were in your estimates for the second half we certainly haven’t pulled those back.

Steve I might just add one thing. I think one thing that may not be obvious is that non-operating income is down some certainly versus 2007 and is actually declining through the year and that is simply a matter of interest rates coming down. With all the cash we have got on our balance sheet just having the interest earnings component of non-op come down is $2-3 million a quarter.

The next question comes from the line of Kenneth Muth – Robert W. Baird & Co.

Just kind of on a quick housekeeping, non-GAAP tax rate what would you kind of recommend us looking at going forward?

The non-tax GAAP rate?

The non-GAAP tax rate.

We’re working off a 10% tax rate generally. I mean there are certainly some items there…I would say probably a majority of those items are going to hit a U.S. entity that are below the 10% at this stage.

As in zero because we pay no U.S. income tax on the tax credits.

There are a lot of kind of other items there that kind of bridges you from the GAAP EPS and the non-GAAP. I was trying to come up with…you give a non-GAAP tax rate of 10% or a GAAP tax rate, sorry, at 10% and non-GAAP came up at about 3.5% this quarter. It sounds like it is fairly consistently in that range give or take a little bit.

It is certainly not zero all-in on the non-GAAP items but we are well below the 10% and I would think on a blended basis you’d be coming in sort of mid single-digits. I haven’t done that math but that is probably where we’d come in.

When we do model it out on our own internal adjusting models it does come out to be a tax rate around mid single-digit percentages.

On the fiber connectivity can you just give us an idea of kind of what were the most popular products this quarter and was there a significant change in mix or just kind of more volume of the same thing?

I’d be foolish if I didn’t take this opportunity to say all our products are popular. But quite frankly I think we still have the same drivers in our product line. All of our central office fiber products were obviously popular in the quarter. FTTX was popular in the quarter, on track. We did have some pick up in the data center part of the business as well so our products targeted on the data center were also popular in the quarter. Of course I mentioned earlier our in-building wireless you had asked specifically about connectivity but in-building wireless obviously did well.

On the international marketplace is the product portfolio different from what is going on in the U.S.?

A little bit but not too much. Of course in mainland China we are operating primarily off of the Century Man product portfolio for the most part but in the balance of our international business I would say it is essentially at this point in time the same family of products.

The non-U.S. stuff in the international marketplace how long do these trends do you think kind of last? We’re in kind of the rollout, but just getting started or kind of mid-cycle?

My feeling on this is we are kind of at the beginning of a cycle internationally. In terms of the broadband fiber rollouts they really are quite frankly in their infancy. So they really haven’t contributed in a large way. We expect them to be much more contributory in the future. What we are seeing the benefit of is some market share pickup and some gains in our core fiber business outside of the United States. We have also seen a demand in certain geographies for our legacy copper products for various applications. As I mentioned on the front end of the call I think the good news is there is a certain element of growth yet to take place in the market and internationally FTTX is an event that will happen but hasn’t happened in a big way yet.

The next question comes from the line of Tal Liani – Merrill Lynch.

My first question is again going back to the trends in the fiber business that business has been lump in the past especially in Europe where there were a couple of orders for deployment and then it fell back. In the U.S. deployments seem to have sort of come to a stabilization. I understand the MDU opportunity is new. My real question is how do you get visibility around the FTTX business 2-3 quarters out? I understand the longer-term secular drivers but what about visibility?

The best way I can answer that is probably the following. First, in the fiber business non-FTTX, so central office, we have been moving along now for quite a number of quarters at a very healthy clip at addressing the growth in that market and it really has not been lumpy per se. In Europe it may have been lumpy for some other players but given that we are just beginning to get the traction we were looking for, there is really not a historical pattern on the fiber side that we can relate to. It has really been a significantly improving environment for us there. In terms of visibility around FTTX, we have been working as you know particularly since the start of last year and through this year very close with Verizon. There have been a number of changes in how we go about working together and internal tools that have enabled them to control their business better. I think what we rely on is we essentially have a feel for our contracts, our market share allocations and we work with them closely to try and establish where we are and where they are in terms of the needs to ship against those contracts and how they are attracting in terms of their success in deployment relative to timing and inventory needs on their part. So not a perfect world but certainly a much improved world from where it has been a couple of years ago.

There has been very good improvement in gross margins and I’m wondering if you will stable at this 36% level or what are the drivers to make it go higher or lower from these levels?

I think for now we would be very happy as a company if we could solidify around the 36% for a period of time. I think it is our view that we probably will. What could affect those up or down? Certainly volume could play a role; mix of product in the quarter could play a role. Those are the two things that could move those up or down in a quarter. Over the longer haul I think that other factors continue to come into play. That is the future contributions that we would hope to get out of our competitive transformation program. So to put that in perspective with this benefit we are seeing this year has been about 18 months or so in the works. For those that have listened to calls from that era we said we would expect the benefits to occur in about 18-24 month time frame. Indeed they have. The next trench again will come from other significant efforts that we have underway and will take, some money over a period of time to implement and we would expect to see some benefit from those efforts in a future period. But in the near term period we think holding around that 36% range is a very nice place to be for ADC.

One last one, about half of your sales are coming from copper and enterprise connectivity which have not grown much. What is going to turn that down? Is it sort of on the copper side, the mix shift to fiber and I guess on the enterprise side is it more macro or are there other elements and what is going to turn around that business?

Our enterprise sales in general have been up so we are experiencing growth at the enterprise. Our core central office copper products we have been saying for a long time that is a part of our business we expect to decline over time and that is something we have cited on a number of occasions when it comes to our overall growth rate. The areas that we are investing in are growing very, very significantly and so to some extent we are still in a transition from a portfolio standpoint away from some of that legacy business over time to the newer and higher growth product families that will serve the next generation applications in the networks. So, the one good thing I can say about the core copper business is it certainly has never declined yet as fast as we normally anticipate it will. So, it has managed to either grow a little or hold its own for the past couple of years in spite of an obvious transition to fiber. Now part of the reason for that may be when carriers have a huge amount invested in their copper networks as they do and they need to do some things right away to make enhancements to capacity to serve their customers and they are not ready to transfer to fiber they install our copper to serve those needs. Certain of the international markets particularly in Latin America still make significant use of the copper plant and we have seen as we have mentioned in the past applications around wireless back-haul that continue to support the business. Clearly it is a business that will slow and has slowed, but a business that has served ADC well and will continue to serve us well over the next several years. But we do expect to get our growth over other parts of our portfolio.

The next question comes from the line of Nikos Theodosopoulos – UBS.

First of all if you can give any commentary on the 10% customers and did you see as part of that within AT&T did you see a rebound in the Bell South/Cingular part of that business? The second question would be there is an expectation now right or wrong we’ll see the U.S. dollar will stabilize and appreciate going forward. A lot of the stuff sold by U.S. companies have been on sale with the U.S. dollar depreciating over the last year or so. Do you think if the dollar appreciates it will have any impact on your international demand? Do you view that demand as somewhat independent of what has happened to the dollar over the last year or is there some correlation with some of that slow dollar with to pick up?

First of all let’s start with you wanted to know about Bell South and Cingular. Yes…

I just wanted to get a sense of who the 10% customers were and I think as of last quarter you hadn’t seen any year-over-year growth in that part of your business.

The only customers above 10% were Verizon and AT&T. Other than that we don’t have any 10% customers. In terms of the dollar, Nikos, I don’t think in the future a strengthening dollar is going to have a dramatic impact on our competitiveness in those markets. Many of our products, in China particularly we are producing our product in-country so it is not going to be a competitive issue. The only area where we might see a little change would just be simply on translation on currency but not on competitiveness.

On the 10% customers do you have the actual percentages?

Yes, for the quarter?

Yes.

Verizon is a little over 17% and AT&T is a little over 15%.

The next question comes from the line of Paul Silverstein – Credit Suisse.

First off just on the 10% customer question can you give us some sense between with the Verizon FiOS project if they trust with the bulk of the 17% with Verizon to change homes passed and homes connected given Verizon is in that build out. Can you just give us a sense what proportion of revenue from Project FiOS for you is the homes passed versus the homes connected and how you expect that to transition over time?

Right now the majority of our business is in the homes passed category which obviously would make a lot of sense because as this network builds out the actual deployment, franchise rights, all the things they need to do and the ramp to take rates they need to do with their customers, over time that will transition and probably shift to something in the neighborhood of 50-60% sometime through 2010, the end of 2010.

Homes passed is 50%?

Correct.

Given they have done one million homes to date I trust in the territories where you’ve gone into homes passed and the homes connected piece you are getting homes connected?

Yes. One of the things that I have pointed out in the past is given the success we have had in deploying our fiber distribution hubs and other products as take rates come up the more of those you have deployed in the network the more success base you can get over future periods.

Are the margins different on the homes connected piece and then homes passed?

Somewhat.

Better or worse?

A little better.

Going back to the EPS question if you all do…let’s assume you do flat consistent with your guidance for Q3, is there any reason…I understand there is variability with respect to the gross margin line dependent upon product mix, etc. but is there any reason why EPS would be meaningfully different? To put it another way should we expect opEx to be consistent with the Q2 level since that is the only real variability at the EPS line would be on gross margins?

I think more or less that is probably true. I’ll let Jim provide a little more detail around it but I think directionally that is correct.

Yes, but with one caveat and to the point I made earlier. You would expect opEx to be flat going forward although the second quarter was the first quarter that we built in the full LGC and Century Man so clearly it is up from Q1 to Q2. We expect Q2 to be generally fairly flat, up a little bit perhaps. But then where we take some EPS out again is below the line in the interest income line because we have seen a slow emergence of the lower interest rates impacting our interest income.

Jim, on interest rates you are generating what 6.9-6.8 in that range?

That is probably about accurate.

If I just do my own math it sounds like you are going to do the first three quarters of the year depending on where you do gross margins that is going to be somewhere in the $1.00 to $1.05 range. If in fact that is the case that means in the fourth quarter to hit your guidance it is somewhere in the order of $0.20 to $0.30. I don’t know if there is a question here but it just sounds…I just want to make sure this is just a function of you being conservative as opposed to something being wrong in the business in the back half of the year. I trust this is just you being conservative. It sounds…

As I said earlier, Paul, the revenue that is incorporated into our guidance certainly reflects the revenue trend that has been out there for some time which is the second quarter potentially having the third quarter peak a little bit above it and the fourth quarter off a little bit. So for the most part we had our upside in the first half and we are on track to meet what we thought we were going to do in the second half of the year. On top of that of course we want to be reasonable in our expectations. I think everybody is aware that there is so much potential of a Verizon strike. We don’t know that is going to happen. We don’t yet see any recessionary effects in our business but six months is six months. Essentially if you look at the numbers there is certainly no indication in those numbers that we expect anything bad to happen.

Understood. It just sounds like the fourth quarter is a lack. Let me move on. Operating margins. Your professional services turned positive which is the first time I can recall in quite some time where you actually had positive margins in that business. The question is this a one-off or is this thing actually going to start generating some bottom line? Secondly, on the network solutions business I know the wireless LGC piece is new but what should we expect going forward in terms of that going from a loss generating business to becoming incremental to the bottom line? Then I have one more question.

I’ll answer the last one and I’ll let Jim go back and answer the first one. As you recall our strategy when we acquired LGC one of the things we stated was that we did expect to move into profitability in our network solutions business as the wireless products continued to ramp. So I would still maintain that with volume we will move that business into an incrementally contributory mode. So right now it is still ramping. We haven’t got all of that benefit but we certainly expect to see that business become profitable.

Can you give us an idea of at what volume that business becomes profitable?

Paul I would say remember that we have a fair amount of new amortization of intangibles built in. So if you are talking about a fully allocated pure OI basis that is a ways out. I will tell you if you look at it on an adjusted basis where we take out our intangible amortization we certainly have a line of sight to break even by next year.

On the professional services piece, do you expect that to continue to generate some profitability albeit long?

Let me just talk about that. We are pleased with the progress that you have noted in the professional services business. One thing that we have done pretty dramatically this year is we have restructured our EMEA business which is where a disproportionate amount of the OI loss has been in the past. They have done a really terrific job of getting that to break even. I would say that going forward we think that this can be at least a break even business that we are seeing today. Obviously there are variations going forward but we have a line of sight now to making that an actual contributor but I would say that the break even is what we have bottled this year based on the actions we have taken and we do believe that is sustainable.

Keep in mind Paul the break even is on a stand alone basis and doesn’t account for the product pull through.

You would argue Bob that it does pull through product and that is why you are still in that business?

Absolutely. It pulls through product and it is very strategic in the eyes of our customers and also it is part of what we bring to our customers as our total solution.

I know you haven’t given this in a while but I was hoping you would share with us the split between your FTTX business and your core CO fiber business?

It is about 50/50.

I’m going to come back and say the core fiber business because of growth here, the year-over-year growth has been so strong that it is now probably closer to 55/45.

Of the 45 can you give us some sense…how much is non-Verizon of the FTTX? Bob you mentioned in your prepared remarks that you are finally starting to see the needle move in respect to non-Verizon FTTX build outs in Europe and elsewhere. Can you give us some idea for where you are at right now in that non-Verizon?

FTTX business outside of Verizon?

Correct.

This is a real swag but I would say something in the 40% range would be non-Verizon.

40% of the 45% is non-Verizon?

Right.

Can you tell us how much that was up either year-over-year or quarter-over-quarter?

I just don’t have that material in front of me Paul.

The next question comes from the line of George Notter – Jeffries & Co.

A question on the integration of Century Man. It looks like it was $8 million of revenue here in Q2. I think below the annual run rate that those guys were generating prior to the acquisition. It’s kind of funny; my impression is that China is fairly active right now and having the Olympics. Did you expect to get more revenue out of Century Man and how do we look at that business right now and when do we might expect to get that business back to break even or better?

I’ll answer part of it and I think Jim can handle part of it. They’re actually on target. Pretty much on target with the revenue plan that we had when we did the transaction. We weren’t expecting a big pop because of Olympics because quite frankly a lot of that has was already behind them. That was already money spent. That was never part of our expectation with Century Man. What is part of our expectation was getting a long-term position in the Chinese domestic market where we could grow our share in China and then take a low-cost platform to other adjacent markets and get much greater participation over time in some of the competitive emerging markets where growth rates over time are going to be much higher than Western Europe and the U.S. So Century Man was not a short-term investment made for short-term results. Although I will saw they are meeting their short-term results. We also said that we were going to add some infrastructure costs there to be able to assure that we comply with all the regulatory agencies and bodies we need to comply with and also to provide the appropriate level of business control and also build out a little bit to those market platforms to take advantage of growth in both the Chinese markets and related markets. So from our perspective Century Man is very much on track.

I would add two factors. I agree with Bob on the numbers. Remember, Chinese New Year took the very end of Q1 out and a big 10 days or so out at the beginning of Q2 so sales were almost nonexistent during that period of time. Obviously there has been a very significant disruption as the result of the earthquake as well. So we’ve seen some slow down there but for the full year it is on track.

On margin structure, you grew the top line 6% year-on-year and the organic is up 16% year-on-year. The operating margin went from 11.2% to 11.7% and certainly 11.7% is impressive but is it logical to assume we should get even more margin expansion under that kind of top line growth here given how manufacturing centric your business is?

I’d have to go back and look at your calculation. I think one of the items we had in there was an adjustment for inventory required under purchase accounting. So when I actually sort of do the fully adjusted it was about 12.2% so we were actually a bit above 12% for the quarter. The only thing I would add is we are seeing leverage but as we have stated publicly before specifically as it relates to LGC and Century Man, Century Man was not done with the expectation there would be specific cost synergies. In fact because of the operating environment in China we added opEx in there to make sure our compliance was locked down and rock solid to U.S. standards. In terms of LGC that is a high gross margin but also high opEx model in general. Those gross margins are well above our corporate average but also because of high R&D expense you have high opEx there. If you just look at the growth from the LGC and Century Man the normal leverage that you might get out of that top line growth is not evident just because of the nature of those two particular acquisitions.

The next question comes from the line of Cobb Sadler – Deutsche Bank.

Can you talk about your positional fiber business? You said it was stronger in the quarter. How sustainable is that? Also, that business’ growth has been stronger in Q4 whereas your FTTX business has been not so strong in the second half. Do you think that Q4 could be a little bit better because your traditional long-haul fiber business is strong?

I can’t get to specifically my expectations right now for the fourth quarter but I can address the first part of your comment. I do think the growth in core fiber is certainly sustainable given all the trends that are evident in the marketplace. The fiberization of networks everywhere is underway. We talked about the significant increase in capacity requirements. So we see the move to fiber and related growth being sustainable certainly for the foreseeable future. Pegging down right now where it would be in this year’s fourth quarter I’m not in a position to do that.

The margin profile associated with the core long-haul fiber business that is probably higher than the corporate average?

Correct.

The next question comes from the line of Jack Monty – Lehman Brothers.

From an outA standpoint I’m just curious how the environment looks? Is it more target rich than say last year at this time? Valuations have come down but maybe more companies that meet your region or product criteria? Maybe you could just expand on the thoughts with regard to that?

Sure. You know for us I wouldn’t say it is more target rich because targets don’t just pop up. We study the market for a long time and when you see us do an acquisition it is not something that just popped on our radar screen. It is something that has been in the works and has been discussed and analyzed for quite some period of time. In that context there is nothing out there that is totally new to us in terms of an opportunity. But to put a different perspective on it the real issue for us always is are those companies that we have identified as attractive and desirable are they actionable for us? If the question were rephrased, is it a more actionable environment or less actionable environment I’d say it is probably about the same in terms of actionability. As you know we have put fairly exacting standards on the types of acquisitions that we are interested in. So in terms of valuations I would say expectations are probably modestly better in some cases but not dramatically. I think there is still a false sense of what valuation should be out there in the minds of some companies but they have not yet really adjusted totally to reality although there has been some modest improvement. That is always a hurdle particularly when you are dealing with in some cases when you are dealing with private, venture backed companies. In terms of more established companies probably still an issue but not as much of an issue.

The next question comes from the line of Brian Coyne – Friedman, Billings, Ramsey & Co.

First of all I was hoping you could give us a bit of an update on what you are seeing on the enterprise side. Demand specifically. It looks like you are flat year-over-year and I was wondering if you can just give us a sense as to what your customers are telling you and maybe some differences domestic versus international and whether you can see growth for the fiscal year? Then I have a follow-up question.

I’ll let other and Jim chime in on part of the question. In general we expect to grow our business. Where we are seeing signs of help are certainly in the data center growth. We’re also seeing positive signs in some of our verticals. The gaming casino, destination resort business is still attractive. Oddly enough, even though one might think it, we have not seen yet significant downturn in the financial vertical. We’ve seen a little pull back by one or two but in general we have not seen our activity in that vertical slow down dramatically or change course. So pretty much across the board in terms of high-end activity we still see a fair amount of potential this year for our enterprise business. It is hard to break it out geographically because you get into a country by country kind of analysis. This year the U.K. might not be doing so well as they seem to be in an every other year cycle. Australia is doing good. Other parts of Asia are doing good. As you go through each country it is very significantly different circumstances in each one. When in aggregate we expect the business to grow this year.

I’ll put Mark a little bit on the spot here. You spoke a little bit last week about some very early stage efforts of the company to focus your competitive cost transformation gun sights on the opEx line against looking over the next three years. I was wondering if you could speak to that a little bit. If you are heading close to the 36% gross margin sort of number rather than 34% do you need to sort of re-think or perhaps raise or stretch for a 14% operating margin?

I think right now we are very happy maintaining the 14%. We drive the company to 14%. I can almost assure you we will raise it to something else. But I like to achieve the original goal before I raise it. What I’d like you to understand about the opEx side is this is not a head count reduction activity. We have done all that. What we’re doing inside the company is looking across the enterprise at all of our systems, processes, procedures that are cross functional and used across the enterprise globally and we’re looking at over a period of time identifying where we can make significant changes in those activities that will result in substantial operating costs and more efficient global scalability over time. So that is where the bulk of the work is focused on and quite frankly that is normally the activity that gives you the most benefit from a sustaining point of view.

The next question comes from the line of Christian Schwab – Craig-Hallum Capital.

The Cingular/Bell South question that was asked earlier, I don’t know if you answered that. Do you see an up tick sequentially from Q1 to Q2 and inline with Q1’s conference call do you still anticipate that business to accelerate throughout the year?

From Q1 to Q2 we saw a pick up in Bell South. We saw a pick up in Cingular as well. If I look at it on a quarter-to-quarter perspective Q2 2007 and Q2 2008, Bell South was not up on that basis. So it is kind of mixed but certainly between the two quarters we saw a pick up. If I look at it on a full-year perspective, year-to-date 2007 and year-to-date 2008 Bell South is still significantly behind in their spending. Cingular is up a little but it is not a big absolute number.

So you would anticipate the initial signs out of AT&T regarding those territories, the Bell South and Cingular network, would be a recovery from just maintenance spending so that could be a pleasant positive surprise in the back half of the year?

I was distracted for a moment, the very first part of your question was?

Just the fact it would appear that if revenues are not up yet and you guys talked about that accelerating throughout the year the question was that Cingular and Bell South could be a positive surprise in the back half of the year. I would assume that you guys are assuming since you haven’t seen a big recovery just to continue as modest improvement but there could be something more significant. Is that fair?

I’m expecting there to be modest improvement. I don’t really expect a dramatic improvement until they begin to deploy light speed in that region. I don’t think light speed is going to start in any meaningful, obvious way this year. So I think what you are going to see and this is just my opinion…I think you are going to see a continuation of efficiencies being driven by AT&T out of the Bell South territory. I think there will be an up tick in spending but I think that is more going to show up in 2009 than the last half of 2008 although I would expect a small pick up in the second half. If I’m wrong then it will be upside.

On the bendable fiber to MDU’s and then Verizon’s announcement that the city of New York and its five Burroughs could begin to be deployments could begin there as soon as the July/August time frame, our checks kind of suggest that you are positioned currently in a better situation for that product versus your competitor. To the question, I think at the very beginning of the call, would you anticipate that your blended mix of 50-120 fiber to being around 120 that the average mix of that business could move higher and that is what would be driving growth given your competitive advantages in that product. Would that be fair to say?

I wouldn’t train it that way because it is too difficult to predict where in that range any one effect is going to take you. I would agree to your first comment that we are very well positioned to enjoy that business. But I would say what it does is it certainly contributes along with whatever the overall mix of stuff is that we are selling in terms of FTTX and it certainly contributes but I would say what it really does more than anything else is continues to expand our market share within Verizon and other places and enables us to forge a leadership position with our available fiber not just with Verizon but with all the other carriers that are likely over the future to deploy fiber in MDU environments.

The next question comes from the line of Simon Leopold – Morgan, Keegan & Company.

I wanted to see if we could look at some training questions regarding your biggest customers. Bob you earlier mentioned or eluded to the Verizon strike question. Given that they have a contract expiration in August, I’m not asking you to predict the strike or not but the general behavior around a contract expiration may lead to some accelerated orders and I’m trying to get a sense of how much of that you might have seen in the April quarter and how much of that you think is affecting your next quarter?

Good question. Actually I don’t think we have seen any acceleration of a meaningful nature. Verizon has pretty much this year been pretty tight on procurement. They have got their systems I think and methodology to a point and quite frankly they know they can rely on ADC for pretty quick delivery so my experience so far this year is they have been operating more on an efficient mode, not over-procuring. So if something like that were to happen I would expect it might happen a little bit closer to strike time if there indeed is going to be a strike. But at this point we have not seen them stockpiling inventory.

So if you look at the sequential jump in the fiber connectivity business what would you point at as sort of the biggest non-Verizon source of that jump?

Probably Cingular.

Shifting gears and right off of that question you have talked in the past about the opportunity for fiber in the home is more lucrative in terms of revenue versus fiber to the node. Yet, your revenue from Verizon and AT&T are pretty close. I guess I’d like to try to see if you can explain a little bit more about why AT&T is working out so well for you guys?

Essentially AT&T a lot of that business are other families of products and services. Our presence with AT&T is in terms of their mix of fiber to the node and fiber to the prem about 95% of their forecast to build is fiber to the node, 5% is fiber to the prem where we participate though a lot of our business with AT&T is in other products and services.

So maybe should we think about one of the good aspects of it classic AT&T the enterprise initiatives?

Long distance, the classic AT&T. Clearly we are set to participate in some way in the FTDN end part of their deployment. It won’t be obviously as big as FTTP with Verizon and we’ll participate in FTTP but it won’t be as big as Verizon because they are not doing as much of it. So we’ll be a player. Then we also enjoy a lot of other business with AT&T.

The next question comes from the line of Ray Archibald – Kaufman Bros.

On the wireless coverage business, can you give us a sense of the sort of mix of U.S. and non-U.S. and what the respective growth outlook is for those markets? Then I have a follow-up.

I don’t have that level of detail of information in front of me on that specific product line but let me take a guess at it. I think in the current quarter probably more of that would have been domestic than international. I can’t put an exact percentage on it. However, what I can say is that there is a lot of international demand building for those products and part of the value of the acquisition as we mentioned in the past is our ability to use our global channels in concert with where they had channels to really leverage that product internationally. On a future basis I think we’re going to see good success across the board and increasing participation internationally but I think in this quarter more of that business was domestic than international. I just got a statistic. I think I was correct. About 60% domestic and 40% international.

A demand outlook would be similar or do you expect that international demand would be a little higher?

That’s a little harder to predict because you get a couple of big pieces of business in the quarter internationally and it could start to (audio break) so I would say for now I’d say that is probably a reasonable mix. As we move into midway through 2009 that may change.

The next question is on the Century Man. I think Jim you had mentioned that the earthquake has been or is expected to be somewhat disruptive given the damage. As that settles down is there likely to be some catch up spending as they rebuild the affected network there and is that something that could perhaps be later this calendar year or is that something more of a next year type of expectation?

That is pretty tough to say. Obviously that whole market is very fragmented. As you know Century Man’s run rate at the time of purchase was about $40 million annually so whether that provides a significant upside or not it is kind of tough to call at this point. Our nearer term concerns around that been making sure that our facilities and more particular our employees are taken care of and okay. Also we have actually tried to be quite proactive in terms of providing some aid in the forms that we are able to both monetarily and through technology to those victimized areas. It would be really tough in terms of future sales to say we are going to expect a bounce back from that.

Last question, dealing with the enterprise business specifically the enterprise fiber. Can you give us a sense as to how much of that business is upgrade of existing data centers versus new data center builds? Or is that too much granularity?

It is probably too much granularity but I’m guessing more of it is coming from new.

Ellie we will take one more question.

Your final question comes from the line of Todd Kaufman – Raymond James.

With regard to your FTTX business the last few years when you have had strength in that business it was many times followed a couple of quarters later by carriers working down inventory and weaker trends. But then earlier in the call you suggest that maybe the carriers have better procurement and inventory control. Can you just elaborate on that?

The event you are referring to Todd was 2005 and 2006. In 2007 there was a major improvement in the working relationship forecasting and the internal controls at Verizon and as you recall last year we had very systematic ordering and fairly linear and predictable performance throughout the year. We have seen an extension of that coming into this year. So I think they have worked out the bugs and also keep in mind we’ve got a level standard of 3 million homes passed and the years where we had the ripple each of those years the target was ramped up dramatically from 1 million to 2 or 2 million to 3 and I think that created a lot of difficulty and a lot of over-procurement in order to meet the deployment cycles. Now things apparently with level goals at 3 million per year the systems are running smoothly so I think that was a business hiccup of 2005 and 2006 and we are past it.

Ellie that will conclude the call today. Thank you everyone for being with us.

This concludes today’s ADC second quarter earnings conference call. You may now disconnect.